Venture Capital Trends of 2021

Did you start off 2021 wondering what it would have in store (and hoping it was less grim than 2020)? We did too. To predict what venture capital trends will look like in 2021, we analyzed 2020 venture capital deals and deals in Q1 2021 thus far.

Here’s what we’re seeing:

  • The healthcare wave of 2020 will continue.
  • Ecommerce solutions that mix shopping with social media will win deals in 2021.
  • Supply chain automation is the behind-the-scenes industry that will see continued funding in 2021.
  • Startup centers outside of Silicon Valley will grow as a percentage of deals closed this year.

Word map of tags from VC Deals tool of deals in January 2021. Source: VC Deals.

Healthcare rides the wave into 2021

From mental health platforms and telemedicine to biotechnology and therapeutics, there was an uptick in funding in healthcare in 2020, propelled by factors induced by covid-19.

Mental health solutions are propelled by high demand & employer interest

Covid-19 and the associated lockdowns have had a significant toll on mental health, increasing the demand for mental health services including digital solutions. This factor combined with expanding coverage from health insurance and employers to pay for these services has supported a boom in digital solutions for mental health in 2020 that will continue its momentum into 2021.

According to Mental Health America’s research, the number of Americans experiencing severe symptoms of anxiety and depression increased significantly since March 2020 and the amount of people seeking help for these conditions has surged.

Calm, one of the leaders in sleep and meditation digital platforms, raised $75M at a $2B valuation right at the end of 2020. As Inc.com wrote, this deal is, well, a big deal, when it comes to forecasting venture capital trends in 2021.

Companies like Hurdle, Lyra Health, Modern Health and Frankie Health who all landed funding deals in Q1 2021 are positioning themselves as an employer benefit, as more employers look to expand their health benefits from physical to mental health. This, combined with an increased focus on making it easier for employers to manage benefits including health insurance and mental health services through healthtech and HR software like Noyo, will mean enterprise deals providing a path to profitability for growing mental health startups.

Mental health digital solutions is a VC trend to be on the lookout for this year.

Telemedicine is essential

Covid-19 accelerated the need for telemedicine and virtual care options in order for medical providers to stay afloat during the pandemic. As Inc.com reported on, health experts think that this trend in telemedicine is here to stay.

There were 18 deals in telehealth companies in 2020 for a total of nearly $500 million in funding. Zocdoc, a virtual medical appointment scheduling software, has already landed $150M in funding in February 2021.

Biopharma will save the day

Our data shows a cluster of healthcare and biotechnology terms including “cancer drugs”, “cell therapies”, and “precision oncology” already popping up in 2021, based on January alone. Google trends has “biopharma” trending upwards and literally off the charts in February 2021. We think 2021 is going to be a big year for biopharma. A few biotech startups that have already secured venture funding in January 2021 are TScan Therapeutics, Immuneering and Theolytics.

The Ecommerce trend goes social

One of the winners of 2020 was ecommerce. This was already a growing sector, but 2020 propelled ecommerce miles beyond traditional in-store retail. More people are shopping online from home, buying more stuff for themselves and others. Another thing that folks relied on more to connect with other humans while quarantined at home was social media. TikTok boomed, coming in with 850M app downloads in 2020 (beating Instagram’s 503M and Snapchat’s 281M by a mile). It became more than just a platform for Gen Z’ers. It became a place where a pasta recipe could go viral.

What do we get when we put these two trends together? Social ecommerce. This is where we think the trend is going in venture capital. Companies that combine the social aspect of social media apps with the revenue generation of people’s desire to shop are going to cash in.

Poshmark, the poster child for combining social and ecommerce, announced in September 2020 that they are going public. Talkshoplive, a startup that hosts live shopping-focused videos with celebrities, just landed $3M in seed funding in February. Think TV infomercials, but more modern and influencer-y.

