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How will the startups created in 2020 be different from startups built before?
It's a great time to build a company, but the coronavirus pandemic, economic downturn and Black Lives Matter movement will shape startups in new ways, according to top venture capitalists.
Co-founder of LinkedIn and general partner at Greylock
The class of 2020 startups will be unique in two ways: 1) the massive shift in market readiness, and 2) nearly every founding team will be distributed.
The pandemic has set certain markets back (e.g. coworking spaces), but it has also created the conditions for other markets to take a giant leap forward. A specific example: telehealth startups. While the majority of health visits have now moved to video calls, the implications go well beyond a simple shift in delivery mechanism.
Moreover, older adults represent a large proportion of patients, and an even larger proportion of market power. Not previously early adopters of telemedicine, older adults are now developing what is likely to be a lasting habit, accelerating the industry adoption cycle by several decades. This will speed up the deployment of new technologies such as AI and machine learning to make diagnoses via smartphone imaging, or to extract information from doctor-patient interactions and improve follow-up and follow-through. And while the pandemic will eventually recede, we will see a permanent change in how we access health care.
Another impact for the class of 2020: All founding teams will be distributed. Previously, most founding teams coalesced in a specific place, but there isn't much social distancing in a garage! Teams that want to build world-changing products together will need better ways to communicate. It will be more difficult — and more important than ever — that co-founders find ways to quickly connect and align. And when people are sheltering-in-place, the geographic density of talent in Silicon Valley is much less relevant. The techniques that Silicon Valley uses to scale companies, such as Blitzscaling, can be learned and practiced by anyone. The next generation's big winner could be based anywhere with sufficient access to financial capital and virtual access to technological expertise.
Co-founding partner at Floodgate
- Areas where I think there are interesting new opportunities for startups:
- They will leverage new knowledge management tools: Knowledge management hasn't been rethought in some time, but with the move to remote work — whether they are fully remote teams or hybrid teams — documentation will become a central focus of organizations. Some interesting tools have popped up (Supernote.io and Almanac.io are two we have invested in, but Notion and Roam Research are two other examples) and we're still investing in this space. In particular, I'd be interested in companies that are creating deeper knowledge management and search as well as a social network for knowledge, which is more consumer-facing.
- They will empower the solopreneur: With the uncertainty of the go-forward economy, many individuals are taking matters into their own hands and becoming their own businesses. Digital tools like Dumpling.us and Mighty Networks (our investments) enable the solopreneur to build their own clientele, set their own schedule, and create their pricing on their terms. We also think that companies like Substack and Cameo and Patreon power a new content path for solopreneurs
- They will rediscover the Future of Joy: With money saved on gyms, travel, events and eating out, consumers will start to look for new ways to experience joy. There are opportunities for creating new categories of spend. One example we are seeing is Learn Monthly, where we believe consumers are mastering creative pursuits like oil painting or music production in a similar manner to how they might pursue running a half marathon (social, bragging rights). What other ways of experiencing joy are new and unexpected?
- How startups will be run differently than in the past:
- Essentialism: Companies started this year will know what is essential and what is not. Employees will not be bogged down by face time but will be evaluated on the quality of their work and measured by the contributions they make to their company. Many of us have applied the Marie Kondo principles of decluttering our homes to decluttering our work lives and businesses. It enables us to rethink fundamental assumptions about the world — what we need and what we simply do because it's the way that it has been done. My feeling is that this means management moves from storytelling to execution with a renewed emphasis on wisdom rather than hope.
- Minimum viable companies: Companies started this year will not try to buy the perception of product market fit with growth of vanity metrics. Instead, they seek to build first a minimum viable company that balances product innovation and value with a business model that is not dependent on scale for margins. Such companies have the ability to outlast competitors and are not required to outspend them. While this may mean less reliance on venture capital, most companies don't need venture capital anyway.
- Renewed focus on access and inclusion: Founders are focused on creating diverse teams from the get-go. This means diversity of viewpoints. Diversity in lifestyle. Diversity in background. Much of this is enabled by geographical diversification through remote work. Continued work needs to happen to make sure that this representation happens at the executive level, board room and cap table.
