13 Investing Predictions for 2021
For the past few years, over that quiet final week after Christmas, I’ve been making a list of predictions for the new year to come. Spanning across venture capital, tech, demographic trends, and emerging areas of interest, my lists from previous years have served as a way to both hold myself accountable and put into words the whirlwind of thoughts that cross my mind on a daily basis.
This year, I’ve decided to publish these predictions. Although 2020 proved to be a year that no one could have predicted, I hope we see some of these themes come to fruition in 2021. While some of these takes may seem a bit out there, many are legitimate possibilities and areas that I’ll be watching closely going into the new year.
So with that, let’s start off hot out of the oven with a crowd favorite: digital media.
Digital Media
1. Gaming will become the next $100 billion consumer goods channel (g-Commerce)
Depending on how you size a market, this take will seem either completely out there or a bit bland. Regardless, investors will be keeping a close eye on “g-Commerce,” or in-game commerce.
Users on gaming platforms are becoming increasingly engaged. For example, Fortnite hosted a concert with rapper Travis Scott, attracting over 12.3 million attendees. With video games becoming a new “third place” between work/school and home, as well as the increasing adoption among non-traditional players and widespread popularity, the gaming industry has several catalysts to propel it forward as a new retail channel:
- A highly engaged audience that is growing rapidly
- Its global reach by nature of being digital
- Platform offering interaction and social discourse
- Robust processing power that will enable a large volume of transactions
- Users with high-speed connections
- #Metaverse —one of the hottest topics in VC, but creates an opportunity for virtual currencies and economies
We are already seeing the beginnings take place with the “gamifying” of the fashion industry for audience engagement. For example, just a few months ago, Burberry announced it will be launching its summer 2021 fashion show via Twitch. Pandemic-driven cancellations of in-person events may spawn a digitization of future events in all consumer-facing industries, and what better way to reach the next generation of buyers than through a channel in which (in the case of Roblox) users spend nearly 3 hours per day!
All of this time spent online will spur another media prediction related to industry consolidation.
2. Large media platforms will lead a spree of consolidation
With so many individual content creators across podcasts, newsletters, blogs, YouTube, and TikTok, as well as their audiences growing in size and level of engagement, I expect many large incumbent media companies to start striking deals with these creators, similar to what we saw with Spotify acquiring exclusive rights to Joe Rogan last year.
This phenomenon is best illustrated in the podcast industry. Podcasts are quickly growing as a new form of content consumption. 37% of the US population (104 million) has listened to a podcast in the last month, up from 32% in 2019, and this number is only increasing. Only 16 million people consider themselves “avid podcast listeners,” leaving a remarkable opportunity for whitespace in the market.
However, the supply of podcasts is also increasing, while only a few key, quality personalities or companies that dominate listening and engagement, such as Wondery, Joe Rogan, Kara Swisher, and Tim Ferris. I expect this dynamic to spark a battle for vertical integration among content distributors (Spotify, Apple, Amazon) for these and the other elite few podcast creators.
3. Focus on mental health and the monitoring and awareness of the content we consume
As the pandemic increased mental health awareness, it also increased the volume of digital content available at our fingertips. The reality is that much of this content is what Polina Marinova Pompliano, author of The Profile, calls “junk food content” and is often a waste of our time.
I’ll be watching for new startups focused on tackling the issues surrounding mental health, depression tied with social media, and the common exhaustion/fatigue we’ve all experienced after spending hours watching a mindless show or scrolling through substance-less “news” stories online.
“What we put into our brains will become just as important as what we put into our bodies.” -Polina Marinova Pompliano
Speaking of which, let’s talk about health.
Health and Healthcare
4. Digital health will continue to see a massive boom in funding and widespread consumer adoption driven by the pandemic
Just as the pandemic accelerated all sorts of trends, being forced to stay at home opened our eyes to emerging new area of telehealth. When it no longer was possible to go visit a doctor, the doctor and related health-services came to us — virtually. The opportunities in remote clinical services offered through “virtual visits” with healthcare providers are plentiful and only growing as the technology improves and funding increases. The median VC deal size through Q3 2020 was $39 million — up from $25 million in 2019.
Outside of telehealth, digital health has also seen a surge in artificial intelligence research tied to A.I. in healthcare and A.I.-assisted disease research stemming from COVID-19.
