What venture capital funds are ready to invest in 2021
Despite the pandemic, 2020 was a record year in terms of investment. Over $ 300 billion was raised through venture deals worldwide. Investment funds got into such wild excitement that they raised entire herds of unicorn companies in Europe, America, and Asia.
The most fertile was winter 2020-21, the second wave of "harvest" is expected in the summer. Joseph Blumenthal outlined the main reasons for such investment activity and directions that arouse interest among the players of the venture capital market in his articles.
The investment sector, like the entire world economy, has responded to the pandemic. Investors focused on online trading and delivery services, cloud storage, communication, and streaming platforms - everything that helped maintain a high quality of life in a lockdown. Large players, whose business met the challenge of the times as much as possible, went into rapid growth. So the British service for the delivery of ready-made nutritional kits Just Eat took over its junior competitor GrubHub ($ 7.3 billion deal). Another example is the Clubhouse project, which raised $ 100 million during the beta testing stage of the application (in the spring of 2020) and gained insane popularity in the US at the beginning of 2021. By the way, from the end of May, it became available not only on IOS but also on Android.
The incentive to invest in this and other areas has been the reduction in interest rates. Between the risk of uncertainty with the support of startups and the guaranteed loss of money in inflation, players choose the former. Investment companies made rare but large investments, preferring startups that are at a mature stage.
What to expect this year
To date, the positive dynamics continue. As confirmation, Vivian Blumenthal cites data from Crunchbase. According to statistics from this platform for finding business information, in January and February, the volume of venture capital investments amounted to $ 39.9 billion per month. Delivery and logistics, fintech, AI and machine learning services, as well as robotics and automation, blockchain, and green transport became the leaders in attracting investments. The coronavirus and active development of vaccines have increased the drive of venture capital firms to develop genetic research, According to the expert's forecast, the development of startups related to digital medicine and biotech will slow down a little. However, the stagnation will not affect the development of medical information systems and aggregators of medical services. On the contrary, significant growth is expected here.
Perhaps one of the most attractive areas for investors is space technology (SpaceTech). But we are not talking about raw startups, but about companies that have repeatedly confirmed their practical benefits.
Elon Musk's brainchild SpaceX is in the lead in space technologies. In 2020, against the backdrop of the successful launch of Crew Dragon, private investments in the company alone exceeded the volume of the USA space program and amounted to $ 2.41 billion. This is more than a quarter of all world private investments in the SpaceTech industry ($ 8.9 billion).
Jeff Bezos and his team are showing interest in space: AWS (Amazon Web Services platform) is creating a special unit for SpaceTech, and the billionaire himself has given impetus to his space project Blue Origin.
DeepTech, neural networks, and gaming
Fundamental technologies (DeepTech), as well as projects based on quantum computing and AI, are receiving a lot of investor attention.
In Europe, at least a quarter of startups work with DeepTech. The most attractive of them turned out to be the Romanian unicorn UiPath and the British Graphcore.
Neural network startups are also continuing to rise. The priority of venture capital funds is AI scenarios that will be useful in the b2b and b2c sectors. Nowadays, computer vision systems are in demand for manufacturing, retail, banking customer service. The investment race is won by multi-format neural networks that are most effective in working with BigData and detecting cyber threats.
The gaming industry is also receiving substantial infusions. Here, the target audience has long been represented not by teenagers, but by a solvent audience who take their gaming meta and multiverse seriously. The most popular gaming platforms are actively transforming into channels of communication and entertainment content, as well as e-commerce platforms (paid games, streams, e-sports betting, etc.).
The gamification industry is specific, but startups in this area are more likely to receive investments at an early, pre-seed stage.
The attitude of economists to cryptocurrencies is ambiguous and not everyone considers this area to be worthy of funding. At the same time, venture capital funds can finance individual projects that offer not HYIP technologies, but a really working crypto product. So, in 2021, there was a huge interest in crypto art, including NFT-tokens (non-fungible tokens), confirming the right of a particular buyer to own a unique digital object on the Internet.
In addition, the main function of the blockchain - distributed ledger technology - has received a new embodiment in fintech, marketplaces, and medical projects.
Delivery and logistics
In the pandemic, delivery services have reached a qualitatively new level, delivering not only traditional e-commerce goods but also medicines, supermarket products, and any ready-made meals from restaurants.
It is noteworthy that in February 2020, there was a decline in venture investments in food delivery services, but after the introduction of quarantine, everything changed dramatically. Startups in the field of food delivery, logistics, taxi, and freight transportation received large cash infusions. For example, companies offering IT solutions to optimize supply chains have raised more than $ 3 billion in the United States and the European Union.
Warehouse aggregators, tracking platforms for controlling transportation, SaaS systems, automation, and robotization services for warehouse processes also flew in. And there are no prerequisites for growth to slow down in 2021, as the e-commerce sector (for which logistics is required) continues to grow.
Tips for Young Startups in 2021
1. Adapt your business to the trends associated with the pandemic and its aftermath. At the same time, one should not blindly follow the flagship companies, copy their developments. For example, the expert believes that interest in pure telemedicine will fade away. But those technologies, platforms, and tools that will be able to adapt to the work of medical institutions after the lifting of all quarantine measures will remain in demand.
2. Conduct extensive market research, bespoke development (testing future product ideas or prototypes), niche-market solutions that answer specific problems, and subsequently expand their functionality. Move according to the kaizen principle, from small to large, gradually expanding the range of services.
3. Do not focus on the hype, study the experience of those who are still in the shadows, but tomorrow they can break out to the top and set a new trend. Most promising projects do not appear in the news at first and receive moderate investments.
4. The most risk-free option for a startup is to launch on the local market. After assessing the success achieved in your city or region, you can understand whether it's time to move on and scale your business.
Now there are many programs and investment resources that open up great opportunities for regional companies. In particular, the Business Platform provides effective tools for building a financial model and finding investors anywhere in the world.