Managing partner at Forerunner Ventures
This year has exposed so many important issues, including the crisis of COVID and the deeply important and impactful work of Black Lives Matter. Because these long overdue issues have surfaced and cracked the outdated veneer of status quo, this breakthrough class of startups will be reevaluating long-held business values and instead lead with compassion to make a real social impact.
These new startups are likely to be more purpose-driven with regards to their missions, business impact and cultures. The ones that capture our attention will be built around solving customer needs versus desires; they will prioritize sustainability practices and be hyper aware of their overall footprint on the planet; and importantly, they will be building diverse teams with inclusive practices. These startups won't be afraid of having important and often difficult or uncomfortable conversations and will understand their ability to influence for good.
In terms of operating, because of the pandemic, millions of workers experimented with working from home for the first time in their careers. And given that many tech companies have already mandated work-from-home until 2021 (Twitter, Google, Microsoft), many others will likely follow suit. As we continue to adapt to remote work, employees are operating within different frameworks, and companies will need to reimagine new ways to foster bonds and build strong team dynamics, especially from the top down.
In the face of unknowns and unimaginable hurdles to growing a business, flexibility and the fortitude to make swift changes will be more essential than ever for founders. Founders set expectations on growth, and it's their responsibility to build teams that can deliver on those visions, but now more than ever they have to have the adaptability to react to and ensure solid foundations for achieving considered growth and recalibrating their businesses for ever-changing environments. Resilience is the key word here.
Venture Partner at NextGen VP
We've left the pre-COVID world, where companies can easily raise millions amid major money losses and ignore human and social dynamics. New startups will be molded by the implications of COVID and the social and racial justice movement.
Startups will be remote-first to preempt health issues and avoid unnecessary real estate costs. Startups will focus on problems that affect the many and not just the elite few because of the work-life challenges that COVID has brought about (e.g., job loss, WFH). Startups will bootstrap, prioritize revenue, profit and performance more than ever. Because of the tightening of purse strings, startups will prompt side-hustling entrepreneurs looking for extra cash. This new breed of entrepreneur will create products and services (a la passion economy) and generate additional revenue streams.
From a social and racial justice movement perspective, startups with underestimated founding teams will get their moment to shine with capital coming their way from the VC and tech ecosystem that is putting their money where their mouth is (e.g. a16z's Talent x Opportunity Fund, SoftBank's Opportunity Growth Fund, Google investing $100 million in underestimated founders and funds).
Funding will come from a more diverse set of vehicles, from alternative VC funds to equity crowdfunding, to debt to newly activated diverse angels. Underestimated founders will build the companies of the future — ones that represent the diversity of our population and produce the products and services that the mass market sorely needs.
Partner at First Round Capital
The national conversation around race and equality is creating a renewed emphasis on the importance of diversity in the startup and venture ecosystem. I'm hopeful that this much-needed and long overdue pressure — on both the startups being built and the investors tasked with backing them — will result in a more diverse class of founders than ever before.
Founders are taking a hard look at the composition of their founding teams, their cap tables, their board rooms, and their early hires — and will be less willing to let "diversity debt" accrue as the costs are impossible to ignore. As investors, we have a tremendous amount of work to do here. That work consists of 1) acknowledging and dismantling the bias within narrow "traditional" founder archetypes, 2) putting in the legwork and process changes it will take to back more founders of different backgrounds, and 3) pushing ourselves and the companies we back to build more inclusive organizations that are more representative of the country that we live in.
Whether it's fully remote or some kind of hybrid model, we're also seeing a broader shift toward both distributed workforces and distributed systems. We're noticing that companies in our community are increasingly opting to buy rather than build, and we expect to see developer focused API services proliferate. We're excited about this trend because it empowers new companies to focus as much as possible on their core product and creates a new category of developer focused companies for us to partner with as investors.
Finally, the growth-at-all-costs mentality is becoming more muted in the 2020 startups. We are seeing a shift from a "tell me the story" fundraising environment to a "show me the proof" fundraising environment. Conversations around contribution margins and unit economics are starting much earlier on in a company's life. We think businesses without a very strong economic engine will face challenges when they go to raise money this year, and the class of 2020 founders will take this into account when balancing growth vs. profitability.
Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.
El Salvador's President Nayib Bukele recently pushed through a law making the country the first in the world to adopt bitcoin as legal tender. But there's a problem: A company it is relying on doesn't have the required U.S. licenses.