5. Social health platforms will emerge with tools to foster connection and meaningful relationships
As I mentioned above, mental health awareness has taken center stage over the past year. Quarantine caused isolation and loneliness for many, and with lockdowns came a severe longing for social interaction.
While we met digitally through Zoom, most social interactions were quick, efficient, and seemingly transactional. I expect this meaningful social deprivation to create an intense appreciation for deeper human relationships. This will likely be reflected across platforms focused on community, employers, consumer brands, and even new technologies.
6. Personalized medicine gains traction as more data on patients becomes accessible in near-real-time
Increased adoption of biowearables among consumers will lead to greater accessibility of data and insights related to individual health. Wearable startups like Oura and WHOOP, which initially targeted serious athletes and high performers, will gradually become mainstream and used by regular people. WHOOP recently raised a $100 million round of financing at a $1.2 billion valuation, and new VC firms (such as NEXT VENTŪRES) have emerged, focused solely on the area of improving human optimization.
Levels, a startup offering continuous glucose monitors and insights, recently raised $12 million led by a16z. The biowearable market is hot, and as more data on individual health metrics is available, doctors will be able to personalize drug types and dosage to each patient’s personal needs.
Investing in Private Markets
7. Traditional VC will slowly be infiltrated by founders and creators as new investors
We saw the beginnings of the creator economy in 2020. Podcasters, writers, streamers, TikTokers, and YouTubers will start to seek new ways of monetizing their audience bases beyond subscription or ad models. They could even start to appear on cap tables, as TikTok star Charli D’Amelio did with her investment in Step, a teen banking startup, last month.
With the increased competition for deals and commoditization of capital, VCs who find difficulty establishing a unique and compelling value proposition for portfolio services will have an even harder time accessing good deals. On the flip side, I expect many VCs to partner with famous figures (i.e. content creators, pro athletes, etc.) to improve both deal flow and their narrative around portfolio value-add capabilities.
8. LPs and investors generally will start to realize that the real returns are in private markets, leading to an emergence of new VC funds
I know this one is may stir up some controversy, but if the recent IPO-palooza showed us anything, it’s that the winners are the institutional investors who invested earlier in private markets, not the public market investors who bought post-IPO after the pop.
Moreover, companies are staying private longer than ever before, and I expect the private lifespan of companies to only increase. With capital increasingly available and the baggage that comes with being a public company (quarterly filings, public scrutiny, reporting standards), it only makes sense that private companies stay private as long as possible.
As supply of capital grows and LPs look for new ways to deploy capital, following a strong year for IPOs and a low-interest rate environment, I predict that new funds will emerge (even more than in 2020) to chase private market returns.
Whether it’s ex-founders or experienced GPs leaving established larger platforms, this new wave of funds will spark a greater demand for seed stage investment rounds by institutions, which may even lead to increased “pre-seed” stage investment.
Work
9. A new C-Level position — the CHRO (Chief Human Resources Officer)
Much has been written about the pandemic’s implications for remote work, so I’ll be brief here. I believe culture was grossly underappreciated as an asset to a company prior to the pandemic, and the shift to remote work (regardless of your view) has proven that culture is both crucial and difficult to maintain.
The hardships of maintaining and transmitting culture are easily visible in the onboarding of new hires in a virtual environment. Whether it’s trying to offer a valuable internship experience or onboarding a new full-time analyst, trying to replicate and transfer culture through Zoom is just not the same.
With this increased emphasis on company culture, the distributed workforce has also led to the realization that “talent” — however you want to define it — is not a pure quantitative measure, and that EQ matters just as much as (if not more than) IQ. Human resources will spearhead a redefined focus on creativity over simply execution when hiring and assembling teams.
Regardless of your views on the future of remote work, the distributed workforce is here to stay (at least partially), with a reorganization in HR at companies to be more global, flexible, and digitally-focused.
10. Rise of the individual — the personal business economy
As I touched on in predictions 7 and 8, the rise in VC funding opportunities will contribute to lowered barriers to entrepreneurship.
There has never been a better time to be an entrepreneur.
Plentiful financing opportunities, along with a growth of the creator economy, more bundles of tools will emerge to allow individuals to aggregate content; engage their community; and manage finance, marketing, and sales. I envision a full-stack Shopify-esque platform for individuals. We are already seeing this trend play out at a smaller scale with platforms like Substack, but I expect to see more platforms arise offering a wider range of enterprise services in one place.
