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Last year saw unprecedented investment into startups, with seemingly almost every sector notching new records for funding.

This year? Not so much. Venture funding overall is retreating amid public-market turmoil, record inflation and rising concerns about an economic recession. Even so, several startup sectors stand out鈥攅ither for still outperforming, or for being particularly hard-hit by the venture pullback.

We take a closer look at a few of the most bullish and bearish startup industries midway through 2022.

Cybersecurity: Still bullish as threats continue

During the height of the venture market last year, few sectors did as well as cybersecurity. The industry raised a record amount of venture capital and unicorns were minted on a seemingly weekly basis. Even this year, as the venture market has turned, cybersecurity has birthed more than a dozen new unicorns in the first six-plus months of the year.

Investors don鈥檛 expect that to change, but there are caveats: Valuations will level out and startups in more nascent areas of cyber are likely to face harder times raising cash.

鈥淎nything that enables a company鈥檚 digital transformation will continue to get funded,鈥� said , co-founder and managing director at , which specializes in cybersecurity and infrastructure software investments.

Specific areas mentioned by multiple VCs at last week鈥檚 in San Francisco included startups in the spaces of DevSecOps鈥攚here security is integrated into the software development process鈥攃loud security and any tech around identity and authentication.

鈥淎t the end of the day, that’s what cybersecurity really is, right?鈥� Y茅pez said. 鈥淚t鈥檚 about identity and identity control.鈥�

, managing partner at cyber investment firm , added that just like most budgets in the current market, security budgets are getting slashed. That may help emerging technologies around AI and cybersecurity, as IT departments look to help automate more as resources get cut.

That does not mean, however, it’ll be like last year. In 2021, startups demanding valuations based on 50x or 100x ARR was not unheard of. Y茅pez said companies should now expect something much more in line with the top companies in the public market鈥攁bout 15x in the next 12 months.

鈥淭he market is normalizing,鈥� Y茅pez said.

In a sector as large as cybersecurity, one should also not expect all areas of the industry to be affected exactly alike. Newer, deep technologies in the sector likely could see a pullback. Startups looking at different forms of encryption, quantum security and tech related to crypto and Web3 could see a slowdown or bigger multiple drop.

鈥� Chris Metinko

Crypto: Headwinds push toward bear territory

Speaking of crypto, that is one area that could bear the brunt of this pullback.

The industry faces the perfect storm of investors becoming more conservative, its own well-publicized growing pains, and a turn in the general populace鈥檚 attitude toward being more risk-averse as inflation and higher interest rates take hold.

While some remain bullish on the market, prices of both Bitcoin and Ether鈥攖he two largest cryptocurrencies鈥攔emain significantly below their all-time highs. Some who follow the sector think Bitcoin could head down toward $25,000 or lower.

While crypto pricing is not directly related to VC investment, it would be foolish to think investors won鈥檛 pull back from pouring cash into startups if the actual crypto market continues its bear run.

Even though last year saw a record amount of investment in the space, this year has already seen some softness and that could continue through the second half of this year.

鈥� Chris Metinko

Biotech: Not immune to the slowdown

As sectors go, biotech hasn鈥檛 been the hardest hit by the venture funding slowdown. But it hasn鈥檛 gone unscathed either.

Globally, funding to biotech startups reached about $24 billion in the first five months of this year. That鈥檚 on track to come in well below the record-setting 2021 annual total of around $72 billion.

However, if funding continues at the current pace, annual investment could still top the 2020 total of $49 million.

Huge rounds continue to get done this year too. Two of the biggest rounds were announced in the past few weeks: , a provider of biomanufacturing technology, raised $625 million in Series D funding, and , developer of a low-cost sequencing platform, closed on around $600 million.

Still, the shuttered IPO window remains an issue. After hitting record levels in 2021, the pace of biotech IPOs has slowed to a crawl this year.

Many of those who have made it to market, meanwhile, are reeling from battered share prices as public biotech valuations contract.

