A return to fiscal responsibility and sound board governance
Private companies with inflated unicorn values got a reality check in the public markets in 2019. Lyft and Uber felt it on the largest scale, but it’s happened at all stages, as companies prioritized growth ahead of fiscal fundamentals. WeWork imploded because calling yourself a technology company when you aren’t doesn’t actually produce a scalable $40 billion-dollar business, just an illusion of one. The growth-at-all-cost mantra isn’t paying off.
The market will continue to return to fundamentals, fiscal responsibly, and sound board governance. Founder equity at the early stage will be structured so that board involvement will have more oversight. For example, founder’s equity at the angel round will be forced into the option pool as they have to earn it out. You’ll see SoftBank and VisionFund tweak their mega-funding, grow-at-all-cost strategy and evolve towards more fiscal responsibility. Masayoshi Son will still be the maverick risk-taker, but I’m betting VisionFund 2 doesn’t get off the ground. The original fund needs the focus, and investors will demand it.
Dual-class, super-voting shares fade away with tech startups
The last few years have seen a rise in dual-class shares particularly with technology startups. These are shares that give founders super-voting rights. Mark Zuckerberg’s class B shares give him 60% control. That means Zuck controls everything at Facebook. This scenario played out during the recent WeWork debacle with Softbank having to buy out founder Adam Neumann to the tune of $1.7 billion.
As noted in a recent Vox article: “Companies like Facebook are basically putting in place a share structure that is a bulwark against management change,” said Amy Borrus, the deputy director of the Council of Institutional Investors (CII).
Dual-class shares aren’t going away altogether. It will take some time to come to fruition, but next year we will see the earliest stage deals set this up. All-powerful, all-ruling founders will gradually give way to more structured and equitable governance.
Female founders finally break the 2% threshold and get real VC traction
Here are two key facts in our industry: first, there are more opportunities to access funding than at any other time in history. Second, report after report shows that companies with women in leadership positions experience better innovation, increase productivity, and improve financial results. Still, women are still getting a paltry amount of venture funding (hovering around the 2% figure for years) according to data from PitchBook (and others).
2020 is the year we finally see real growth pushing that 2% to at least 8%. That’s not anywhere near where it should be — it could take 10 years to see parity — but at least we’ll start to see upward traction. I see the wave building across the industry from conferences to boardrooms to the startups working with Oracle.
Some of the strongest, most insightful startups in our program are led by female founders. Each of them cite access to capital as a major hurdle in starting and growing their businesses, which is a shame because companies like Snap Tech, Transmute, Jobecam, Gapsquare and others are solving big global problems and helping both the enterprise and our society advance.
Explosive growth in environmental and agricultural tech
2020 will bring tremendous growth in solutions solving for environmental and agricultural advancements. Our societal and human needs are pushing the urgency. There is also a tension with how social enterprise and impact funds are realized. AgriTech and environmental tech will be where this happens.
We are already seeing this in our Oracle for Startups program. Kinetica, a platform for active analytics and real-time insights, is partnering with the San Francisco Estuary Institute (SFEI) to protect the fragile ecosystems and waters around the San Francisco Bay. In the realm of food production in an increasingly unstable climate, LettUsGrow helps indoor farms thrive to produce healthy, sustainable, and safe food. TechShelta provides technological support to greenhouse farmers in Ghana and across Africa to help optimize production. Agroscout uses drone technology and real-time data to give farmers better ways to plant, irrigate, rotate, nurture, and maximize crops for better food production.
Shift from traditional “incubators” to a focus on virtual support via corporates
While there has always been a focus on helping startups and entrepreneurs through traditional accelerators, you’ll see a greater increase and collaboration with startups and corporations. Regional incubators will continue to pop up, and they will have short lives, well-established firms notwithstanding. Instead, there will be a focus on virtual acceleration and collaboration. Much like what we see from Coursera and Udemy for education, we will see more virtual offerings for incubation and acceleration. Corporations across the globe have launched virtual startup programs and innovation hubs to connect and support startups.
As Steve Case’s “Rise of the Rest” mantra underscores, great ideas and technological solutions can happen anywhere across the globe. No longer limited to the traditional hotspots of San Francisco, Boston, London, and Tel Aviv, we are seeing solutions pop up everywhere. That’s why you’ll see the strong uptick in “virtual” programs to meet and reach those entrepreneurs with the resources they need regardless of where they live.
2020: 5 Predictions for the Startup & VC Community was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.
Jeremy Webb Startup Grind - Medium https://medium.com/startup-grind/2020-5-predictions-for-the-startup-vc-community-a265fe02ddfd?source=rss----f5c95cc981bd---4