What Startups I Would Like To Bet In 2021
Emerging trends and how in 2021, we might build a better normal.
2020 is just behind us, and it has been a tough year for everyone. Actually, for those like us who invest in Silicon Valley early-stage companies, things have been a bit different. We observed valuations decreasing by 20-25%, and it was easier to access fair deals. Still, even if working from home is a habit that I developed over the last seven years, not meeting anyone face-to-face has been challenging. A significant element in our job is creating new relationships, and even if we always worked remotely, a situation like the present one has been challenging for us.
It’s not all negative, though. This pandemic fostered the development of old and novel businesses, pushing them to rethink their inner mechanisms. We’ve got new markets, new unknown needs, and a wave of ambitious, hard-working founders committed to making us feel more comfortable in the new reality.
For sure, COVID-19 changed our lives forever, and some of the novel attitudes we adopted along the way proved to be effective. I’m sure that some of them are here to stay even after COVID-19 is entirely behind us. Remote work and distributed teams are the new normal because it will take some time to get back to our life as it used to be. The opportunity is to invest in specific sectors that can help people keep working and living even in weird situations like the present one.
Thinking about this, I want to highlight some of the areas where I would like to see some real efforts in 2021. And not only from Silicon Valley companies but from startups bootstrapped outside the USA with global ambitions—as it should be.
Cloud (Security)
Moving online, most of our activities helped everyone to understand why security is so important at any level. We need to trust that all the information that we put online is safe. If it’s meant to be private, then it must stay secret. Most of the online services we use every day are kept in the cloud. Every click on a web page link today ignite hundreds or even thousands of call to microservices. Machines’ workloads are assessed in real-time, and the computational power is adjusted consequently, and that’s thanks to novel technologies like Docker containers and Kubernetes.
The world of container and Kubernetes security evolved enormously during the past six years. Docker burst onto the scene and its containers took the infrastructure world by storm—Tomasz Tunguz, Redpoint Ventures.
Software architectures changed profusely and quickly to enable applications that can scale as we need. It didn't happen overnight in twelve months; the technology was already available, but very few people understand the real opportunity behind this change. We need more software engineers eager to solve complex problems to make this transition happen smoothly. The cloud has been extensively used in the last ten years as a place where companies put their data and applications. Now we need to make this place more affordable, accessible, and secure. A lot has been done in the last few years alone, but much more needs to be accomplished yet. The effect of this pandemic on our society is to accelerate the adoption of online services, transforming it into an urgent necessity.
As investors, we struggle to find such people, but I’m sure this industry will flourish in the next years. That’s an opportunity.
The Internet As Your Private Place
Another factor that impacted our life during the last twelve months is our dependency on platforms and services like Google, Gmail, Instagram, and Facebook. As they use to say: if you don’t pay for a service, then you are the product. We accepted that fact for years because we didn’t feel the need to be left alone in our online journey. Many services are free, so it looks ok to let them take from us. We had many other offline options to socialize outside the Net. That’s changing, and I keep experiencing a growing pain thinking about the Internet and how much it changed over the last two decades. It’s not more possible to consider it your secret place because everything you do is tracked, profiled, and, in the end, sold. In the past year, I had moments when I dreamed of finding a spot just for myself on the Internet—a place to think, write, and keep my thoughts just for me: no sharing, no social activity, and privacy guaranteed. Some essential services like email, journaling, and messaging may face a new wave of disruption. Technologies and services that have been considered for granted and free for the last twenty years should be reinvented with user’s privacy in mind.
During the last week, I spent some night playing with a project of a friend of mine. It’s called secrez, and let me say that his tool is not for anyone, but the direction is the right one. It demonstrated to me that not just the cloud but also your laptop privacy is essential.
Maybe it’s just me, but I firmly believe that this is a big opportunity ready to be explored.
Remote Living
Changes that we all are facing are not just about work remotely, but they involve living a life with much lesser in-person social interactions. Remote working and also living is a new market, and it’s just in its infancy. Most people have to realize the potential future development in the area, but one thing is for sure: we need more and better tools. WIll this condition last even when the pandemic is behind us? Well, Yogi Berra, a baseball player, and philosopher say something wise about that:
It's tough to make predictions, especially about the future.
We can speculate the whole year about this and keep waiting for this painful period to pass by itself without understanding that we need to act instead. I hope I’m wrong, but I think we might have even three to four years ahead of us before we can trust in-person socializing again as we used to. The world will adapt, but people and companies need a better way to do business and live their life. That’s an opportunity to create new companies to solve hundreds of problems.
A few days ago, I read a blog post by Amy Sun that immediately gets me to the point:
Do we really want to return to NORMAL? Isn’t it time we build something BETTER?
… In my lifetime, there have never been so many concurrent problems in the world, with no clear solutions, spanning so many industries and facets of life… It is becoming increasingly clear that our goal should not be to return to the pre-pandemic status quo with all of its accompanying problems, but rather to build better systems to protect our people, communities, and businesses, while also generating wealth and promoting innovation.
There has never been a better time to start a company. To build a better normal.
We don’t want to get back to normal. We want to build a better normal. Life can be better if we use and keep what the pandemic taught to us.
P.S. I also tried to contact her to invest in her company, but the round closed last October 😉.
Open Source
Forcing people to work remotely, limiting social interactions should push many more software engineers to develop open-source products. For the first time in decades, people now have more time alone and more time in general—unfortunately. Such a novel status fits quite well with engineers’ character. The most pressing issue we have right now is helping companies, small and big, to keep growing their business even with the limitations we all know and help people avoid social isolation. Of course, the answer is not just open-source software, but it’s for sure one of the best possible outcomes. Open source means trust, and we need trust to recover from this situation quickly. Open source also means that you can use a product for free and decide later to pay for a more advanced version. That resonates well with the reconstruction ahead of us.
And not just that. I firmly believe that open source is possibly the best approach to tackle the big enterprise market from the ground up at any time. My prediction is that a substantial portion of these products will come from outside of Silicon Valley in the next year. Not because I think you can find better programmers outside this area, but because it’s easier to bootstrap such a product outside San Francisco. In the open-source world, you need one or two years to grow your community to the point that it is interesting for an investor to step in.
Many VCs think that investing in this area is a big bet, but we love those kinds of bets. I invested more than once in companies based on such products in my career, and, with the right founding team, it always paid off.
A final thought
I think 2021 will be a fantastic year because many of the services and products we gave for granted have to be reimagined. The areas I highlighted here are just a few of those accelerated by what we lived in 2020. Now we need people who want to make a difference and bet on their ideas and perseverance.