#03 — My 2021 tally and my top 5 predictions for 2022
Some 2021 reflections
Last October I set out to write a blog post a month. As anticipated, when the day job gets busy, finding the time is challenging. While global venture funding reached $643Bn globally for 2021, my tally after three months is as follows:
The aim was to publish this post in December, but sadly it didn’t happen. Given it’s a thing that people are writing predictions for the new year, I thought I’d join and add my view on what I think may come in 2022. Needless to say, this is not a full list of predictions, but it is a selection of things I believe have shown promise. The topics range from consumer-related trends to tech to fintech to healthcare and further to climate tech.
My top 5 predictions for 2022:
- BNPL will expand into further industries
- NFTs will attract mainstream consumers
- Content creators will be paid more fairly
- Patients will build personal health records by leveraging day-to-day tech
- Climate tech will heat up
For each prediction, I will have a 🐂 bull case and a 🐻 bear case, i.e an “upside” or “why it will happen scenario” and a “downside” or “why it won’t happen scenario”.
1. “BNPL” will expand into further industries 🛒
🐂 Bull case: While NFTs are a thing now, “online payments for physical goods” will remain a thing too. In 2021, over $4Bn in VC funding was invested in Buy Now, Pay Later (“BNPL”) companies, such as Klarna. Investment was up from $1.7Bn in the prior year. As consumers get used to getting what they want while spreading payments across various periods, it’s not crazy to believe that financing companies will offer segment-specific BNPL or financing options.
- Australia sees Healthcare BNPL: Australian company Afterpay already offers BNPL for certain types of health treatments, such as dentistry-related services.
- US sees travel-related BNPL: US-based Uplift offers BNPL for the travel industry to spread the cost over time
🐻 Bear case: While BNPL in the UK has increased rapidly from 5.8M UK users to 10M UK users from 2019 to 2020, we shall not forget that Klarna needs to make money somehow. Klarna has three main offers, Pay in 30 days, pay in 3 installments, and financing. For the first two offers, Klarna takes a transaction fee from the retailer that offers the Klarna service on its platform and if payment is not paid on time, late fees. For financing, there is a mix of transaction fees and interest fees to be paid by the retailer and consumer. Klarna’s path to profitability is reliant on leveraging the community they build and instantiating programs such as referral or affiliate schemes and with a reversing environment, turning to profit is going to be challenging (see Klarna’s financials here)…but then again, with $3.9Bn in VC funding, who needs profits? 🤷♂️
2. NFTs will attract mainstream customers 🏀
🐂 Bull case: Since NBA Topshot’s launch, 600k+ NBA fans now own a “digital highlight” on the platform. This is the NBA’s way of further engaging with fans, but really, it’s a way of creating a limitless, monetizable digital library that can be traded on a marketplace. The company that runs Topshot, Dapper Labs, specializes in blockchain-based experiences (remember: Cryptokitties) and has raised a total of $650M and is valued at ~$7.5B. Similarly, french firm Sorare raised over $750M in funding, focusing on football.
- Demystification of NFTs: with more media attention on NFTs, the general publics’ interest has steadily increased throughout 2021. Initial hesitation has evolved to broader, more active participation in this economy. Another example: The Australian Open will launch a line of interactive NFTs linked to on-court matches and a metaverse for fans when it kicks off main draw matches on the 17th of January…yes, Novak Djokovic will be there…probably both, in the “realverse” and the “metaverse”. While many people don’t quite know what to make of it, there is something here, and consumers are starting to think so too (see Exhibit 1)
🐻 Bear case: While owning digital art, apes and assets may be fun and even financially lucrative, the majority of the mass market is still far away from buying a digital video clip or art that can be watched on youtube, for free. A few other arguments against it:
- A link to artwork: There is also the argument that you don't buy the “actual digital artwork; people are buying a link to it. And worse, they’re buying a link that, in many cases, lives on the website of a new start-up that could well fail within a few years”. The Atlantic
- Environmental considerations: In the world of NFTs, each transaction or recording of artwork requires more and more computing power to complete. More computing power means more resources consumed which means, it will harm the environment.
3. Content creators will be paid more fairly 🎨
🐂 Bull case: Next10 Ventures, a fund that backs businesses in the creator economy predicts: “We forecast the global creator economy, excluding China to reach $23 billion this year, driven by tens of thousands of creators who make a living on digital video and social platforms”. This is enabled as the market is ready and the technology can support it:
- Web 2.0 to Web 3.0 transition: Web 2.0 allowed creators to get paid for their performances or art, while platforms took most of the cut. Web 3.0 will shift the payment split in favor of creators, moving it away from platforms. Fans will be able to influence their idol and subsequently, the creator will get paid more fairly.
