2018´s Industry Recap and 2019 hottest industries for Venture Capital

2018 was a historical year. Last year saw the highest level of venture capital funding since 2000, the last year of the dot-com bubble.

According to data published by PitchBook and the National Venture Capital Association, Venture Capital firms spread roughly U$S 131 Bn. across 8.949 deals.
The previous record was a $100 million total notched in the year 2000.

More than a half of the total capital invested came from U$S 50 M (or more) deals. This boosted the average deal size and valuations across every investment stage and series last year. But because venture investors are paying so much up front, it’s becoming harder to profit.

382 fundings were U$S 100 M (or more) “megarounds,” up from 266 in 2017, with 184 of those coming from the U.S.
In terms of “unicorns,” companies with a valuation of at least U$S 1 Bn., the U.S. saw the creation of 53 new ones in 2018 versus 29 in 2017.
The fourth quarter alone saw 21 “unicorn births,” the highest ever recorded in a single quarter.

Venture capital investments in Asia rose 42% in 2018 versus 2017 with an 11% increase in the amount of money invested. Asia broke records with a 35% in “megarounds”, to 162, and a 60% jump in the creation of unicorns, with 40 coming of age during the year.

California, Massachusetts, and New York continue their dominance of venture investment activity, attracting 79% of total U.S. capital invested and 53% of the number of U.S. deals completed last year.
VC funding in the San Francisco region jumped 55%, to U$S 28 Bn., and New York funding reached U$S 13 Bn.
Venture Capital firms and investors point to increasing operating costs and higher valuations in those three states, signaling optimism for more investment in emerging ecosystems, which also have the benefits of a growing talent pool, maturing networks and ecosystems, and more favorable pricing.

VC Trends

Artificial intelligence, digital health and financial technology companies led the investment portfolios, with AI-related funding jumping 72%, to U$S 9.3 Bn.

Software continues to eat the world but life science activity has seen significant growth.
More than U$S 23 Bn. was invested across 1,308 deals in life science startups, a record high for both metrics.
Healthtech drew a significant portion of angel/seed investing in 2018Q4, highlighting investor interest in funding groundbreaking technologies to meet some of the biggest challenges and opportunities in the sector.

Rise and Fall of the Venetian Empire

The Rise and Fall of the Venetian Empire should be a must-know Lesson for Innovators

In the fast paced world of technology, innovation is the name of the game. If entrepreneurs do not keep up with the innovative strategies, they would eventually end up losing their market share. A great example can be none other than the rise and fall of the Venetian Empire. To get a better idea of what happened, following is a brief background of the empire along with the lesson learned from it:

Background of the Venetian Republic

Every business would want to last for centuries just like the Venetian Empire did. Between 697 and 1797 AD, the empire flourished the most as a result of its ability to make good decisions in the field of technology along with its unconventional ways and geographic location. However, you should bear in mind that if one has to face a sudden change, it can cause the strengths to turn into weaknesses, leading to a fall of thousand years of success.

The Military Technology

Having a military technology and central position on the main trade routes gave the Venetian Republic a strong edge. The Arsenal, a naval military weapon factory that was considered a production line method of manufacture, was a core of the empire’s naval industry. It fostered creativity and encouraged entrepreneurship and innovation in building its galleys.

Central Geographical Location

The Venetian Republic’s location allowed it to protect itself from sea based as well as land based invaders. Its geography propelled it to develop a money lending and trading economy as there was a limited area that could support agricultural activities. Moreover, it was situated at the top of the Adriatic Sea, which enabled it to become an important trading hub, connecting both the west and east side through the Mediterranean.

Exploitation Over Exploration – A Beginning of the End

Like a number of successful organizations, Venice also hit the level where it started focusing on exploitation instead of exploration. Entrepreneurs decided to follow a traditional route, as established practices gained popularity as compared to exploration. Traders and merchants focused on incremental innovation through efficiency and optimal use of resources. Having a focus to quickly increase their fortune, they deviated away from mapping new directions.

According to Alessandro Barbero, a professor of medieval history at the University of Eastern Piedmont, galleys were favored by the city’s navigators for a very long time. But as seafaring galleons began to surface, it allowed countries, situated at the border of the Atlantic, to create new routes for trading. These routes were not flowing through the Adriatic Sea. Venice lost its competitive edge with the introduction of ships that could survive at sea for a longer period of time i.e., months and years. This was the age of exploration, and this is when the city began to fall. So, with the invasion of Napoleon, the Venetian empire officially collapsed.