Zap Solutions Inc., which operates the Strike digital wallet, doesn't have money transmitter licenses in most U.S. states, according to Decrypt. Strike's website said it is offered in the U.S., except in Hawaii and New York. But Zap only has a license in Washington state. That could mean transactions to or from the U.S. could be illegal.
Remittances, largely from the United States, account for more than 20% of El Salvador's gross domestic product, according to the World Bank. One reason why Bukele has touted bitcoin for the country is the potential to lower the cost of remittances.
Electronic Arts announced Wednesday it has agreed to acquire Playdemic, the maker of the popular mobile game Golf Clash, from Warner Bros. Games for $1.4 billion in cash. The deal marks EA's second major mobile acquisition in six months, following its decision in February to acquire Glu Mobile for $2.1 billion.
The deal should benefit both companies, though in vastly different ways. EA, more traditionally a maker of console and PC games, is looking to expand its mobile portfolio as more and more of the game industry's growth comes from smartphones. Golf Clash, in that respect, is a popular mobile game with more than 80 million downloads and a competitive online element with high player retention and in-game spending.
Warner Bros., on other hand, is looking to find new homes for some of its media properties to shore up cash now that its parent company, WarnerMedia, is being spun out of AT&T and merged with Discovery. There has been some speculation as to what will happen to Warner Bros.'s game division during the merger, considering AT&T said it was interested in selling off the unit as early as last September. Following the merger announcement, the company told IGN that some, but perhaps not all, of the internal studios might be sold off in the transition to Warner Bros. Discovery, though it was not certain.
However, the press release announcing the Playdemic sale says, "The remaining Warner Bros. Games portfolio is included in the recently announced WarnerMedia-Discovery transaction and will become part of the combined media and entertainment company after the expected close of that transaction."
Web browser company Brave has already positioned itself as the privacy-friendly alternative to Chrome. On Tuesday, it came for even more of Google's territory with the launch of its privacy-focused search engine.
The company said in March it was launching a search engine that doesn't track or profile its users. Now, the company is launching Brave Search in beta.
"Unlike older search engines that track and profile users, and newer search engines that are mostly a skin on older engines and don't have their own indexes, Brave Search offers a new way to get relevant results with a community-powered index, while guaranteeing privacy," Brave's CEO Brendan Eich said in a statement.
Brave's built its own search index for this product, rather than relying on Google or Bing. For some queries where the index doesn't have enough relevant results, Brave will use Bing as a backstop. But users will be able to see what percentage of results are coming from Brave's index, versus third parties.
"Brave Search fills a clear void in the market today as millions of people have lost trust in the surveillance economy and actively seek solutions to be in control of their data," Eich said.
As Brave leans into the search market, Google is, meanwhile, working on making its browser more privacy protective, in part, by killing off the third-party cookie. But critics argue that while third parties may have a harder time tracking people on Chrome, Google, which has a gigantic ad business of its own, will still be able to follow their every move.
Bitcoin has fallen bellow $30,000 for the first time since January and could soon turn negative for the year. The cryptocurrency fell 11% between Monday and Tuesday to a low of $29,140.96, according to data from CoinDesk.
The six-month Bitcoin boom began its decline when Elon Musk tweeted a breakup meme with the cryptocurrency, signaling that Tesla would be reevaluating its investment because of the emissions and environmental consequences of crypto mining. While Musk later walked back his comments, the cryptocurrency has been volatile ever since.
Traders had speculated that $30,000 was the possible support level that would ease the cryptocurrency's fall, but its new low has some speculating that level could actually be $25,000 or even $20,000, according to CNBC.
The European Commission opened an antitrust investigation into Google's ad business, it announced Tuesday. The regulator is looking into whether Google favors its own ad tech services "to the detriment of competing providers of advertising technology services, advertisers and online publishers." It's also examining whether Google distorts competition by restricting third-party access to user data.
In a statement, Europe's antitrust chief Margrethe Vestager said, "We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack." The commission said it's particularly interested in the obligation to use Google's ad tech tools to buy ads on YouTube, and whether Google's ad tools favor its own AdX exchange.
It will also investigate Google's planned removal of third-party cookies in Chrome, and its plans to stop tracking on Android phones.
The European Commission previously fined Google €1.49 billion for "illegal misuse of its dominant position in the market for the brokering of online search adverts."