Trends from 2017, Predictions for 2018

Inspired by Fred Wilson’s What Happened in 2017 and What Is Going to Happen in 2018, I’ve tried my own version connecting trends, opportunities and venture capital with specific learnings and examples from my portfolio. I hope a quick read is at least slightly helpful to founders and investors over the holiday.

Tech is Global:

2017 is the year where technology players are global. Several of my portfolio companies were acquired this year — Faraday Bikes was acquired by Pon Holdings, Flipagram by Toutiao, DogVacay by Rover, and Upverter by Altium. Three of the four acquirers were overseas companies. Pon is Dutch conglomerate, Toutiao is Chinese news and content platform, and Altium is a publicly listed Australian electronics design company. These names weren’t even on my radar at the beginning of 2017. It’s a big reminder for entrepreneurs that your partner going forward may not be based in the U.S.

Big Chinese companies will have greater presence on the global stage and begin to compete with America’s largest tech companies in important fields like AI. China is trendsetting not following in areas like mobile payments, bike sharing, etc. VCs such as Sequoia and GGV who have feet on multiple continents will do well in such a world. BAT (Baidu, Alibaba, Tencent) became the new FANG (Facebook, Apple, Netflix, Google). And the world’s largest tech fund, Softbank, is based in Tokyo not Silicon Valley.

Marketplace consolidation:

DogVacay was an example of marketplace consolidation which is happening writ large in the ride sharing space. Softbank is at the forefront as they have aggressively deployed huge amounts of capital to dominate ride sharing worldwide. Didi acquired Uber’s China business in a win/win deal. Upverter’s acquisition by Altium shows smart technical teams that build useful products will continue to be valuable sources of innovation for big companies. For entrepreneurs this is a reminder to maintain healthy relationships with your competitors because you may be on the same team one day.

Revenue Matters More than Ever:

Several portfolio companies raised growth rounds — Tala raised a $30mm series B led by IVP, AirMap raised a $26mm series B led by Microsoft, GetAround raised a $45mm series C led by Toyota, Clutter raised a $64mm series C led by Atomico. And last but certainly not least, Segment raised a $64mm series C led by YC Continuity. In 2017 growth rounds were plentiful and highly competitive for companies that were scaling revenue. But several of my portfolio companies were not able to raise funds to continue. There is a lot of growth capital out there but the revenue bar has risen significantly from prior years. As always, it is critical for founders to watch their burn rate to have enough time to figure out product market fit — Segment went through two pivots before figuring it out. Six years later it’s really working. That’s a reminder that building important companies takes time and a lot of trial and error. For founders, here is an excellent video with Peter Reinhardt on how to find product market fit. For angels, remember it takes years to really see returns and places like AngelList are helpful if you run out of ‘dry powder’. For 2018, more big investors that look and act like private equity instead of venture capital.

Early Stage / Energy 2.0:

With regard to early stage, a trend that I’ve believed in is the electrification of everything. Obvious Ventures wrote a wonderful piece at the end of 2015 on The Coming Electricification of Everything. I felt the same way since driving a Tesla roadster years ago and have made bets in this space with an Energy 2.0 thesis — that transportation and power generation will shift and it will cause massive disruption and opportunity. Around this thesis, I invested in Bird, Arcadia Power, Faraday Bikes, Hyperloop One and Opus 12.

If you were trying to create a new app for xx, 2017 was probably a tough year for you. With millions of apps competing for people’s attention VCs have mostly moved on. This is a reminder for aspiring entrepreneurs to be different from the crowd. Be weird and don’t follow the herd. And look for investors that have a thesis in your space — they are already sold on the idea. Urbanization is a global megatrend and I’m predicting compact electric devices like Bird proliferate to help solve the “last mile” problem of traffic and congestion in cities. I’d like to see more VC investment in deep technology like batteries.

Cryptocurrency:

Finally, Crypto. Speaking of weirdos, it is illustrative that being early and different is so important. The fringe types that were early to crypto crushed it (if they didn’t sell too early). And overall I’m a believer in blockchain and that decentralization represents a generational shift in software. It feels like cryptocurrency will also reshuffle the deck in venture. Because the assets are liquid much earlier, instead of closed funds we see open hedge funds. And the leading new players are folks like MetaStable, Polychain Capital, and others. USV, Andreessen, and a couple other traditional folks were early and got it right. But overall I think crypto may reshuffle the deck in venture in an interesting way. Cryptocurrency is deep, complex and vibrant enough that we are seeing investors specialize in this space.

In 2018 there may be a “flight to quality” from many overvalued ICOs to currencies like Bitcoin and Ethereum which still have lots of room to grow. We’ve heard a lot about Bitcoin energy consumption (this Wired article feels hyperbolic), I’d love to see an in depth study of the envionmental impacts of Bitcoin mining versus gold mining. If you know of one, please reach out.

Anonymity vs. Personas:

One of the other interesting developments from cryptocurrency is the anonymity of some of the leading minds. It is nothing short of incredible to see the Rube Goldberg machine that Satoshi created. He / She / They tipped the first domino and had the foresight to remain anonymous in a world where privacy has become rarefied. For investors, having a persona is extremely valuable in terms of deal flow and access to competitive rounds. But due to security and other concerns we may see a new model where the leading thinkers stay under the radar. If cryptocurrency continues to rise it will create a surge of wealthy and anonymous individuals who will quietly shape technology and even philanthropy. Hopefully we’ll see more examples like the Pineapple Fund in 2018.

I’m excited for the new year and deeply grateful to the entrepreneurs who I’ve been able to learn from and work with. Happy New Year!