by Todd Crosland, CrowdFundBeat Guest post,
Since the end of 2015, a year in which the technological sector reached new heights and venture capital flourished, there has been some trepidation surrounding venture capital’s future. Last year, entrepreneurs churned out a surprising number of unicorn companies, which spurred investors to put more stake in startup companies. The companies did not disappoint – they created new online lending platforms, all sorts of wearable technology, and even online education became a more profitable and popular platform. 2016 has not been so fortuitous, as investors are taking a step back and asking ‘what next?’
The focal point of this year’s investing will be in late stage investors, as venture capital investments have had a tumultuous start in the first month of this new year. This particular crop of investors will most likely put their money toward startups that have already somewhat established themselves. The technological sector is still growing, and it makes sense that investors will want to further shape this field rather than put their money in something completely new. It is a safer bet.
It is also safe to say that unicorn companies will be in shorter supply in 2016. Investors have shown that they are not willing to take such financial risks anymore, and will focus their finances on companies with more realistic business models. Also, there will be a focus on the unicorns of 2015, and, as is already beginning to show, their increasing financial needs. Investors have found themselves forced to invest more money to keep the unicorns afloat, which is another reason they have become wary of putting their money in any new ‘unicorn’ type companies.
The IPO market is also looking quite dismal, and, although it may not bounce back, it will not necessarily become worse. Companies in the technological sphere who have a good grasp on their finances will be drivers in this market. This means that startups with already-existing business models that have been proven to be successful will obtain the most venture capital investments.
Education Technology is a sector that does not look like its value will decrease anytime soon. It is especially relevant because education is a hot topic in ongoing presidential debates. I predict that venture capitalists will flock toward companies that emerge to create educative technology, including virtual reality devices.
Overall, the beginning of this year has been disheartening for companies and venture capitalists alike. While venture capital investments may not take off again this year like they did in the last, there is a good chance that venture capital investments will bounce back in fields that are already established as the year progresses.
For further reading on this subject, read CNBC’s article about Venture Capital in 2016.