2021 Tech Trends and Predictions from High Alpha

No one could have predicted that a global pandemic would change everything in 2020. While 2020 was a year of twists and turns, we’re looking forward to what 2021 has in store for us. As we dive into the new year, we’re taking time to reflect on the current tech landscape and how it’s been forced to transform over the last year.

It’s a tradition for us to share our predictions about the tech trends that will shape the startup ecosystem in the coming year. We asked High Alpha marketers, finance and venture experts, recruiters, and other teammates which trends they believe will shape startup strategy in the new year. These are the venture capital, HR, marketing, and business trends that we believe will only grow in 2021.

(Truly) Implementing Remote Work

Remote work is here to stay, but companies will need additional compliance support in 2021. It’s a lot to manage to hire and pay workers across boundaries. Hopefully we’ll see upcoming legislative changes that promote ease of working from anywhere. In the meantime, expect to see more companies using platforms like Deel to handle international workers and companies moving to a PEO to hire around the country. Justworks and FullStack are some tech-first focused companies that will let companies hire the best talent, no matter where they are.

Hope Williams, HR Business Partner

Solving 2020’s Remote Work Problems

As I predicted last year, more companies are embracing a remote or distributed workforce. While I didn’t expect a pandemic to force every company to become remote overnight, it’s clear the genie is out of the bottle, and we’re never entirely going back. A hybrid workforce will become the new normal for enterprises, while startups increasingly move to distributed teams. I’m interested to see what companies form to solve the pain points uncovered during WFH. We’ve all felt firsthand the pain of sitting on Zoom all day and how difficult it can be to network at virtual events. These are a few examples of the many interesting problems to solve as we move into this next phase of work.

While there is much debate on Twitter, I believe San Francisco will remain a technology hub as aspiring founders still flock to the city under the guise of the still-looming network effects in the area. However, we’ll see more companies formed between the coasts as founders embrace the belief that a large company can truly be built anywhere. We’ll undoubtedly see Miami, Austin, Salt Lake City, Chicago, and Indianapolis benefit as companies form there and distributed employees move there.

In a surprising turn of events, COVID-19 helped drive one of the hottest early-stage venture markets we’ve seen in some time. Venture funding slowed early during quarantine but accelerated during Q3 and Q4 as firms caught up on investment pacing. This funding frenzy led to an incredibly competitive market with some companies funded at valuations that were an eye-popping 100x+ revenue. I predict many of these companies will struggle to grow into these valuations leading to buyer’s remorse and several down rounds during the second half of 2021.

Seth Corder, Principal
Drop Seth a line at seth@highalpha.com if you’re working on any of these tools. He would love to chat.

MicroSaaS to the Fore

SaaS had its decades of glory, and there are many more to come, but there’s a new guy in town. The purpose of MicroSaaS is to make what already exists even better. Think of the many niches within SaaS that would now be nearly impossible to break into (for example: instant messaging — hi, Slack). MicroSaaS tools contribute to these areas as add-ons or plug-ins to make that SaaS tool more effective. Tyler Tringas, the founder of Storemapper, wrote the book on microSaaS (really — he wrote an e-book). In the e-book, he defines microSaaS as “a SaaS business targeting a niche market, run by one person or a very small team, with small costs, a narrow focus, a small but dedicated user base and no outside funding. Hence, micro-SaaS.”

In 2020, SaaS products have been challenged to be better, do more, and connect others like never before. But entrepreneurs are still bringing new ideas to the table. For some, finding an existing and successful industry giant to pair them with is a good strategy. As it turns out, this year provided us with an entirely new stage of problems for businesses like ours to solve. All of a sudden, a lot of SaaS products have an opportunity to fill in the gaps that have been created by permanent remote work, the rise of telehealth, at-home fitness, house shopping from your couch and only getting up for your GrubHub, and more. MicroSaaS was only able to scratch the surface this year, but it’s going to be even bigger in 2021.

Frankie Smeriglio, Marketing Manager

The Rise of the Chief Diversity Officer

It’s been a challenging and transformational year. 2020 has brought a pandemic and a political climate that most of us have never experienced. If we are looking at 2020 through a “glass half full” lens I am grateful that this year has highlighted the Black Lives Matter movement, economic, and gender disparities.

At High Alpha, we recently formed a DE&I Committee. As a woman in tech, I thought I had a solid grasp on diversity issues, but have learned more in the last few months than I have in a decade working in tech companies. As people continue to learn they will inevitably care more about DE&I. And companies don’t have a choice but to pay attention now… The fastest growing C-suite title in 2020 is “chief diversity officer” according to a LinkedIn analysis of nearly 100,000 C-suite hires in the U.S. from January to October. The appointments of chief diversity officers grew 84% as a proportion of the total of senior executives hired this year. On December 1 of this year, NASDAQ filed a proposal with the SEC that would require listed companies to have at least one woman on their boards, in addition to a director who is a racial minority or one who self-identifies as lesbian, gay, bisexual, transgender or queer.

The tide has shifted and I predict even bigger waves and progress in 2021.