I also expect more consumers to join private, membership-based communities, driven by this new class of creators. Quarantine has exacerbated the human need for connection with others and the search for a sense of what reality is. Private communities of like-minded people satisfy both of those needs.
Retail and eCommerce
11. eCommerce eats retail + DoorDash’s unique opportunity
Most people fail to realize just how powerful FedEx and UPS are in our global distribution network, and their leverage is being seen during the current delivery strain. Delivery giants are capping shipment limits to simultaneously meet shipping demand and fulfill their civic duty as vaccine distributors.
At the same time, the flight to the suburbs, surge in remote work, and retailers shifting from brick-and-mortar to online business models has led to a boom in eCommerce spending.
However, the system is strained, with essentially only UPS, FedEx, and USPS dominating the space and not enough capacity to meet the surging demand for delivery services.
All of the trends mentioned above provide an opportunity for non-urban food delivery companies to diversify beyond food and into physical goods.
*Enter DoorDash*
I see this situation as a chance for DoorDash to expand from food delivery to a last-mile enabler for localized eCommerce. The company’s base of suburban metro areas could enable them to establish individual local networks of retailers in these different regions.
Such a system would allow independent retailers to reach more customers without relying on the incumbent delivery giants. While DoorDash’s current tech is meant for restaurants, would it really be that much different to apply it to retailers?
“Just as Amazon started with books, DoorDash started with food.”
-Probably all of us in 10 years looking back on 2021
Amazon has already entered, and if DoorDash doesn’t enter the delivery space, another rock star startup will.
In any case, they could at least start with grocery delivery services. Speaking of which, I expect grocery delivery to stay mainstream after its mass adoption among consumers onset by the pandemic, as well as its favorable dynamics in creating a recurring revenue stream through simplifying an instinctual human behavior.
But grocery will require a key missing piece to the eCommerce puzzle: last-mile delivery.
12. Last-mile delivery tech improves rapidly out of necessity
Watch out for M&A and SPAC activity in this area to explode in 2021. With loosened regulatory barriers — Prop 22 in California exempts gig economy companies from providing employee benefits — and currently dominated by a few stagnant players, the industry is ripe for, say it with me, ~disruption~.
As I mentioned in prediction 11, food delivery powerhouses (DoorDash, Instacart, Postmates, etc.) are positioned nicely to move out of food and into broader retail and convenience.
Even more interestingly, investment in electric and autonomous vehicle (EV/AV) technology is currently hotter than a summer day in Atlanta. Think of SPACs, Rivian, Tesla, Nio — the list goes on.
With such increased awareness, there exists opportunity for Amazon, Walmart, UPS, or FedEx to partner with an EV/AV company. Such a partnership would foster an environment for rapid tech development, more competition, demand for top engineers, and bringing of products to market.
I expect continued investment plus new partnerships in EV/AV in 2021 that will spur innovation across fleet management software, autonomous delivery robots, and other last-mile delivery solutions.
Sustainability
13. An enormous wave of funding and new companies targeted at mitigating the climate crisis
2020 was a pivotal year for the sustainability movement due to tangible environmental impacts seen from wildfires, hurricanes, and other natural disasters.
Additionally, with people spending more time outdoors during the pandemic and a newfound appreciation for the natural world, the conditions are ripe for a new wave of startups to emerge. One potential industry is sustainable travel, with pent-up travel demand and consumers seeking ways to reduce their carbon footprint.
Even if travel takes multiple years to recover, I expect a flood of investment in companies and technologies (such as predictive analytics in climate forecasting) focused on mitigating the next global challenge we face.
If 2020 taught us anything, it’s that we are more resilient and capable than we thought. If we work together in our efforts and send our resources towards technologies to change the world for the better, we can accomplish spectacular feats, as we saw with the miraculous development of the COVID-19 vaccine.
There is so much to be excited about heading into 2021 and so many new ideas yet to be explored, so fasten your seatbelt and enjoy the ride — we’re in for a doozy.
What do you think? Let me know if you agree or disagree with any of these predictions. I’d love to keep the conversation going.
If there are any other topics related to VC, tech, business, or investing you’d like to see, please reach out! I’m always looking for new people to meet and topics to explore.
