2021 Questions

As we prepare for a new year, these are the unanswered questions that we believe will impact the start-up ecosystem in 2021.

Many people share New Year predictions. These predictions can be used to understand how forecasters think and what thoughts are trending. Instead of making predictions, We try to figure out which questions will be answered and what the implications of those answers are.

The following are the questions that are on our mind as we enter 2021:

  1. How healthy is the underlying economy? Will we enter a recession soon?
    The economy performed better than expected in 2020 and projections look even better with a vaccine being distributed. COVID caused hidden structural changes. Many companies were forced to improve productivity and small business went bankrupt in large numbers. These changes are permanent and may lead to high unemployment and a recession when government subsidies stop.

    The implication of these two changes?
    A potentially long-term jump in unemployment impacting the least prepared.

    How this impacts our perspective?
    This change will create several new opportunities in

    • Education and training: The culmination of new technology, stubbornly high unemployment and rapidly changing job requirements will create opportunities for new education and training startups like Mastermind* who are enabling experts to create live cohort based courses.

    • Job marketplaces: The nature of work will continue to evolve. At one end you will have a highly skilled workforce who will want to choose how they work (where, how long, with who). This will create new opportunity for startups like gsquad* who assembles teams of distributed developers to work on projects in teams. For people who need to find new skills to find jobs, there will emerge a companies like Nana who combine training with job opportunities.

    • Finance (including Defi): As employment changes it will require new finance and insurance products to serve individuals and new business models.

  2. Which Covid trends reverse?
    All of us have been forced to pick up new habits due to COVID. When a new normal emerges, which trends will stick will be different based on personal experiences and background.

    The implication of this change?
    The long-term impact of COVID may be underestimated as some habits that seem to have returned to normal (e.g. working from an office) may have only done so for large and visible cohorts (e.g. boomers). In reality, younger cohorts may prefer the new way of things and permanent change is just a few years away from taking place.

    How this impacts our perspective?
    Startups that take advantage of market disruption or build in a fast growing market have an easier time finding success. Hidden habits that are growing fast present an ability to invest in a non-consensus but correct opportunity.
    A few founders will understand the hidden but fundamentally changed habits and what new opportunities these changes create. As we emerge from COVID and life seems to return to normal, we will need to make sure we are even more open to what founders are telling us to see if they have an earned insight and potential to build a solution for a trend that is non-obvious.

  3. How will all the new currencies impact startups?
    This question is about public stocks not bitcoin. 2020 saw 250+ SPACs and 24 tech IPOs. Valuations remain high providing these companies with valuable currency for acquisitions.

    The implication of this change?
    With public markets ascribing higher multiples than private markets for late stage tech companies we expect companies to continue to go public in 2021. All these companies with liquid highly valuable currencies should translate into more acquisition. In turn this should lead to higher valuations and lower the time it takes startups to have an exit.

    How this impacts our perspective?
    Founders should take advantage of market conditions to raise rounds on great terms. Most founders will focus on valuations but we believe there is an inherent risk is raising too much money at too high of a valuation. If a round is priced for perfection it increases the chance of a flat or down round which is more harmful than a bit of extra dilution. We will work with our portfolio companies and new investments to choose the right investors for them and negotiate the cleanest terms possible in their fund raise.

  4. How will consumer and employee values change their decisions?
    This year saw an ever increasing focus on the values that a company has. Employees and customers are making decisions based on companies companies political views, approach to diversity and inclusion and impact on climate change.

    The implication of this change?
    Companies are starting to talking about stakeholders instead of just shareholders. These companies will want to demonstrate that their values are lived by and more than words.

    How this impacts our perspective?
    We are actively looking for companies who are are reacting this shift to build the tools that enable companies to communicate, measure and act on their values. For example companies like Crescendo* are helping companies measure the inclusivity their culture and then provide education where it is required.

If you are a Canadian founder and building a company that is impacted by any of these questions please feel free to reach out to me at alex@n49p.com.

*Indicates the company is an N49P portfolio company