Jennifer Linehan, Head of Partnerships

The Rise of E-Commerce Infrastructure

COVID-19 accelerated e-commerce growth by four to six years in just a few months, but we’re still in the early innings of the e-commerce phenomenon — the market is less than 20 percent penetrated. This unbelievable growth rate coupled with a predominantly untapped market is a formula for innovation in the area. This acceleration is almost certainly going to come with significant growing pains for e-commerce brands. Because of this, a segment of the market I’m keeping my eye on in 2021 is the e-commerce infrastructure space.

I believe there will be massive growth opportunities for two types of companies in this space: companies that help brands create a better experience for the end-consumer and ones that enable brands to expand margins and scale effectively. Things like site performance, logistics, and distribution, among many others, are paramount for performing those activities well and e-commerce infrastructure companies are in a unique position to facilitate them.

Nick Calla, Venture Analyst
Reach out to Nick at ncalla@highalpha.com if you’re working on any of these tools — he’d love to learn more!

Everyone is a Maker with Low-Code and No-Code

From chatbots to the Internet of things, we are in no shortage of riding the waves of new startup fads. One trend has been steadily growing in popularity over the past year: low-code and no-code tools.

While low-code and no-code software is not a new invention, they allow us non-developers the ability to create software, apps, websites, and more with little to no code used. Typically, they use methods like drag-and-drop and easy to use plugins. Tools like Shopify, Zapier, and WebFlow are some common examples.

With these tools, anyone with a computer and access to the internet can use these tools and build their business. In 2021, as these tools become more and accessible to more people, the expansion of makers and ideas will also accelerate giving further development to the low-code and no-code market.

Ian Misiak, Analyst, Go-to-Market

Tech Focuses on Helping Underserved Communities

Since 2020 tested companies on their ability to shift, pivot, and not rely on the way things have been done until now, candidates will also be actively asking questions about how companies have recalibrated in 2020 and their plans to do so moving forward. More leaders and technologists are asking how companies and new technology can have an impact on underserved communities and social issues.

Companies will need to be prepared to share about how they supported employees through the pandemic and how they addressed and continue to address social injustice. More and more employees will be sensitive to a company’s culture and that means that candidates may be taking the lead in more interviews to share what is important to them, including topics around protected classes. Although candidates are often taught to not share any information about themselves that would indicate a protected class (because employers are not allowed to ask), more candidates will be forthcoming with such information as a way to interview companies and their ability to respond to diversity and inclusion.

Oaksoon Callahan, Director of Founder Talent

Public SaaS Companies Continue to Surge

Despite the challenges faced in 2020, it was still a bellwether year for public SaaS companies and SaaS IPOs. The EMCLOUD SaaS index is up 82% since COVID-19 started and the median EV/NTM revenue multiple has risen to 12.2x as of Dec. 19th (charts below from Albert Wang of Public Comps).

With IPOs like Snowflake, ZoomInfo, BigCommerce, Asana, Palantir, and more in 2020, we are seeing a lot of activity in the public markets that I think will only continue in 2021. ARR, subscription businesses, and predictability are in right now, and I think we’ll continue to see the SaaS and cloud markets outperform their peers in 2021. With the higher stock prices, additional cash on hand, and low interest rates, I think we’ll see even more M&A activity in 2021 than we saw in 2019 or 2020 as well.

Drew Beechler, Director of Marketing

Better Technology for Aging Americans

COVID-19 has hit Americans over 65 disproportionately hard. While this became clear early in 2020, the long term impacts of the pandemic will come into focus in 2021 and beyond. According to the U.S. Census Bureau, more than 10,000 Americans turn 65 every day. The growth of this age cohort, when paired with pandemic-induced trends, will present unique opportunities for new, innovative solutions in 2021.

One direct result of COVID will be an increase in the number of elderly Americans wishing to remain in their homes, rather than entering a long-term care facility. The decision to remain at home won’t eliminate the need for care. Instead, it will exacerbate the home health labor shortage and require family members to fill caregiver roles. In addition, new digital or hybrid in-person services will run the gamut from tech support to telehealth.

My hope is that 2021 will bring new tools and services to this large and growing part of our population. Solutions that improve and safeguard the physical, mental, and financial wellbeing of this cohort of Americans have never been needed as badly as they will be in the new year.

Riley Crane, Business Design Analyst
Working on an idea in this space? Reach out to Riley at riley@highalpha.com.

Renewed Focus on HealthTech

Health-related technology has been growing for years, but the COVID-19 pandemic has forced founders and VCs to refocus on health tech. COVID has done little to slow the growth of SaaS (as can be seen in the charts above), and I see more and more entrepreneurs tackling sticky healthcare problems with tech. Take Cured, a High Alpha portfolio company, for example: they’re rethinking the way that healthcare providers communicate with patients and their families.

PitchBook reports that in Q3 2020, venture activity around healthcare and life sciences was at its highest ever — a fact that is probably of little surprise. Mental health was also top of mind in 2020: U.S. mental health-focused startups accounted for $1.37 billion worth of VC deals in the first three quarters. Between telehealth’s explosive growth, vaccine development, and a heightened consciousness globally about health and well-being, 2021 is sure to be a banner year for HealthTech entrepreneurs.

Emily Brungard, Marketing Analyst

What has our team predicted in previous years? Take a look back at our tech predictions for 2018, 2019, and 2020.