Being a tech investor basically comes down to the ability to get ahead of the innovation curve; or, if you’re a growth investor, the ability to identify the mature domains in which category leaders can continue to flourish.
Either way, investing is a forward-looking task, one which we sometimes get right and (unfortunately) sometimes get wrong.
Since this is basically our investment team’s day job, we asked them to tell us what they will be keeping an eye on in the coming year.
As the chapter on the 2010s is closing, we could not be more excited about what the new decade will bring!
Spike in sustainability investments throughout the entire stackCleantech has a negative sentiment for all of us. We all remember the huge bet on Cleantech from 10 years ago, and how it turned out to be too expensive, too early, and completely not relevant for financial returns. However, it seems that the “wind” is changing again, and sustainability is becoming “in” again.
We predict that 2020 will see a spike in sustainability investments, with a focus on the entire stack. We mean the full range, from infrastructure to consumer and business applications. The major winners in this area will be companies that will disrupt existing business processes with newer, cleaner technologies that have a minimal impact on the end user.
Facebook/Google losing share in marketing spend?
In the past few years, Google and Facebook have becoming the winning duopoly in advertising. With constantly rising share, the overall marketing spend is going mostly to them. However, in 2019 we saw the huge challenge in finding low(er) Custom Acquisition Costs, which creates a real need for new advertising channels.
Will TV rise again? Will Snap take marketing share? Will new online channels emerge? It’s hard to say, but with the combination of supply need (advertisers) and consumer sentiment (moving away from Facebook), we may see opportunities for new advertising channels.
2020 will be a breakout year of AI, one way or another
AI has been promised as the solution to every problem we face today. It will impact and disrupt almost every industry conceivable. AI today has billions of investments, and large and small companies trying to use it and integrate it. Will it reduce tech barriers to entry in many industries? 2020 will be an important clarifying year for AI – we’ll see if it can live up to our high expectations, or if it will under-deliver.
There will be a blossoming of deep tech investmentsI believe that we’ll see a significant increase in VC funding in deep tech companies, where the investment risk is in the development of the technology itself.
The availability of horizontal platforms and open source repositories will support the heavy lifting for new innovations and allow a wider range of opportunities at a higher pace and a lower risk profile. These next generation companies will transform problems from the physical/chemical/biological space into the digital domain and leverage newly-available technological platforms to create end-to-end solutions. This is what we call “programmable nature.”
Israel has already demonstrated considerable success in building major companies that leverage deep technologies, with Mobileye, Orbotech and Habana being the latest examples. With Israel’s legacy in physics, chemistry and biology, we will see a proliferation of deep tech focused startups coming out of the country.
Software and fintech will continue to convergeThis is by no means a “new trend” but the convergence of a broad range of software solutions and Fintech is expected to intensify. Both B2B and B2C software companies understand the power of engagement with their customers at the transaction level and the value in improving both the customer experience and the loyalty by providing an end to end seamless solution.
The customer, business or consumer, no longer wants to deal with any type of transaction “hassle” and the software provider doesn’t want the end of the customer’s journey to be associated with any hint of a negative experience that is in third party control . For the software provider there are added benefits – in many cases not only there is more money to be made, there is also very valuable data that can be collected that will further improve customer experience and ultimately business outcomes.
And the winner is… Personalization
No questions asked – we all expect now an ultra-personalized experience, and the younger we are the higher the expectations. In fact, Millennials are now making a very large portion of consumer and business decisions. We are all lazy, we all like to be spoiled and feel special. The entire journey is just that much better if it feels personalized, if it is personalized. From all aspects of go-to-market, through product experience and customer service, and even ending a relationship – all will continue to be disrupted and those who will put their unique customer expectations first, and deliver, will win.
In 2019, we saw a widening gap between private and public valuations. Major companies like WeWork and Uber failed to live up to their private valuations when they IPO-ed. And even though the public valuations didn’t confirm the high private valuations, that didn’t stop investors from continuing to write massive checks to private companies, at very high valuations.This disparity between the private and public markets cannot continue for long, due to the fact that eventually investors need liquidity. All the investors that have billion-dollar companies in their portfolios on paper have to realize those investments in real life. I think that 2020 will be an important year in which we’ll either see public markets rising to meet the high valuations set by the private investors, or we’ll see those investors falling back down to reality and perhaps exploring a variety of creative solutions – selling positions on the secondary market, waiting for the company to get profitable and distribute dividends, etc. Or, we’ll have to wait for 2021, or later, to give us these answers…HR Tech will continue expanding its scope
HR tech has really innovated in recent years, both in talent sourcing (the ability to find relevant candidates without wasting precious resources) and in talent retention (monitoring the development of employees, make sure they’re content in their positions, add value to them beyond work etc.) These processes need to be technology-based. The scope of HR tech is already expanding, and 2020 will be the next stage in the steady evolution of this important industry.
Double-digit growth in alternative lending2020 is expected to show continued strong growth for alternative lending, specifically for SMEs, as the asset class becomes mainstream. Several factors will support this growth:
1) Small businesses continue to be significantly underserved and are highly cash flow sensitive.
2) Alternative lending platforms have reached a level of maturity, and they’re now able to attract significant funding.
3) Global investors are looking for sustainable yield in a low interest rate environment – this asset class provides a meaningful avenue to achieve this.
2020 will be the year of fintech lender/bank consolidation and partnerships
Next year I predict that we’ll see more bank–fintech partnerships, and I predict we will start to see some acquisitions on a global scale. This will happen because many tech-enabled non-bank lenders will have reached the “maturity stage”. There will be a critical mass of these companies that will allow banks to explore strategic partnerships.