5 things venture capitalists are looking for in 2021

After a momentous 2020, 2021 will see businesses still needing funds and VCs still seeking opportunities to invest.

Throughout 2020, venture capitalists (VCs) have turned away from sectors such as hospitality and retail, due to the industries’ cyclical nature and the dramatic impact COVID-19 and the government lockdown have had on business. Brexit poses a different set of challenges, across almost every sector.

Yet in 2021, the fact remains that businesses will still require funding, and VCs will still need to find suitable opportunities.

Here are five items set to feature on the agendas of venture capitalists in 2021.

Despite Brexit and the coronavirus pandemic, the issue of climate change hasn’t gone away. In the midst of the government lockdown in the late spring of 2020, a popular topic of public discussion was the impact that the huge reduction in traffic was having on the carbon footprint of major cities and urban areas.

The systematic reversal of more than three centuries of urbanisation has focused investors’ minds on what has a previously been a more difficult sell in terms of returns.

The year 2020 has been a time of incredible social conscience, when movements like #MeToo and Black Lives Matter were at the forefront of the global conversation. It culminated in a change of presidency in the US, and the arrival of the first ever woman (and woman of colour) to hold the office of vice president.

Representation is a key theme for 2021 and not one that investors will ignore. Not only do VCs now have targets to meet in terms of representation, but there are funds created specifically by female investors for investment in all-female boards and specific VC funds to support diversity in investing. This has never happened before.

While other markets lagged, technology was a genuine winner in the pandemic. In 2020, every part of our lives became digital, and the ability for every business and individual to do whatever they do online moved from conceptual to essential. As such, any business or sector that fails to evolve with the developments in technology faces new and profound risks.

Described in investment circles as the new ‘Tech Gold Rush’, 2021 could be the new 1999 when it comes to investment.

Government lockdowns across the world in 2020 left a large number of the population with not a lot to do.

Any market that achieved 9.3% growth in 2020 is worthy of note. Gaming did. The world’s gaming population has grown year-on-year and in 2020 will reach 2.6 billion people. In fact, a nation inhabited only of gamers would be bigger than China and India combined.

Since 2019, the world-renowned Call of Duty video game has grossed more than $500 million, while Christmas shoppers in 2020 have struggled to buy the new PlayStation 5 console, as Sony’s latest release remains out of stock the world over.

VCs everywhere will be looking for the next big winner in this booming market.

This is a slightly more left-field market, and one that recognises the direct-to-consumer start-ups. In 2020 VCs have found growth in the surge of discretionary online spending throughout lockdown, so much so that they are now identifying and labelling this market as the ‘late night brands’.

Typically, these are fast-moving consumer goods (FMCG) people buy on a mobile phone, via social media, while simultaneously consuming another form of media. It’s been described in investment circles as ‘Netflix and billed’.

As the world returns to work, discretionary spend could lessen as people become more budget-conscious in 2020’s fourth quarter. VCs will continue to find growth – and therefore value – after the pandemic, now the world’s population has taught itself to buy online.

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