Every year as the holidays approach, we like to take a step back to reflect on everything we’ve seen and ask ourselves as a team what we believe the coming year has in store. 2020 has been a tough year for many, from stressing economic conditions to the loss of social contact with friends, family, and colleagues, but if there has been one silver lining to this year it was the hundreds of founders and entrepreneurs we met who continued to start, build, and grow their businesses in the face of the worst public health crisis we’ve seen in a hundred years.
Looking back on our predictions for 2020, I don’t think any of us could have imagined what this year would bring. Although we believed we were witnessing a once in a generation shift to remote work, I’m not sure any of us were prepared for just how dramatic and abrupt that transition would be. Some themes we were watching, like the fight against disinformation in an election year, we were grateful to see take hold. Others, like the rise of a new wave of “ML Ops” startups, we are excited to continue exploring (see our recent landscape here). And while we would have liked to see more progress on some, we believe we’re still in the early innings of most of what we shared.
In keeping with tradition, for the third year in a row we wanted to share a few predictions for 2021. Read them below, and let us know if you’re working on something similar or have thoughts to share.
In 2019, we were mostly working and learning in person. In 2020, we shifted abruptly to all remote. While the swift transition to all-remote may have been challenging, the shift back and to a more permanent hybrid may prove even harder. We’ll need more (and better) tools to help with employment engagement and retention. As employers begin to more frequently fight for talent with other employers outside of their local market, we expect to see a new urgency around payroll and compensation management with more flexibility in the way offers are created and delivered. This current environment has also created new norms and fertile ground for the development of new ways for people to communicate with each other, which is possibly the most important contribution to the Internet over the past few decades. Innovation in this area will likely speed up as workplaces take advantage of advancements to keep remote workers fully involved and engaged as well.
Over the years, hardware has become a four-letter word and a category that venture capital investors have steered clear of. Hardware is generally a tough business model. You can be growing revenue, but at the same time you need to be investing in and growing inventory. You also need to be an expert at forecasting demand, or you might sink millions into a product that doesn’t sell. Finally, there are several challenges associated with the logistics of fulfilling and shipping a physical product. With the rise of subscription-based business models that generate predictable revenue streams and better eCommerce infrastructure to manage the above, hardware is making a comeback. We expect to see a surge of hardware companies taking advantage of this new tooling and a renewed ability to sell their products by attaching the purchase of hardware to subscription software.
3. The shift to SPACs could upend the traditional IPO and direct listing process – Lindsey Gray
We’ve already seen that 2020 was a record year for SPACs. In 2021, I expect we’ll see more blue-chip companies and brand names choose to go down the SPAC route. This could help remove the historical stigma of SPACs and create a snowball effect of more top companies choosing SPACs instead of traditional IPOs. There are a number of additional benefits that are attractive to pre-IPO companies, including speed and ease of execution as well as the ability to provide financial projections. Lastly, competition between SPACs has led to more acquisition target-friendly terms which makes them an even more attractive alternative for founders and VCs.
4. Politics will creep further into daily decisions and technology – Colin Beirne
People on all sides of America are demonstrating that they want to constantly vote with their wallet and their attention. They do not want to be participating in forums with people that think differently from them, and do not want to support companies and institutions that they perceive are opposed to their values. Personalization in finance/investing is one aspect of this – people want to divest from ‘bad’ companies and invest in ‘good’ ones (and want their own ability to decide what is good or bad rather than being told by some authority). Fragmentation of media choices is another – starting with which cable news network you watch, now becoming which social network you spend time on. Retail companies are picking political sides too – Hobby Lobby and Patagonia may be first movers, but the growing power and voice of consumers may force more companies to pick a side. It may further polarize us and send us into our separate parallel universes – not a good thing, but arguably an inevitable one.
5. Social networks will fracture based on shared interests and affinities – Andy Kangpan
Similar to Colin’s thesis above, I believe vigorous reactions to content moderation, and increasingly pervasive tribalism will lead to a new generation of social networks. I expect us to move into an era where our collective attention is splintered across numerous platforms, each catering to distinct systems of belief and shared interests. We have seen an early glimpse of this evolution through the rapid ascent of Parler, and I believe we are in the early innings of this fragmentation. It may not be a good thing to move further into our echo chambers, but I think it’s unlikely that social networks of tomorrow will serve as general an audience as the social networks of today.
It’s never been easier to build software. Gone are the days of needing to be a full-stack developer or engineer to build a startup. The proliferation of open source, low-code, no-code tools across categories are enabling a new generation of entrepreneurship across backgrounds and experience and closing the skills gap and making it easier to build programs with little programming experience. These tools and open source projects that are community developed and free for all to use will become the foundation for which commercial products are built.
The pandemic has pulled back the curtain on sectors that need innovation to keep pace, including healthcare, supply chain & manufacturing, and education. On the healthcare front, people are starting to realize that going to a doctor’s office in person isn’t always necessary as virtual care can be good enough for many things. We will see more businesses that combine in-person and telehealth care efficiently and make proactive data-based health monitoring much more feasible and pervasive. COVID-19 has also exposed weaknesses in the supply chain and revealed the need for faster production, with 3D printing and rapid/on-demand manufacturing helping deliver PPE and other important parts like ventilators. Lastly, 2020 was a massive forced experiment in virtual school, with tens of millions of guinea pigs worldwide. Though in-person will still be preferred, digital tools in the classroom will leap forward as kids prove their proficiency and literacy with technology and educators learn where technology can deepen and further education.
8. COVID-19 will drive more awareness, interest, and development in the life sciences, resulting in better tools, diagnostics, and therapeutics – Dusan Perovic
COVID-19 has exposed a threat we weren’t fully ready for. In a matter of days, every scientist and engineer was reading immunology and infectious disease literature and thinking of ways they can help. The broader public became familiar with the scientific terminology. The aftermath will drive a resurgence of awareness, interest, and investment in life sciences. We believe the pace of innovation in life science tools (both computational and wet lab-based) will increase, as will the development of better diagnostics and therapeutics for not just infectious diseases but all ailments of humankind.
9. The instability and massive unemployment COVID-19 caused will create greater diversity in the ways people earn and save money – Dan Abelon
As COVID-19 restrictions ease across the globe, I believe we’ll see traditional gig economy companies roar back to life. It wouldn’t be surprising to see momentum extend to a new wave of technical innovation and the development of networks for many types of workers to monetize their skillsets (e.g. Cameo for celebrities, artists, and influencers; or expert networks like our portfolio company NewtonX for access to professional knowledge). I believe both of these trends will be accompanied by greater innovation and more options in the way people save and invest across the board, primarily driven by low interest rates and innovation in DeFi protocols and products as they steadily become popular beyond the early adopter niche.
We wanted to end on a positive note. If nothing else, 2020 has been a paradigm shift in how the world operates. We’re about to have an idea flow from a lab in China where COVID-19 was first sequenced to a German company and a Boston-based startup to develop a vaccine in record time. We’re unlocking a new era of global collaboration, where entrepreneurship and science involve everyone in the world working together instead of doing it based on individual communities. We’re optimistic that we’ll see more collaboration and see more global efforts across science and technology in 2021.