The beginning of 2020 started out strong with a booming economy. Unemployment was low, the stock market was at record highs, and startups were numerous. But then the pandemic hit, and lockdowns and quarantines threatened the world with another recession. For many industries, it has been a tough year, and many small businesses have been forced to close. But for others, the opposite it true. In fact, not only are there several business winners in 2020, venture capital investing is at an all-time high. For those in the right sector, the pandemic has been quite a windfall.
It’s not a shock that technology sectors have done well with so many people working from home. But the pandemic has done more that simply encourage the use of videoconferencing tools and Netflix. In essence, COVID has accelerated consumer trends that were already in motion serving as quite a catalyst. Rather than evolving over years, consumer changes have been condensed into a few months. For this reason, business winners in 2020 were those that found themselves in such a growing sector. And based on the frenzy of capital flowing into these sectors, there’s no immediate end in sight.
“Almost every hot company right now is being pursued like mad. More than ever, there is this flight to being in the assets at any price.” – Matt Murphy, Investor at Menlo Ventures
A Perfect Storm for Businesses in a Growing Sector
When March hit, a tremendous amount of uncertainty existed. Investors and venture capitalists were unsure whether a recession was inevitable or not. Thus, with every pandemic report, the stock market would rise or fall almost on a daily basis. But in time, it became increasingly clear that there were going to be some real business winners in 2020. Many businesses were adapting to a post-pandemic world. By the time that many investors appreciated this fact, opportunities for good deals were shrinking. This was especially true for startups that found themselves in a growing sector.
Fast forward a few months, and venture capitalists and investors can’t wait to get their hands on a hot startup. Not only do they have a record amount of capital saved, interest rates reman incredibly low. Likewise, digital demands have continued to rise as has the stock market. Even the number of acquisitions and mergers have boomed in recent months. The combination of these factors is what’s driving many investors to seek out those in a growing sector. It’s also a reason why several startups have more capital than they likely need.
“I haven’t seen anything like this in over 20 years. The party is as loud and the drinks are flowing as freely as the dot-com boom, despite that we’re all drinking at home and alone.” – Eric Paley, Investor at Founder Collective
Business Winners in 2020 – Collaborative Work Tools
The pandemic forced companies to send employees to work from home. In the process, several began to appreciate the benefits of working remotely. As the months grew, more and more people became accustomed to this new trend. And many companies were ready to introduce their hot products to facilitate this transition. Videoconferencing software, social messaging software, and virtual events platforms were suddenly in huge demand. It’s therefore no surprising this industry has its fair share of business winners in 2020.
In the last 2 years, Zoom has gone from a valuation of $1 billion to $116 billion. Hopin, a virtual events platform, has multiplied its valuation 77-fold in the last year to $2.1 billion. And Discord, a social media platform similarly doubled its valuation to $7 billion post-pandemic. What do these business winners in 2020 have in common? Right place, right time, right platform. By providing quality technologies for collaboration and communication, they have excelled. And with this expected to be the new norm, venture capitalists keep pouring funds their way.
“They used speed to their advantage. Investors who are waiting for someone to raise a round — that’s almost too late.” – Peter McKay, CEO, Snyk
Business Winners in 2020 – Lifestyle Convenience Tools
Of course, work trends were not the only thing affected by the pandemic. Lives were turned upside down, and major shifts began to occur in consumer behaviors. The pandemic ushered in the Come-to-Me Economy, and as a result, several business winners in 2020 emerged. For example, delivery services represented a growing sector as did entertainment streaming services. Likewise, online fitness platforms and online learning companies also saw major increases in demand. In essence, any digital service that enhanced remote convenience seemed to be a winner. And investors took notice.
Some of the business winners in 2020 are easily recognized today. For example, Instacart, the grocery delivery company, has doubled its valuation to $17.7 billion in the last year. Likewise, DoorDash, which is expected to go public soon, has been valued at $35.3 billion. But other companies in a growing sector this year may be less appreciated. Snyk, a cybersecurity software startup, has seen venture capitalist flock to its door. Robinhood, a stock trading app, has enjoyed 4 different rounds of VC funding this year alone. With more consumers getting comfortable with digital convenience, these types of businesses are reaping the benefits.
Predicting the Unpredictable
If one thing is for sure, this year has been incredibly unpredictable. No one would have expected some of these industries to boom the way they have. But then again, why wouldn’t they? Global events introduce major shifts that are catalyze change. Given the impacts that COVID caused on work, travel, and social lifestyles, something had to give. Those technology startups who happened to provide the perfect product for the times boomed. And venture capitalists have been eager to help. In fact, the third quarter alone this year saw $36.5 billion in startup funding. Indeed, many companies had seen hard times in 2020, but not all of them. Those lucky enough to be in a growing sector didn’t just do well…they boomed. And based on continued investing patterns, it appears this will continue for at least the near future.
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