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Remember when it was news that venture capitalists were open for business? Or when Zoom investing was only done by that one guy in Ann Arbor (ha, I kid!)? These past few months have felt busier than ever, with no holiday slowdown in sight when it comes to startup growth, hot IPOs and new financings.
Even with a distracting bull market, I wanted to reflect and see how the youngest startups are faring. Alex Wilhem and I dove into data, provided by Pitchbook, to see if the next DoorDashes and Airbnbs are getting their first financings.
The answer is that seed investing flourished but in a complicated way. COVID-19 shook up which startups were considered attractive by private investors. And that changeup came at risk to certain sectors and people.
Here’s how two investors explained the dynamics:
Freestyle’s Jenny Lefcourt:
I think seed prices are being driven up by the larger [venture] firms playing earlier and feeling like they cannot afford to miss the next DoorDash. I think the larger firms have so much capital to put to work and feel they are better off burning some [cash] at seed for the upside of being in the right [startups] where they can double, triple, 10x down on their winners.
Eniac Ventures’ Nihal Mehta:
Because you can’t meet in person, investors felt way more comfortable investing in ‘proven’ entrepreneurs that had pre-existing connections to their social circle.
The long-term ramifications of this tunnel vision means that female founders lost out during this time, since social circles in venture capital are largely white and male. From a sector perspective, e-commerce and edtech have had an easy time raising, but at the cost of travel and hospitality.
The data brings a sort of dissonance to startup-land: Even though seed investing has never looked more busy and fruitful, this is good news for some, and bad news for others. It’s a healthy reminder that a boom and bust can be true at the same time.
How’s that for a 2020 sign-off? We’ll be off next week but in the meantime, two bits of homework: take advantage of this Extra Crunch holiday sale and send me tips and thoughts to [email protected] or tweet me @nmasc_ in between your holiday treats.
I’ll chat with you all in the New Year.
Edtech’s biggest challenge in 2021
No sector has had a year quite like edtech. The sector attracted $10 billion in funding globally, and remote learning went from a tool to a necessity.
Here are my favorite edtech stories I wrote this year:
- Edtech investors are panning for gold
- Teachers are leaving schools. Will they come to startups next?
- Edtech is surging, and parents have some notes
- Edtech startups prepare to become ‘not just a teaching tool but a necessity’
- Will edtech empower or erase the need for higher education
Finally, in my end of year op-ed for TechCrunch, I propose that the ubiquity of remote learning surely brought a boom to new users, but it may have in fact limited the sector’s ability to innovate in lieu of fast, easy scale.
Here’s my biggest tip for the year ahead:
For edtech in 2020, flexible and scrappy was a survival tactic that led to profits, growth and most of all, aha moments that technology was needed in the way we learn. Now, as we enter the rest of the decade, the sector will have to shake off its short-term-fix mentality to evolve from tunnel vision to wide-pan ambition.
A $16B checkbook for space startups
Funding for space startups is defying odds – which is the poetic flair we need once in a while. As part of our TC Sessions: Space 2020 event, a number of TechCrunch reporters dove deep into what kind of money is going into … the space.
- Some think that space startup funding didn’t slow, despite the economic downturn, because of government involvement providing a budget buffer.
- The man who handles the money for the Air Force’s $16 billion checkbook wants startups to slide into the DMs.
- Three VCs talk about space junk, sustainability, and the merits of space manufacturing.
Chris Boshuizen of the venture firm DCVC and a co-founder of Planet Labs notably said:
We don’t yet live in the sci-fi future, where you can just fly up, grab a piece of debris and bring it back. That’s really, really hard — I think probably five years away — but something we want to support and see happen.
Remembering the startups we lost in 2020
Building a startup is always difficult, but the pandemic was a plot twist that led to a not-so-happy ending for many companies this year. So, as part of an annual TechCrunch tradition, we paid homage to the startups we lost in 2020.
Here are my takeaways:
- This is not a fun list. Failure is hard, but you can learn a thing or two when you sort through the ashes. For example? Big names, big plans, and a boatload of money isn’t a replacement for actually making money.
- List includes short-form video app Quibi, to lawyer tech startup Atrium, to a slew of travel startups which fell apart as the virus dragged on.
- While some businesses chalked up failure to COVID-19, the cracks and fundamental business flaws were often peeking through far before the pandemic began.
Across the week
Seen on TechCrunch
Seen on Extra Crunch
Finally, Equity is ending the year with two holiday episodes. This week, we’ve got reflections on this dumpster fire year. I teamed up with Danny, Chris and Alex to just sit back and think about this eventful year. We also got five venture capitalists who we got to leave us their notes as well.
The goal for this episode was to sit down and think a year that no one could have ever predicted, but with a specific angle, as always, on venture capital and startups.
We asked about the biggest surprise, non-portfolio companies to watch, and trends they got wrong and right. There was also banter on Zoom investing (Alex came up with Zesting, not me) and startup pricing.