Startup Trends From A Student Venture Capitalist’s Perspective
Here at Dorm Room Fund it is our job as student investment partners to keep up with the latest startup and venture capital (VC) industry news. This could be as simple as keeping up to date on the newest funding rounds or as complex as trying to identify and predict up and coming trends.
Rather than simply keeping our findings and predictions to ourselves we figured it’d be beneficial to share them with our readers! Here are several startup and venture capital trends we expect to see in 2016.
Down Rounds and Tough Fundraising
In recent years valuations of the hottest startups have hit never-before-seen highs. Companies like Uber ($62.5 billion valuation) and AirBnB ($25 billion valuation) have become more valuable in the eyes of investors than many public companies that have had years of success and profitability. While these valuations have allowed startups to grow at tremendous rates and retain top-level talent, they have also started to concern venture capitalists across the valley.
VC firms are becoming more selective with the companies they are deciding to fund. This has become problematic not only for companies looking for Seed and Series A, but also companies that are looking for later stage funding. Take DoorDash for example. Even though they recently raised $127 million, shares of the company were sold for 16% less, leading to a lower valuation than before. In the long term this down round won’t affect DoorDash but it is a good indicator of what may become norm in tech over the next year.
I believe this fear surrounding loft valuations will lead to more and more “down rounds” in the coming months, as well as a continuation of the lack of IPO’s coming from the tech sector (there was not a single IPO filed in January, the first time that has happened since the recession).
While some may view this as a sign of bad times for tech, I think it could be quite beneficial. Startups will be forced to fight their way through the downturn, leading to a return in focus on profitability and a sound long term business strategy, something that has been almost forgotten among the emphasis on viral growth and user acquisition.
Growth of Machine Learning and AI
Kevin Kelly, the founding executive editor of Wired Magazine, recently said “the business plans of the next 10,000 startups are easy to forecast: take X and add AI. This is a big deal, and now its here.”
The recent advances in Machine Learning and AI have allowed all startups, regardless of industry, to incorporate this technology. Companies in every industry are collecting large quantities of data and utilizing machine learning to predict future behavior and uncover upcoming trends. Mattermark, for example, is using data to help venture capitalists quantify signals of growing and potentially lucrative startups. Mattermark is helping VCs find the best startups quicker and more efficiently than ever before.
At Dorm Room Fund, we have already seen the effects that machine learning is having on the way students look at starting companies. We recently funded Pavlov, which provides a framework to design and develop the next generation of intelligent applications. This framework allows companies to quickly build and scale machine learning workflows out of the box. Pavlov was founded by two current students, which perfectly showcases the increase of machine learning awareness.
Students are being exposed to machine learning early, which will stay with them as they enter the workforce and start their own companies. Machine learning, and the possibilities provided by it, is here to say. As machine learning advances even more, I believe all companies, regardless if they are startups or have been around for decades, will incorporate machine learning or AI into some aspect of their business.
Internet of Things in the Home
Kevin Ashton coined the idea of Internet of Things back in 1999, but only now have the products begun to really change the way we live. Our homes are beginning to do more than hold our possessions and protect us from the elements. Homes and appliances are now learning how we live and adapting over time to our preferences and tendencies.
One company that is taking advantage of this new trend is Eight. Eight is a bed cover that tracks 15 factors ranging from usual time of bed to amount of motion at night. Eight uses this information to provide feedback on optimal conditions for sleep and communicates the results to other parts of your home, like your lights and air conditioning system.
As technology continues to advance and more entrepreneurs focus on IoT and the home, I believe smart appliances will not be solely used by young professionals and individuals plugged into the tech industry. Individuals and families will incorporate IoT into their homes to the point that it is the new societal norm.
This will personalize the home experience and improve the comforts of daily life.
In Conclusion
While we at DRF expect to see these trends continue in 2016, we can never be sure. Every day entrepreneurs come across game changing technologies and ideas that will completely change how we live.
These innovations are impossible to predict, and while they can completely ruin expectations, they have the ability to truly change the world. This potential is what makes venture capital, and our job at Dorm Room Fund, so exciting and worthwhile!
Dorm Room Fund is dedicated to supporting student founders across the country and helping them reach new heights. Working on a startup? Get in touch on twitter or here.