- Big bets are being made: Google Area’s 120 just announced Qaya’s beta launch in December, a product that provides web storefronts for creators who want to sell products and services directly to their audiences.
🐻 Bear case: Traditional agencies, platforms, and media organizations will have to ‘fight’ to retain talent. In either scenario, I find it challenging to argue against the fact that creators will get paid more fairly, because a) I think they should get paid fairly and b) for traditional outlets to retain talent, the only long-term solution is for publishers to create better incentive models for their employees…this means allowing creators, such as journalists to capture more of the value they are creating. If they don’t, they will create their own substack or will join another platform, such as Rally.io anyways. Either way, pay should go up.
4. Patients will build “personal health records” by leveraging day-to-day technology 📱
🐂 Bull case: Smart wearables are tuned into our day-to-day activities and monitor our vital signs. People want to own their health and by creating smart health hubs, effectively on people’s iPhones, consumers and patients are starting to be the holders of much of their own data. The iPhone is slowly but surely en route to becoming our integrated health record, with which people will eventually go to a GP and upload records of treatments or records they had done elsewhere.
2021 investment into connected retail health continued, at the beginning of Q4 2021 it was 2x that of prior year’s total and it had surpassed $17Bn in global funding.
- Continued VC investment in biometrics and connected data companies: Tempo, a smart home gym provider, raised the largest deal tracked among biometric wearables and devices during Q2 2021. With a 2.7x valuation step up, Tempo’s $220.0 million Series C drove its post-money valuation up to $776 million. In June 2021, Apple’s update included a walking steadiness biomarker, data sharing capabilities, and a mindfulness application. This further demonstrates Big Tech’s interest in the healthcare industry.
- Other cool start-ups: Wingspan aims to give the patient records back to the consumer (Exhibit 2)
🐂 Bear case: In the UK, the NHS’ complex network of CCGs is being merged and moved to ICSs. This is to simplify the commissioning of care, via a newly formed network of Integrated Care Systems. Needless to say, it will be challenging to expect systems to be integrated in a way that patients can easily bring in their own (digital) records. Personally, having received my COVID vaccinations in the US and Germany, and not in the UK, trying to get my COVID certificate uploaded into the NHS system has proven impossibly challenging. While I’d like an interconnected, personal health record that feeds back from my phone into the healthcare system, I remain doubtful that 2022 will be the year where this is cracked. Yet, I remain hopeful as more start-ups and public-private collaborations will put the NHS and other systems on the right track…most importantly, it will allow patients to own their health.
5. Climate tech will “heat up” 🔥🚀
🐂 Bull case: 2022 will be one of the hottest years on record. Carbon-negative technologies, especially direct air capture, represent a long-term mega-trend that will drive significant VC investments in 2022. BCG launched Green Ventures aiming to accelerate the process towards a net-zero economy. Corporates who lead the way in sustainability agendas, will be able to stand out. There are various other reasons to remain optimistic about this trend:
- COP26: The 2021 UN Climate Change Conference in Glasgow highlighted the need for greater carbon tech advancement, as the world failed to align with the Paris Agreement trajectory
- Improved climate models: Climate models now show that decarbonizing society alone will be insufficient in reducing emissions to limit global warming to 1.5 degrees Celsius. To close the emission gap, “negative emissions” capacity will be required
- Growing DAC market: The voluntary market for DAC-based CO2 removal is growing fast, with companies such as Microsoft (NASDAQ: MSFT), Stripe, Shopify (NYSE: SHOP), and Swiss Re (PINX: SSREY) committed to investing in DAC removal to offset CO2 emissions.
🐻 Bear case: I hope the above bull case holds true and no bear care is necessary… there is lots to feel optimistic about — see 🐂 bull case. Yet, as we all know; governments, businesses and broader systems are slow to implement change. While there is optimism post COP26, anybody who believes in science and/or has watched David Attenborough’s, A life on our planet and the recently released Don’t Look Up 👀, will find there is also a fair bit of skepticism, particularly as political agendas get in the way of making real progress.
That’s it! Looking forward to the year ahead and tallying up my predictions at the end of the year 🙏
Happy 2022 und bis bald.