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It was a banner year for venture capitalists, at least for those that bet on breakout companies like Airbnb, DoorDash, Snowflake and Palantir. The surge in IPOs has been stunning—and has resulted in enormous windfalls for Silicon Valley’s top investors. This will inevitably lead to even more investments in the coming years.
But in the meantime, the economic environment is likely to improve as well. The big driver will be the roll out of the vaccines for the Covid-19 virus.
“Early signs are showing that 2021 is going to be a good year for startups,” said John Chambers, who is the former Executive Chairman and CEO of Cisco and current founder and CEO of JC2 Ventures. “At the beginning of the COVID-19 pandemic, I was concerned about the impact on startups–but they are doing much better than I originally anticipated. All of the startups in my JC2 Ventures portfolio have moved passed the crisis management phase and are now back to growth.”
Consider that the VC industry has undergone some major changes. It seems like the days of requiring in-person pitches are gone. This should make it easier for companies outside Silicon Valley to attract funding.
“Startup founders and VCs alike have navigated the ups and downs of remote networking and fundraising interactions and will stick to what works and what doesn’t,” said Russ Heddleston, who is the CEO and cofounder of DocSend. “It’s human nature to adapt and I think a lot of the virtual work behavior learned during the pandemic is here to stay. ”
OK then, given that VCs are flush with capital and the economic environment looks favorable, what are the opportunities that they are targeting?
Well, here’s a look:
Liza Landsman, General Partner of Technology at NEA:
“Companies focused on alternative energy will benefit from growing consumer preference as well as new government incentives, particularly those that can provide meaningful employment in this emerging sector, and the sector will attract more venture dollars and find greater receptivity in the public markets.”
Hiro Rio Maeda, a Managing Partner at DNX Ventures:
“As the pandemic forced brick-and-mortar stores to close their doors, consumers and brands now have no choice but to transact online. However, rather than offer their products on a static and unengaging shopping platform, live streaming functionality of social commerce solutions can be used to guide participating customers through the personalized merchandise selection to the payment process, making the experience all the more personal and engaging.”
Scott Beechuk, a Partner at Norwest Venture Partners:
“For startups developing AI-based products designed to solve specific business challenges for large enterprises, the more narrow and deep their focus, the more likely they are to succeed.”
Paul Asel, a Managing Partner at NGP Capital:
“Edge computing platforms will emerge enabling distributed computing to connect and coordinate a proliferation of sensors. We are moving from a Mobile-First to a Data-First world, one in which everything and everyone transmits a signal and intelligent systems render real-time insights. This will unleash a Digital Transformation enabling enterprises and disrupting industries. The Internet impacted 15% of GDP. IoT will transform the other 85%.”
Kristina Serafim, a Managing Director at Verizon Ventures:
“There’s still a lot of room for technology improvements in the remote working environment, which is here to stay. Security, compliance, remote process automation, and collaboration tools that leverage AR/VR/XR are some to mention.”
Eric Anderson, a venture capitalist at Scale Venture Partners:
“With the rise of AI, data has become a business’s most critical asset. On the heels of Snowflake’s big exit will come a realization that data is now the primary workload in business and a whole set of tools will emerge to fill in the gaps and help satisfy data’s promise to the enterprise.”
Noah Carr, a Partner at Unusual Ventures:
“As widespread remote work continues in 2021, VC interest in startups with product-led ‘bottom up’ or hybrid approaches to go-to-market strategy will grow, while companies that rely solely on traditional ‘top down’ field selling will struggle to secure funding. Adoption of the self-serve model in SaaS was already growing before COVID-19, but the pandemic’s impact on business travel has accelerated the shift toward this more efficient option in a remote-first world. Companies that can drive adoption and build community without needing to give prospects an in-person demo will have a natural leg up.”
Kyle Lui, a Partner at DCM:
“Telemedicine will grow even faster in 2021 as it becomes a true alternative to in-person visits. Payers will see the benefits in cost savings and efficiencies, and further push it to their covered populations. We will see verticalization with many startups targeting specific health areas and conditions.”
Jason Green, the cofounder and General Partner at Emergence Capital:
“The last 15 years were the era of software as a service. Over the next few years, we’ll see a marked increase in ‘Services as Software,’ giving providers a platform to offer consumers access to their expertise at scale. Services as Software will deliver the world’s greatest yoga teachers, therapists, doctors, educators, and others right to our homes. There will be an accompanying increase in tools that reduce the friction around delivery, discovery, payment, and management for these platforms.”
Kenn So, a venture capitalist at Shasta Ventures:
“As more products built by startups have AI embedded in them, there will be a need for conscious AI ethics. Its not that VCs should start making up red flag risks upfront and pass on funding startups—most tech is built with the intention to better the world. Its still early but how this is playing out involves VCs asking how ML models could fail and what are the backstops.”
Derek Zanutto, a General Partner at CapitalG, which is Alphabet’s independent growth fund:
“The rise of automation, no-code/low-code and self-service data analytics technologies, coupled with an increasingly tight IT talent shortage, will expedite the democratization of IT within the enterprise, moving power away from IT into the hands of end users. Increasingly, both business and technical employees will feel empowered to directly procure their own tools rather than relying on IT to do so—and sometimes they’ll even procure them without IT’s input. The double-edged sword that accompanies self-service and democratization will shift CIOs’ central mandate from lead implementer to gatekeeper-in-chief, focused on enacting security guardrails and governance controls to help ensure the responsible, secure usage of these self-service technologies and protection and management of critical company data.”
Matt Goldstein, a partner at M12:
“We continue to look at the cybersecurity, fraud, and privacy space. Every tectonic shift in our work and technology exposes new fault lines–new attack vectors–and with those new fault lines, new challenges for cyber startups to attempt to solve.”
Tom (@ttaulli) is an advisor/board member to startups and the author of Artificial Intelligence Basics: A Non-Technical Introduction and The Robotic Process Automation Handbook: A Guide to Implementing RPA Systems. He also has developed various online courses, such as for the COBOL and Python programming languages.
