A new year has begun, and with it we are seeing many speculations about the world of Capital Venture. The year brings on more speculations than normal since we are welcoming a brand new decade. A new—and hyperconnected—roaring ’20s have begun.
This new decade will no doubt be influenced by the learnings of the last. Companies and venture capitalists alike have learned from the leaps forward by some and missteps by others. Looking back since the turn of the century, a number of the innovative tech giants we can’t imagine living without did not even exist. Gmail was introduced to us in 2004 along with the social networking app, Facebook. Twitter didn’t arrive on the scene until 2006 and Instagram graced us with its presence and promise in 2010. What will shape the landscape of the next decade starts with what is shaping this year: venture capitalists and their funding.
Large Rounds with New Players
In 2019, business to business (B2B) companies received more checks than business to consumer (B2C) seed-stage companies. For a number of reasons, VC firms continue to lean in to B2B company growth.
This new class of VCs graduated from startup roles themselves. Most often, they joined these companies early in operating roles and are now leaving with pockets full of money to become investors. When they round up funds from a few other folks and are able to put money into new ventures, they are backing what they know best or are comfortable with.
The influx of new investors into the market means funding rounds are getting more competitive. Small businesses and startups are getting larger and larger rounds of funding. While this might be great news for their operations, business owners should be aware that many later stage companies are also raising funding rounds and then using that money primarily for their marketing expenses.
Go-to-market strategy for B2C companies is difficult for many investors to aid in because the best way to reach the target consumer for this market is through Google and Facebook ads. The later stage companies raising large rounds are saturating this market with their own ads, making it difficult—and expensive—for small companies to break through the noise and make the algorithms work to their advantage.
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A Data Economy
The introduction of the 5G network will force a structural overhaul of technology stacks and how companies are building with them. Everything from smartphones and cars to the apps consumers use daily will be impacted by this shift in network capabilities. The data that companies will be able to collect on this new network is invaluable, especially as the conscious consumer continues to recognize the value of their data and opts to change their privacy settings.
Before the 5G launch, data remains king as companies continue to mine it—both internally and externally—while venture capitalists continue to rely on all of the data collected and aggregated by businesses to make informed decisions regarding everything from investment opportunities to what positions to hire for (data scientists and analysts are going to be a hot commodity atop this list).
Businesses in the B2B space will need to continue growing their services as VC firms encourage the companies they fund to spend wisely and use vendors who are growing their solution bases to include more and more value add services. Value add services are a great way for small businesses to differentiate themselves from competition and continue winning their customers.
A Path to Profit
The major 2019 IPO class saw many companies like Uber, Lyft, and Pinterest all struggle with their IPO debuts while some companies like WeWork famously did not make it to that stage. Startups without a clear path to profitability will not be able to “fake it until they make it” moving forward, and VCs will remain cautious of this and push other exit strategies from the get-go. Mergers and acquisitions (M&A) are on the rise for these companies, while SMBs who want to stay in business and continue to operate as they grow will thrive in this market.
Regardless of M&A or profitability, building or working with a remote team will shift to become the new normal. Big cities are competing for the same groups of workers and creating a shortage of talent. To stay ahead of this, the tech stack your company works in should encourage them to be collaborative and nimble.