2021 Startup Predictions: Trends, Sectors, And Tech That Will Emerge


There aren’t many positives to take out of 2020, but the extraordinary progress made in digital transformation is one silver lining. Rapidly maturing software technologies meant most sectors were already on a digital journey, and Covid-19 has proven an unexpected stress-test for these new solutions. With employees and consumers confined to their homes for much of the year, the world has demanded a more virtual way of doing things, putting pressure on corporates and CEOs to fast-forward the digital agenda.

Where there might have been resistance before, businesses and consumers have had to adapt, and the lessons learned bode well for the future. As well as the obvious shifts, such as the exodus from physical offices and high streets, the case for digitization and automation has been strengthened in factories, warehouses, supply chains, and other back-office processes. And while vaccines give hope that we’ll return to some form of normality in the next few months, many of these innovative new business practices look set to remain.

In what has been at many times a dark and depressing year, science and technology have provided glimmers of inspiration and hope that we can combat Covid-related challenges and continue to innovate and grow. Meanwhile, entrepreneurship has reinforced its position as the last dynamic space in an otherwise stale economy.


With that in mind, here are my thoughts on the biggest startup and VC trends that will come to the fore in 2021.


IPOs: First Manhattan, then Berlin, London, Paris

Although Europe has led the US in terms of the number of IPOs over the last five years, it is dwarfed in terms of the absolute capital raised. While EU tech IPOs raised approximately $19bn in 2020, the equivalent number in the US was several hundred billion dollars, through the high-profile listings of Lemonade, Snowflake, Airbnb, Unity, DoorDash, and many more. However, change could be around the corner with large IPOs on the horizon from companies such as Transferwise, Deliveroo, and Darktrace, which are being wooed to list in Europe, rather than jumping ship to the US exchanges like Unity and Spotify. If they do, it will be great news for the European ecosystem, stimulating further backing of the venture sector here by pension funds, insurance companies, and other institutional investors.


GREEN TRAIN GATHERS STEAM

When it comes to column inches, ESG investing, or impact investing as it’s sometimes known, is up there as one of the top trends of 2020, with investors pouring $45.6 billion into sustainable investments in the first quarter of the year, compared to outflows of $384.7 billion for the overall fund universe. The VC space has experienced a similar ESG fever, with funds being forced to think about, not only the downsides of investing in companies that go against ESG principles but also the huge positives of investing in those businesses that are solving the biggest macro issues we face as a planet - not least climate change.

As a result, ClimateTech 2.0 looks set to be one of the standout successes of 2021, thanks to new business models enabled by IoT, better data, and the acceptance that an energy-only approach won’t achieve the 2050 emissions targets. This is a shift from the previous ClimateTech cycle, which was focused solely on energy, to how climate considerations can be incorporated into a wider range of sectors, such as fintech, agritech, transport, energy, manufacturing, and construction. For example, the opportunity to integrate carbon offsetting tools into consumer-facing applications.


THE PRODUCTIVITY AND COLLABORATION “WAR”

According to Interbrand, four out of the top five most valuable brands in the world are platforms: Apple, Amazon, Microsoft, and Google. If you add Salesforce, these are arguably the companies that will set the tech agenda for years to come. As Tien Tzuo, CEO of Zuora wrote recently: “No matter what industry you are in, it’s not enough to just make and sell a great product anymore. You need to create a community and a marketplace that allows people to interact, transact, and ideally learn from one another. That’s the power of platforms.”

This, combined with the rapid move to remote or hybrid working, has increased the demand for workplace apps, and in particular collaboration and productivity tools, as underlined by Salesforce’s recent acquisition of Slack, which has become the default collaboration platform for young, innovative companies. The question remains whether the company can maintain its current rate of innovation as part of Salesforce, and we will no doubt see a new wave of innovative players emerge in this space in the coming 12 months. Glue, a new app from the productivity startup Memory, is one to watch, as is Amie, which raised pre-seed funding last year.


GLOBAL SUPPLY CHAINS IN DISARRAY

Few areas have been put under as much strain in 2020 as supply chains, with rapid change forcing companies to adapt their plans on a week-by-week, or even day-by-day basis. However, the situation only accelerated a transformation journey that was well underway, with companies looking to reduce the disruption risks posed by geopolitical uncertainty and economic populism, while benefitting from wage and cost convergence. For startups and VCs, this represents an opportunity.

While supply chain tools do exist, they have been relatively slow to maximize the latest emerging technologies ranging from artificial intelligence (AI) to data analytics and the internet of things (IoT). In 2021, we will see a number of supply chain start-ups begin to make their mark, with so