At Detecon, we work in close connection to startups, venture capital (VC) firms and corporations globally. In order to augment our insights into current and future technology trends, we joined the 500 Startups Demo Day for their 25th Batch in San Francisco. We spoke and heard from numerous founders about their startup ideas, business models, industries and future growth plans, and have identified 5 key trends that we think are critical for early-stage startups in the Silicon Valley:
1. Startups with B2B focus have a high potential for acquisition
Batch 25 included a high number of ventures that focus on capturing untapped potential in the corporate landscape. These vary from SaaS solutions, business intelligence platforms or dashboards, where clients can monitor their operations in a focused pace. Considering the market power of big players in the ecosystem, startups are adopting a diversification strategy by enhancing their features, improving UX and compatibility with existing systems. As many enterprise SaaS solution providers have been acquired by large corporates in the last years, new ventures can target syndicating closely with corporations or even being acquired.
2. SaaS Platforms and Aggregators are everywhere, while Deep Tech and Hardware are harder to find
Possibly one of the most surprising aspects of the Demo Day was the absence of commonly portrayed disruptive tech influences that traditionally distinguish Silicon Valley from the rest of the world. This includes the underrepresentation of ventures based on currently emerging topics such as Deep Tech, robotics, autonomous systems and quantum computing. On the other hand, there is an increasingly high number of platform plays in areas such as Business Intelligence, scouting innovative trends, Intellectual Property (IP), broadcasting sports and cryptocurrency prediction. Although these ecosystems are subject to domination by several big players, these startups are either focusing on a niche or have already acquired important vendors as partners in their earlier stages.
3. Management of intangible resources (including Media, Entertainment and IP) has gained significant traction
There is a growing focus on startups that serve as a bridge between a user/customer base and a provider of intangible resources (such as music, podcasts and entertainment). Although verticals such as media and entertainment have been at the forefront of digital disruption and gained extremely high traction in the last decade, these have not been top priorities of large VC investments. We observed a large number of new ventures targeting major improvements to managing intangible products, including tailored content development, user analytics or an enhanced UX throughout existing vendors including streaming services and content creators. Despite their early stage, most of these startups already have a validated view of how to position themselves through the accelerator or have already established their partner base in the industry. It is going to be interesting to observe if the big players from the industry can develop these capabilities in-house or if the disruptors of the last decade are going to be beaten at their game.
4. More founders come from a corporate or academical background, while there are less “serial entrepreneurs”
The term “serial entrepreneur” is quite common in the Silicon Valley ecosystem, whereas Europe is lagging behind this lifelong devotion to entrepreneurship. Remarkably, a high number of startups ended their pitch with a variation of “We have worked in the biggest global players in this industry for years” or “Our team has done research on this topic in the most renowned institutes”, which doesn’t coincide with the stereotype of a Silicon Valley founder as a college dropout, who has been around since before the Dot-Com bubble burst and has founded 5+ companies ever since. Although we have met several representatives of the common stereotype, it was a unique experience to discover the views of teams with a more “unique background” such as physicians, sportsmen and professional poker players. When asked about their starting point, some of the founders even told us that they were approached by a vendor, or even their own company, to address a long-lasting pain point, which has drawn them and their team into the entrepreneurial landscape through their existing partners.
5. Entrepreneurial interest is becoming more diverse, as reflected by the audience, participating startups and the backgrounds of the founders
It is noteworthy, how diversity of founders and teams has been a significant focus of VCs, correlating with the current trend of inclusion in the Valley. In comparison, many VC portfolios in Europe are still struggling to capture underrepresented founders in tech, such as female-led startups (33% of Batch 25) and founders from different ethnicities or backgrounds (40% of Batch 25). Particularly for large VCs with increasing international presence, this also emphasizes an opportunity to achieve higher regional traction for their fundraising activities and portfolio companies.
As a team that serves as a bridge between corporations, public authorities, startups and VCs internationally and on a daily basis, this Demo Day has shown us a different perspective of startups and VC funding. The opportunities and perceptions of the “next big thing” in the tech space of Silicon Valley are transforming even faster than the adoption speed of the rest of the world. When it comes to execution of growth plans, the strategic agility and exchange of know-how are critical aspects, which represents one of the main strengths of the Silicon Valley landscape as a legacy.