2020 was a roller-coaster year, with its stomach-churning drops felt primarily by small businesses and startups. But despite those rough conditions, venture firms raised more money than ever. According to PitchBook Data, Inc., the venture industry raised $73.6 billion in the US, with $36.5 billion of that cropping up in 2020’s third quarter. This spike in funds exceeds the VC industry’s previous high of $68.1 billion, set in 2018.

As the dust settles and the world begins to return to normal, new venture capital trends are starting to emerge. Industry experts cite that lingering effects of the pandemic will heavily influence these trends and may play a significant role in recharging the economy.

Because wise venture capitalists provide capital to companies that show the highest growth potential exchange, it’s in their best interest to know what prospects await them. So, together, let’s explore six areas we think will shape the venture capital trends to watch in 2021. 

Healthcare Will Continue to Dominate the Industry

Throughout 2020, telehealth and other digital health solutions proved to be a godsend, providing millions with solace and necessary resources during the pandemic. Business models that focused on remote patient care and other socially distant medical services experienced significant, rapid growth in the wake of shuttered offices and restrictions.

Because of this growth, there are now more investors looking to break into the healthcare space. Experts predict that deal-making in this sector will reach near-record levels in 2021. Additionally, the biotech and pharma industries are also areas investors should watch. PitchBook predicts that biotech and pharma will likely exceed $20 billion for the second consecutive year.

Diversity as a Profitable Venture

In recent years, diversity or the lack thereof in industries like technology have made frequent headlines in the news. Many have debated the issue and shared their insights, highlighting the benefits of expanding diversity in these fields. And for VC firms, this slowly closing void presents a powerful opportunity.

For those who like to invest their money on the cutting edge of venture capitalist trends, investing in minority-run startups enables significant impact at both financial and operational levels. In industries like tech, your investment can change the way companies staff their teams and expose them to unique and overlooked prospects.

Hybrid Work Offers Opportunities for Startups and VCs

The pandemic demonstrated how integral technology is to further the notion of the “new normal.” And as companies lean into concepts like hybrid work, it sheds light on unexplored opportunities.

For example, as some employees remain remote and others continue working in a traditional office setting, companies can reimagine how they use real estate. Hybrid work makes for a promising venture capital trend because your potential investments can remove location-based hiring restrictions. This can ultimately enhance a startup’s chances of success and ensure a more significant ROI for the investor.

Cryptocurrency Is on the Rise

With a projected global blockchain market of $39.7 billion, it’s becoming more and more evident that cryptocurrency is here to stay. And because cryptocurrency offers more alternative trading opportunities for both new and seasoned VCs, it is inarguably one of the top venture capital trends to watch.

Much of cryptocurrency’s appeal is that it is not regulated in the same manner as traditional investing. It also uses an initial coin offering (ICO) that empowers companies to raise money digitally, creating a flexible way to invest, find funding, and diversify your portfolio. Those who would typically let geography influence their investment strategy can now increase their capital worldwide.

The Demand and Adoption of Automation

New technology with the potential to streamline our lives and daily operations has always been a point of interest for consumers. In response, many companies have started to adopt technologies like automation to boost efficiency and the customer experience while staying ahead of competitors.

What makes it one of our venture capitalist trends to watch is that the influx of automation demand and adoption has resulted in a boom in the fintech industry, signaling that there are investment opportunities aplenty. There are plenty of options to consider, too, from marketing automation software to online-only banking and virtual learning tools. As such, tech-savvy investors of any interest area or specialization can find innovative opportunities in the automation realm.

Alternative Uses for Data

The final entry on our list of venture capitalist trends to watch is one we believe will be a continued trend for years to come. Before the dawn of modern technology, many venture capitalist firms used traditional methods like press releases, announcements, and financial statements to identify potential investment opportunities. These outlets also allowed investors to determine whether a startup needed funds and if they could succeed. Today, VCs have the advantage of alternative data.

Although they offer the same insight as traditional methods, gathering data from non-traditional sources offers something more profound than just surface-level insight. Through alternative data such as job postings, social media posts, credit card statements, and the like, investors can build models to discern which startups have the greatest potential and would benefit most from their investments. We believe this is a trend VCs must continue to monitor because data is ever-evolving. As time goes on, more data sources emerge, as well as more nuanced data, providing new insights that firms can use to inform their investments.

Fahad Alrajhi Group

One of the best ways to bolster your investment portfolio is to stay on top of venture capital trends. We hope that our list of current VC trends inspires you to take a closer look at — and possibly invest in — opportunities you might not have previously considered.

Here at the Fahad Alrajhi Group, our goal is always to foster a culture of entrepreneurship when we invest. We strive to promote education and philanthropy that will impact society with every investment we make. So if you think you are ready to welcome an investor into your company, contact us today, and we can begin walking the path to success together.

© 2020 Fahad Alrajhi Group.