Top financing trends for startups in 2021
Their flexibility and adaptability have made them the main focus of investment and hope for the digital demands of the future. The startups have not been to the margin of the crisis, but the lack of liquidity has not reversed in the same operational problems.
Now, large mutual funds and other capital-intensive entrepreneurs are scouring the market for projects and businesses that are resilient in the face of crisis and built around the needs not only of today but also of tomorrow.
Caution and promises
The growing interest in startups in the face of an increasingly concentrated market does not ignore the fact that this concept of entrepreneurship continues to be linked to extremely high levels of risk.
Between 30 and 40% of these businesses close in their first five years, between 40 and 60% end up as bad investments, and only one or two manage to offer enough returns to be considered successful without regard.
Investors are aware of this fact, and that is why they are more demanding than usual when studying business options. Which has not prevented the progressive growth of the sector in recent years.
With such a result, what seemed to be the beginning of a negative trend in 2019 was broken. For investors, the reference is the 1,227 million that were harvested in 2018, and that points to objective improvement and unrelated to the context of the slowdown or the pandemic.
What worked in 2020: a clue to what is to come
According to the Entrepreneurship Map 2020 – a report that collects the status of this activity in our country for seven years – there are already 6 out of 10 entrepreneurs who have created at least two startups.
It is the highest proportion of the entire series, and is aligned with what is reflected in the European ecosystem, that of the United States and even Latam. Because it is important? The study authors have found that the level of failure decreases after each attempt .
Hence, it is not surprising to see how Spanish entrepreneurs have managed to take advantage of the context and bet on the sectors with better future prospects. Thus, up to 40% of those who started in 2020 did so in the field of health.
In quantitative terms, the capital invested in healthcare businesses has grown by no less than 78% . The Map indicates as followers of the trend fields associated with the material and immaterial effects of the pandemic:
points to other sectors directly related to digitization that has promoted physical restrictions.
Opportunities are opening up in a multitude of sectors: fintech, insurance or proptech, and also the health sector, education, the entire SaaS industry (cloud services to help companies digitize, including, for example, legal tech) , cybersecurity or logistics.
Possible trends for startups in 2021
To understand where the sector will go throughout the year, we must focus on a single priority: the new consumer. Entrepreneurs decide and investors determine ROI based on these.
The crisis has changed priorities and erected new ethical market values . For this reason, any business whose ultimate objective is user service will be able to function.
With that seed, exogenous factors will generate the correct synergy to drive any company forward. ” We hope that 2021 will be a great year for startups, there is more liquidity than ever in venture capital funds .”
” We are also going to see more investments from corporate funds and more acquisitions because large groups are going to have more interest in buying technology companies .”
And what will that mean for the entrepreneurs themselves? From Forbes, there is not such a resounding analysis chart.
More complexity in early rounds
The clearest example will be the British ecosystem after Brexit, but it will not be endogenous to the islands. The recession and rising unemployment will inevitably drain money from the investment market in the business angel and pre-seed stages.
As a consequence, it will be more difficult for entrepreneurs to get their initial round of capital, Founders starting in 2021 will have to focus on creating as simple a business as possible.
Abundance in later phases
Observing the peak of activity on the part of series A investors – henceforth – it is logical to think that 2021 will suffer the same fate. The options will decrease, but in them more FOMO will be deposited.
In other words, competitiveness will grow without damaging opportunities. ” The rounds will place the CEOS at the epicenter of the show when talking about the choice of funds and valuations, ” he adds.
” There could be a slight pause to breathe in the first months of 2021, taking into account the strong end of 2020 and the limitations of human capacity within the funds, but this will be limited in time .”
Technology, technology and more technology
The crisis has not treated all sectors the same, and businesses highly technological or focused on digital ecosystems have become the big winners of the contest . Something that will continue at least in the next five years.
Legal frameworks and industry trends guide the compasses towards certain markets by 2021:
- Automation: growth will be seen especially in heavy industries. ” Previous challenges around accuracy and cost have been solved thanks to advances in artificial intelligence and robotics .”
- Autonomous vehicles: the laws will continue to restrict their implementation, but the trend will be progressive, and not only in the automotive sector. ” Investors are accepting that, away from the congested public highways, there are countless investment opportunities.
- Basic technologies: the mantra “if it ain’t broke, no, don’t fix it” will give way to widespread digitization. Both banking and telecommunications and other industries will be fully open to cloud solutions. ” Investments will continue to flow into this space .”
- Teleworking: although the digital utopia has not been full, the crisis has started the migration towards hybrid performance models. All specialized solutions will work to respond to new needs.
- Infrastructures: the so-called Infratech will live their particular spring thanks to the new pollutant emissions targets, the growth of renewable energies, and the search for efficiency