Editor’s Note: 2020 was a banner year for startup deal flow – very lucrative for startup investors. As the pandemic ends and the startup trends that began last year accelerate, Neil is expecting deals to kick into overdrive; 2021 could break all records. That’s why we’re sharing his 2021 startup forecast with you again today…
If 2020 holds any lessons for us - and I think it does - surely the power of preparedness is right up there.
This past year was remarkable in many ways, but what stood out to me most in 2020 was the rapid adoption of tech in business. In short, the coronavirus pandemic forced most companies to adapt to remote work. Those that couldn't suffered; brick-and-mortar business was one of COVID-19's biggest casualties.
In this environment, three industries quickly emerged as frontrunners, and my experience tells me they'll build on and even exceed that performance in the year ahead of us; I'll be watching these like a hawk in 2021, because I expect to see substantial growth and, even better, outsized returns for folks with the wisdom to get in on the ground floor...
Let me be clear – when I say “ground floor,” I mean the potential to spend $100 to get in on the next Apple or Medtronics.
Health Technology Is Priority No. 1 This Year
It should come as no surprise that consumers and businesses alike are planning to prioritize healthcare next year (an unprecedented public health crisis will do that).
In particular, startups leveraging the power of artificial intelligence and machine learning to bring healthcare into the future are starting to heat up.
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PitchBook's most recent Emerging Technology Outlook noted that e-pharmacies - companies that ship prescription medications to your door - will also pull in record levels of funding next year. The reason is simple: Consumers have gotten used to staying home and have seen the benefits of avoiding crowded errands.
Which brings me to my next point...
"Edtech" - Education Technology - Will Come into Its Own
Kids in the United States and abroad spent the better part of 2020 learning from home, sometimes right next to parents who were themselves working remotely.
The hardware and software that made this possible were critical life rafts that kept the system afloat, to be sure.
But these solutions were far from perfect; suboptimal performance and inequality here were a major detriment and source of frustration to educators, parents, and students alike.
This year, in 2021, look for startups aiming to tackle tough problems. These startups have been known to offer extreme return potential as opposed to simply buying stocks. (You should see the difference between the returns of an IPO investment versus an angel investment on Pinterest - take a look here.)
They'll be working to solve the privacy issues that cropped up, address inequalities and class divides in the system, and square away the logistical challenges that made the great experiment in mass remote learning a less-than-unqualified success.
The pandemic won't go on forever, but, given the limited vaccine supply and daunting challenges of distributing it in the United States, many students may spend the foreseeable future - or even the entire 2020-2021 academic year - learning at home. (As for what this tech might do to traditional snow days... I'd rather not discuss it.)
And it won't just be kids staying home, either...
The Remote Office Is a Permanent Part of Our Lives
While many people will go back to the office as soon as it's safe, a recent Visual Capitalist survey showed that 98% of employees would prefer to continue working from home, at least part-time, for the rest of their careers. That same survey reported that about 82% of company leaders will allow it.
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Realistically, that number will be much lower. An Upwork survey released this month estimates that 25% of Americans will continue working remotely through 2021. That's more than double the percentage that worked from home before the pandemic.
This paradigm shift will require software and hardware solutions that make teleworking easy, efficient, and reliable.
Keep an eye out for startups that solve some of the unique challenges faced by remote workers, like employee management software, new and improved virtual meeting capabilities, human resources departments backed up by artificial intelligence (AI), and more.
Tough Times Are a Breeding Ground for Breakthroughs
By most measures, 2020 was one of the most bizarre, frightening, and chaotic years in recent history. International trade wars, a vicious and deadly virus, and the most contentious presidential election since the 1870s contributed to a general consensus that this year is a bit, well, cursed.
We've been through bad times before. Some of the earliest battles of World War II were fought on horseback. By the war's end, six years later, jet engines were a concrete reality, we had split the atom, and we had embarked on a microelectronics revolution that's still unfolding to this day.
It's been roughly a year since the first cases of the novel coronavirus were identified in humans, and there are already two revolutionary vaccines authorized for use and being administered as we speak; there are many, many more in the pipeline.
Chaos and adversity breed innovation. That's always been true, but in the 21st century, it's never been easier for regular folks to access and profit from these innovations at early stages. Until fairly recently, angel investing was reserved for the top 1% of society, but now, as you can learn about here, it can be a way for the "99%" to gain a shot at the life-changing wealth in the next few years.
I like to think of the startup ecosystem as a volcanic island. An eruption, like COVID-19, inflicts widespread damage and destruction, but leaves behind some of the most mineral-rich, fertile soils on earth. With a little time and rain, those soils breathe life back into the ecosystem with renewed vigor.
We went through a lot in 2020, but on the other side is the promise of rebirth. Entrepreneurs are already jumping into the ring in droves to solve some of the unique problems we face today. In fact, new business applications are shattering records already, with a 78% leap in submissions recorded between June and September of this year. That means we can probably expect to see an order of magnitude more deal flow in 2021 than we saw in 2020. Rapid tech adoption and innovation mean that we could see more opportunities to invest in the next unicorn than ever before.
As always, the advice I want you to take into the new year is to do your due diligence and follow the deal-making dogmas we talk about so often. Look for startups that solve problems in large markets. Look for founding teams with relevant experience and track records. Stick around, and keep plenty of dry powder on hand, because we're about to enter into one of the most disruptive and exciting eras in recent history.
This won't be limited to just angel investing, either. I'm expecting vast fortunes to be on the move in 2021, perhaps as never before. My friend and colleague, Shah Gilani, is putting his money where his mouth is and actually predicting this move.
He's looking for a $353 billion "capital wave" to potentially hit five very specific companies over the next 18 months - I'll let him show you himself. Under no circumstances should you miss Shah's take on this...