- Venture capitalists took to Twitter to share their tech predictions for 2020.
- Among them, Fred Wilson expects some kind of reckoning in Big Tech. Brianne Kimmel, managing director of Work Life Ventures, predicts more celebrities will break into angel investing. And others contemplate whether Silicon Valley is really over.
- These are some of their predictions.
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For venture capitalists, publishing a list of tech predictions is a New Year’s tradition as time-honored as popping a bottle of champagne and kissing at midnight. 2019 did not disappoint. Investors from Fred Wilson to Brianne Kimmel shared their write-ups with their throngs of Twitter followers.
The listicle is so prevalent that after famed venture capitalist Hunter Walk wrote a snarky tweet about publishing his own predictions post — with no intention of writing such a list — a number of people responded in earnest last week. The Homebrew founder had poked fun at the investors who write their predictions with their portfolio in mind.
We read the tech predictions lists and pulled our top picks here.
The seed round has two types
Semil Shah, an early-stage investor at Lightspeed Venture Partners, who also invests out of his own firm, Haystack, expects the flow of capital to continue pumping up deal sizes in the new year.
Shah wrote on his blog:
“The public markets are soaring. Private markets are bigger than ever. There is so much dry powder alone in the Bay Area (well over $50B contractually committed to funds), it’s hard to see that just drying up overnight. In my role as an early-stage investor, I can’t worry about what will happen in public markets, and there is so much capital in the private markets, it means that 2020 is setup to just be a continuation of what 2019 was — and that means a bifurcation of seed rounds, with some seed rounds being very competitive pre-product Series A rounds, and other rounds being smaller, more on the fringe, perhaps out of the Bay Area. The entire seed market is wholly different from when I sent the first Haystack wire in March 2013, and with every fund comes a new game to learn to play.”
A possible reckoning in Big Tech
The rise of tech monopolies was one of the biggest tech trends of the last decade, said Fred Wilson, a venture capitalist who was among the first to recognize the promise of social media and profit from it. Companies like Facebook, Amazon, and Google grabbed the top position in their markets, and they used their power to amass huge amounts of data and control the most popular methods of communication.
Wilson did not speculate on how Big Tech might falter, but he wrote: “What society does about this situation stands as the most important issue in tech at the start of the 2020s.”
Celebrities break into investing
Brianne Kimmel, a former Zendesk executive who raised her own fund in 2019, says “Hollywood angels” are part of the future of early-stage investing. Celebrities will put their own financial resources into startups, as Serena Williams, Will Smith, and Karlie Kloss have already done, as well as join institutional firms as limited partners, she predicts.
She predicts that celebrity-investors will defend their deals on Instagram, TikTok, and other social media apps.
Kimmel wrote in her newsletter: “In the same way vaudeville performers seamlessly transitioned to the film industry with larger crowds and bigger salaries, celebrities will continue to have outsized distribution advantages on any new creative platform and create a high barrier to entry for new creators.”
Investors bet big on Gen Z
The start of a new decade means that some venture capitalists are eager to find the products and services that cater to a new group of consumers: Gen Z. Several investors told Business Insider’s Megan Hernbroth that they expect to spend more on consumer startups in 2020 because of the rising purchasing power of the younger generations. The group’s comfort with e-commerce and fluency with the latest technology trends make for a promising market opportunity.
Caitlin Strandberg, a principal at Lerer Hippeau, told Hernbroth: “On the consumer side, we’ll see more products and services that appeal to the Gen Z sentiments around authenticity, empowerment, inclusion and self-expression. This is a new consumer who is resourceful in learning about the brands and businesses they choose to support with their purchases.”
Fintech gets a new challenger
Financial technology startups will face new competition in consumer brands, Kleiner Perkins investor Monica Desai Weiss told Forbes. As the incumbents wrestle for customers, brands that already have large online followings will add financial technology as a feature.
Desai Weiss told Forbes’ Jeff Kauflin:
“People you go to for other products and services will use fintech to make their product or service easier. Some people call this embedded finance. You’re seeing that with Uber and SmileDirectClub doing it for their teeth aligners. The natural way to do this is with features like flexible payments and insurance. Over time, I think it will go broader than that and will come from brands that you love. Brands like Glossier, Fortnite or Nike that have real loyalty with consumers will start to become bigger players because they have this natural entry point. A challenger bank or a new fintech must build that from scratch in an incredibly difficult world of customer acquisition.”
The great startup migration
The soaring cost of living in the San Francisco Bay Area has made it harder for startups to hire and keep people in their ranks. The result is the slow migration of startups into tech hubs that were previously overlooked, said David Blumberg, managing partner of Blumberg Capital.
Blumberg wrote on his blog:
“This past year, we’ve seen growth of hiring hubs beyond the pricey, competitive, and congested Silicon Valley in welcoming venues around the world. In 2020, we anticipate tech hub expansion across the U.S., in Colorado, Georgia, North Carolina, Tennessee, Texas, Utah, among others. This is partly due to business-friendly environments (e.g. lower taxes and less regulation), lower housing prices and engineering graduates from local universities.”
The future of work is remote
The same pressures forcing companies to open offices beyond the valley will also encourage startups to allow remote work, said Talia Goldberg, a partner at Bessemer Venture Partners. The sprawl will drive demand for new enterprise software solutions that enable workers to get stuff done and connect with their teams from anywhere in the country.
Goldberg wrote on Bessemer’s blog:
“Eliminating geography as a constraint to talent is a game-changer for businesses. Now that most knowledge workers can communicate and collaborate remotely, going to work is more of a state of being than a destination. Workplaces of the future will rely on new software and systems that reimagine team architectures and habits and reinvent operations to serve a global and distributed workforce.”
‘Greentech’ makes a comeback
2019 was the year that climate change became part of the cultural psyche. At least one tech investor is betting that sustainability becomes a broad investment theme in 2020 as a result.
Barry Eggers, a founding partner at Lightspeed Venture Partners, said there’s no shortage of opportunities in the “greentech” sector, from cleaning up the world’s oceans to creating a food system for a growing population.
Eggers wrote on Lightspeed’s blog: “While ‘cleantech’ investing had mixed success during the mid-2000s, ‘greentech’ investing during the 2020s will have the advantage of more efficient business models and heightened consumer awareness, interest, and urgency.”
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