Lesson Learned

One of the most important lessons learned from the fall of the city was that stronger you believe that the future will function as the present does, the greater the likelihood of a decline in the state of affairs. If a company does not explore new directions, it will not be able to survive for a very long time. Therefore, it is important to conform to the fact that future will not be the same as present. The future is always uncertain and opened to all sorts of options. A ground breaking move by a competitor or launch of innovative technology is all it takes to cause an empire to fall. Having a sound business with high walls and neat gardens is not enough, because you might come across opportunities or threats beyond those walls.

Innovators’ Approach to Success

Innovators and entrepreneurs avoid the concept of “success as usual”. They rather invest their time and money in new business models along with exploring latest technologies. They keep a bigger perspective in mind and are cautious of being too effective or efficient, which enables them to foster unconventional mindset, problem solving skill, and an art of challenging the status quo. An innovator will not go after a fixed horizon. Instead, his focus will be on how the horizon moves as they take a step in that direction.

What do Social Investors Want?

Funding is a lifeblood of any startup. It is a crucial element for the survival of any business.

For social entrepreneurs, it is important to take steps in the right direction if they wish to secure funds. This is the reason why they have to learn what social investors really want and what their expectations are. Having a thorough understanding of your businesses increases the likelihood of attracting the right investor. Therefore, the vision of your business must be clear and well-focused.

Below are four main guiding principles every social entrepreneur must bear in mind in order to secure reasonable funds to keep their businesses running.

Financial and Social Objectives Must Be Well-Integrated

Social entrepreneurs have to be convincing in order to succeed in winning the trust of an investor. They not only should have a persuasive social mission, but also present a strong business case. If both these elements are properly aligned, they create a strong case that can make an appealing financial outcome to widen your impact. A great example of that can be Taxi-Electric that runs the cars on electricity and charge a fair price for providing taxi services. In addition to that, they also provide job opportunities to people who experience long term unemployment or are students. Both of these core elements have enabled them to sell as many taxi rides as possible.

Another well-known example is Tony’s Chocolonely that produce and sell chocolates. Moreover, it opposes child labor and slavery at the same time by partnering up with trade firms in Ghana and Ivory Coast to purchase cocoa beans at a fair price directly from farmers. These organizations are making an effort to spread a positive message while growing their revenues and returns.

Investors usually look for such businesses that offer a combination of both. It is quite likely that angel investors would invest in visionary ideas and would try to improve the business side of these social startups, whereas, investment funds tend to focus on the business side in order to assist them in aligning their social goals. Investors normally expect social entrepreneurs to have a deep understanding of their financial as well as social goals along with having an integrated approach and clear vision. It is important to optimize your plan through discussion with your investor.

A Well-Balanced and Strong Management Team

It is important to have a well-balanced team of professionals.

Investors always stress the importance of having a solid team that has its goals aligned with the goals of a business. Having a group of professionals who are motivated to invest their time and expertise in a social enterprise is considered quite healthy for a business as it is an indicator of good future prospects. Financial institutions and venture capital firms specifically look for companies with strong teams while taking investment decisions. Therefore, it is recommended to add a diverse group of people in your team at an early stage, because having more than one person behind an idea shows its strength and persuasiveness.

Measure Your Impact

It is not easy for social firms to measure their impact or quantify its outcome and they blame the lack of resources for not being able to do so. Investors, however, consider the impact measurement a strong requirement before they invest in a business. Although, they understand that it is difficult to measure the social impact, yet, they emphasize that it can prove to be very helpful for social entrepreneurs to maintain focus on their operations and identify clearly what their goals are.

The question remains how to get it done. The key is to start small, for example, measure the number of people employed by a social enterprise and the positive feedback it receives. There is no doubt that every method comes with its limitations, but one cannot deny that you can, at least, measure your progress with it. Taking the question “why” is it you want to measure the impact can play a vital role in integrating your financial and social goals.

Avoid Deviation from Your Core Mission

It is very important to stick to your key mission. The deviation can cost a business a lot in terms of losing their financial wealth and losing their core values. It usually occurs after two to three years into the business, especially when new employees, leaders or investors start showing interest.

For venture capitalists, the shift from a mission is one of the major issues that arises in social enterprises. It happens when they start deviating from their balanced view of pursuing financial and social goals together, and instead, move toward financial returns at the cost of their social mission. If such deviation occurs, it detracts the social entrepreneurs from the original mission they discussed with investors.

It is to be noted that moving away from the original mission is not a bad thing as long as the expectations of the enterprise and investors are aligned. Keeping the investors on the same page, and having their agreement is crucial for the success of any social enterprise.