鈥� Joanna Glasner

Electric vehicle investment: Slowing its roll

While the electric vehicle sector has enjoyed years of rising funding levels, VC investment in the space so far this year lags. In 2022, VC-backed companies in the EV space have so far raised nearly $5.8 billion, compared to $7.7 billion raised during the same period last year, according to 小蓝视频色情网页版 data.

There are a few reasons for that. First, some of the most high-profile EV companies, including and , raised $1 billion-plus funding rounds in past years but are now public companies.

But investors also have a growing risk aversion to EV companies, according to , a senior equity research analyst covering the automotive sector at the research firm There鈥檚 also the risk of over saturating the EV market, given the high number of new electric models that are expected to debut in the U.S. by the end of next year.

鈥淵ou see it in the valuations that contracted enormously across the space,鈥� Nelson said. 鈥淵ou look at some of the more successful startups and the struggles they鈥檝e been having to ramp up production, like Rivan and Lucid. And I think it鈥檚 given a lot of VC investors pause in terms of giving additional investment in the space.鈥�

The valuation issues stem from 鈥渉eightened economic concerns,鈥� risk of a looming recession, and the auto manufacturing space being highly cyclical, he said.

Nelson pointed to recent reports of , the clear leader in the EV space, pausing hiring and considering layoffs. Reuters reported earlier this month that Tesla CEO said in an email to executives that he had a 鈥渟uper bad feeling鈥� about the economy and wanted to cut 10 percent of the company鈥檚 staff.

鈥淚f Tesla鈥檚 outlook is that grim, investors are asking how much worse it is going to be for a company that鈥檚 in the startup or not even in the startup phase yet,鈥� Nelson said.

鈥� Sophia Kunthara

Proptech: Momentum builds despite macroeconomic woes

Although some sectors have been hammered by the apparent pullback in VC investment, real estate tech has remained resilient鈥攅ven outpacing last year, which was a standout.

In 2022 so far, startups in the real estate space have raised around $12.4 billion, up from about $11.4 billion during the same period last year, per 小蓝视频色情网页版 data. Those companies range from construction tech startups to real estate financing companies.

According to , managing partner of , there are multiple reasons for the continued interest in proptech despite the downturn in VC investment overall.

For one, more employees have started working in offices again, even part-time. There are also more conversations about sustainability taking place.

Construction and the construction labor shortage continues to be a hot topic.

We鈥檙e also starting to see more of the intersection between the physical and virtual worlds through conversations around the metaverse, Lunawat said.

鈥淚f you look at real estate as an asset class, it鈥檚 a trillion-dollar industry,鈥� Lunawat said. 鈥淭here鈥檚 a lot of room for real estate tech to grow.鈥�

Five years ago, it was still the 鈥渇irst innings鈥� of investment into the real estate class, Lunawat said. Now, there isn鈥檛 a single homebuilder or other stakeholder who isn鈥檛 interested in what鈥檚 going on with real estate tech, as many have seen how technology has benefited their competitors.

That interest overshadows anything going on in the macroeconomic environment, such as聽 rising interest rates. Lunawat expects more funding specifically into the areas of single family homes, construction tech and hospitality.

鈥淭his year is actually looking better for proptech in many ways,鈥� he said.

鈥� Sophia Kunthara

Climate software: Still hot

Climate-focused software startups are landing big rounds in recent months, even as overall venture funding contracts.

A 小蓝视频色情网页版 funded in roughly the past year have collectively pulled in nearly $1.6 billion. More than half of that funding total has come in 2022, indicating invigorated investor appetite for the climate software space.

鈥淚t鈥檚 a very unique moment where there鈥檚 an unbelievable amount of talent. That is partially why you鈥檝e seen more dollars flowing,鈥� said , CEO of decarbonization-focused utility data platform , which landed $200 million in Series E funding in May. 鈥淭here are more investable companies.鈥�

Another factor contributing to escalating fundraising is the lamentable fact that news on the climate front continues to get bleaker. From droughts and heat waves in the American Southwest to threatening to accelerate glacial melting, climate change is prompting a stepped-up sense of urgency among investors who follow the space most closely.

鈥� Joanna Glasner

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