The new year brings hope and promise for startups. Happy New Year 2021!
As we ring in 2021, we reflect on the end of a historic year. 2020 has been a time of massive upheaval where our culture, our careers, our families, our friendships, our emotions, and indeed our entire lives have been turned upside down in ways no one could have imagined or foreseen.
Over the next few weeks, the post-mortem of this chaotic year will begin. We will try to make sense of everything that happened and work to chart a way forward. This is why I wanted to come back to this year for startups. While many businesses have certainly struggled, many entrepreneurs have leaned into the challenges of 2020 and refocused their businesses to support new standards. They have not only created or grown successful businesses; they helped us survive the toughest year in the planet’s recent history.
2020 has started with a lot of promise and hope. The economy was booming and funding for entrepreneurs was at an all time high. At the end of 2019, I predicted that the next decade would see major innovations in healthcare, the sharing economy, and 5G communications. The momentum was strong and it looked like those predictions would start to come to fruition. Then the pandemic hit. After the initial shock, startups around the world pulled out their “Plan B” books and started altering their business plans. Companies that jumped in quickly with pandemic-ready solutions won out and created a new digital economy for virtual connectivity.
As the economy slumped and signs pointed to a long-running battle with COVID, it became clear that the bar for business survival this year would be high. If a business plan worked, the business might survive. If it had any flaws, the company had no chance to try again. If a company offered people the ability to work, stay connected, and learn from home, demand for its products and services skyrocketed. If the business relied on in-person transactions, it faced a massive reduction in revenue and potential closure.
At this point, some startups just haven’t survived. Others that had funding had to delay their go-to-market plans, which meant they needed more cash. The Paycheck Protection Program (PPP) loan forgiveness has helped many startups, but it was not the ultimate solution. VCs were also actively helping promising companies in their portfolio.
The light at the end of the tunnel
One of the most surprising and positive things to come out of 2020 was the growth in venture capital funding. Venture capital investment in startups domestically and globally has been robust in 2020 despite the massive downturn in the economy. In fact, in the third quarter of 2020 alone, U.S. venture capital firms invested more than $56 billion in startups (total venture capital investment funding in 2019 was $54.9 billion). , according Pitch book).
This excellent news comes with a caveat, however. Most of the funding went to established startups or well-known entrepreneurs. While more money was being spent on existing businesses, VCs were very conservative on new deals. Yet VCs have worked tirelessly to meet market demand and invest in quality businesses.
As the year draws to a close, changes once thought to be only temporary are now trending towards the new normal. The pandemic has forced us to work from home – with no business travel or commuting. As a result, we’ve had more time for personal development and family – and employees and companies realize there may be no turning back. Big tech companies like Facebook and Google have instituted working from home for the foreseeable future. I don’t think that will change even with the vaccine.
Working from home has opened up a new opportunity for businesses: the ability to leave dense cities and relocate to cheaper, less populated areas. As an increasing number of employees can work remotely, companies are no longer tied to densely populated areas for strong talent. Tesla and HP have already announced big moves from California to Texas. I expect more companies to follow suit as the traditional work structure breaks down and it becomes easier for employees to live and work where they want.
In the coming year, I see innovation in virtualization continuing. While many of the technologies in this new lifestyle have been available for some time, the drive to combine them all and get consumers to buy the latest innovations is new and here to stay. There is so much growth in this new segment. Startups work hard to plan and create solutions.
In terms of investment, I see a lot of money being invested in connectivity and technologies to increase the productivity of the distributed workforce. Entrepreneurs and VCs see the value of the new digital economy and will continue to fight to be part of it.
Whether we realize it or not, our lives have fundamentally changed forever. For some, the change has been accompanied by the loss of family members, friends or jobs. For others, it has been a year full of opportunity, including the ability to spend more time with loved ones and reflect. I was lucky. I spent quality time with my family and observed life in a way that I had never done before.
The new year is almost here. Whether you’re on the frontlines of the pandemic, retreating from economic turbulence, or completely reinventing your life, 2021 is sure to have some good surprises in store for you. We have to… that’s how we survive. Happy new year.