Supply chain automation is the new blockchain

Ok, we don’t actually think blockchain is on the out. But, supply chain automation is the behind the scenes buzz happening behind huge companies. Huge companies that rely on tracking suppliers and materials all around the world, are starting to catch onto the power of technology for these logistics processes. While you might hear autonomous vehicles and jump to wondering when you’ll be able to nap while your car drives itself, venture capital firms are thinking about the potential of autonomous vehicles to take over large scale supply chains. There is HUGE potential here, and vc’s are seeing it.

  • Uisee, an autonomous logistics vehicles startup, raised $150 million.
  • Wingcopter, a Germany-based drone delivery startup raised $22 million in a series A.
  • Slync.io raised $60 million to continue expanding their data-based logistics process automation software across Europe and Asia.
  • Pipe 17, a SaaS to help ecommerce connect and monitor their inventory and fulfillment processes raised $8 million in seed funding.
  • Lastly, Dallas-based Mercado raised $25 million to ramp up marketing for their supply chain automation software.

Some action we’re already seeing in this vc trend in the first quarter of 2021:

Venture Capital is moving out (of Silicon Valley)

For much of 2020, everyone in venture capital and tech was talking about whether or not Miami will be the new Silicon Valley. 2020 came with a massive physical exodus from San Francisco, the Bay Area and Silicon Valley, transforming the landscape in a big way. Many large companies in VC and tech physically moved their operations outside of the Bay Area. Palentir moved its’ headquarters from Silicon Valley to Denver last year; h ardware giant HP announced it was moving headquarters from San Jose, CA to Houston, TX; and Oracle also relocated its’ headquarters to Austin, TX.

Tech hubs outside of Silicon Valley were already growing and this shift was further accelerated in 2020. While we don’t think Silicon Valley as a hub of venture capital will cease to exist, what is clear in the data is that the number and size of startup hubs outside of Silicon Valley is growing. A lot. And we think this is only going to further accelerate in 2021.

GV (aka Google Ventures) was one of the top 10 most active venture capital funds in 2020. Notably, their investment portfolio is one of the most location-diverse of the top venture capital funds, investing in companies located outside of Silicon Valley, including New Orleans, LA, Columbus OH, Lehi UT, and Bethesda Md.

A few cities where vc deals are trending up:

Austin, TX — There were 43 deals in Austin, TX in 2020. The biggest Austin-based deal went to Everlywell, digital health company that raked in $175M in a series D funding round.

San Diego, CA — Still in California, but many miles from Silicon Valley and larger metropolitan areas like LA, New York and London. This small surfer city is pulling in a growing amount of venture capital. In 2020, there were 32 San Diego deals vs. 27 in 2019. Many of these deals were in SaaS or biotech categories, including the largest deal of the bunch which went to Erasca, a precision oncology startup that landed $200 million in a series B round last April.

Atlanta, GA — In 2020, there were 29 venture capital deals for Atlanta-based startups, up from 20 in 2019. One of the largest deals went to OneTrust, a digital compliance tool specializing in helping companies comply with developing privacy regulations in the US and abroad. They raised $210 million at a valuation of $2.7 billion.

Denver, CO — 15 deals in 2020 were based in the mile-high city of Denver, CO. Though smaller in number, some of these were large venture funding deals including Boom Supersonic, a startup building super-fast commercial air routes. They raised $50M in venture capital from WRVI in December 2020.

Dallas, TX — There were 14 deals in Dallas, up from 9 deals in 2019. Among these was Mercado’s $2.5 million raise to grow its’ supply chain automation business as discussed in the supply train trend above.

Keep your eyes peeled for these trends

  • The healthcare trend of 2020 is here to stay.
  • Ecommerce + shopping = deals.
  • Supply chain is the new blockchain.
  • VC funding outside Silicon Valley is growing.

To wrap up, here are the venture capital trends you should keep an eye on in 2021:

Trends are always changing, so we’ll be keeping an eye on how trends evolve. To see the full data used in this report and monitor how these venture capital trends play out in 2021, check out the VC Deals app here.

Originally published at https://vc.deals.

The Searchable Venture Capital Database. Making VC more transparent, one search at a time.

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