We’re taking out our data-driven crystal balls to predict Global Investment Prediction 2017 trends to watch. Mining the Crunchbase dataset for signals in the aggregate data, we’ve identified trends such as growth in seed funding that foreshadows a future spike in Series A for startups in a particular niche. Company descriptions on Crunchbase also show what’s hot and what’s not. Startups know what words and technical skillsets to highlight to draw investors’ attention.
Post-seed rises amid Series A crunch: Post-seed financing will gain additional momentum in 2017. A relatively new category, this represents angel and venture investors backing startups that have raised some seed capital and demonstrated early product-market fit, but are not ready for a full Series A. Post-seed rounds are typically in the $1 million to $2 million range. Crunchbase data shows post-seed investors are already having an impact in increasing the median size of a pre-venture round.
Several firms with a post-seed focus closed funds in 2016, including Bullpen Capital, First Round, and Slow Ventures. One factor driving the rise of post-seed is the super-sizing of funds operated by top-tier early and multi-stage firms, with a growing number now topping $1 billion or more. While most top-tier VCs do pursue early stage deals, they now have more capital to invest in the most compelling startups, which has contributed to increasing the size of Series A and B rounds.
A bountiful funding environment for seed-stage startups in 2014 and 2015 also means there are plenty of founders looking for their next rounds right as funding tightens. These trends create a big market opportunity for post-seed investors.
IPO market gains momentum: If private valuations dip, as they have for many unicorns this past year, public markets will look more compelling. Already, the venture-backed 2017 IPO market is poised to outperform 2016, beginning with Los Angeles-based Snap Inc, reportedly planning an offering at a target valuation of between $20 billion and $25 billion. If Snap’s debut goes according to plan, it will be largest venture-backed IPO offering in years.
Other tech unicorns that are generating buzz as potential 2017 IPO candidates include Spotify, Pinterest, Slack, Dropbox, and even Uber. In recent years, hot private companies haven’t been under great pressure to go public, as they’ve been able to raise vast sums at high valuations from late-stage investors, private equity firms, and sovereign wealth funds. Uber alone raised $3.5 billion in a single 2016 investment from Saudi Arabia’s sovereign fund. That may be difficult for anyone to repeat.
All about AI: Artificial intelligence and machine learning was a growth sector in 2016, and data points toward even more investment in the space in 2017. For one, a comparatively high portion of funding rounds and capital went to very early stage companies, leaving room for larger follow-on rounds. More than 300 companies raised seed or early stage venture financing, while only about a dozen closed late stage rounds in 2016. Additionally, we saw a healthy number of acquisitions in the space, such as Intel’s $350 million acquisition of mobile vision technology company Movidius and Samsung’s purchase of AI virtual assistant developer Viv. Part of the trend is also semantic. When a technology is hot, companies play up their use of it.
From “curated” to “concierge”: For a number of years now, consumer internet startups have made liberal use of the term “curated.” These business models are based on cherry-picking the best of news, events, fashion, and more, to help consumers navigate an endless sea of online information. In 2017, we predict that the curated companies will be upended by new “concierge” businesses, which makes sense in our time-starved world. Like curated businesses, concierge-type startups also focus on finding the best things for their users. But they also tend to offer ways to make delivering said good a more pleasant experience. Examples include Envoy, a concierge service for senior care, Headout, a mobile concierge for travelers, and Omni, a concierge storage company.