The year fast coming to a close was unlike any other in our lifetimes. In prior posts, we shared our observations on the state of venture and tech as the market swooned; we foretold the waning influence of Silicon Valley as smaller ecosystems benefited from the exodus of tech talent (and now VCs) from the Bay Area; and, during the market’s March bottom we made our Bull Case for why LPs should stay the course and continue investing in the VC asset class, market gyrations be damned.
Now, in these closing days of 2020, the Dow flirts with 31,000; two highly effective vaccines are being deployed around the world; and, we’ve experienced a wave of highly successful technology company IPOs and M&A transactions that rival any vintage since the heady dot-com days of the late 1990s.
As 2021 comes into view, we turn our attention to 4 expectations of what we expect to see in tech and venture in the coming year:
1. The “decoupling” of capital and geography, accelerated by Covid-19, expands and matures.
We at Catapult, as a venture firm founded on the premise that geography was becoming less relevant as an impediment for startups to access capital, have long argued that as cloud adoption and remote workforce collaboration technologies became mainstream, more companies would eschew costly tech hubs like Silicon Valley for smaller locales offering reduced operating costs, more diverse talent pools, and lower team attrition. With little argument, the pandemic has accelerated this trend by an order of magnitude. Stories of tech talent and VCs moving from the Bay Area to places like Miami, Austin, and Seattle have gone from a theme to a meme in the space of a few months. We wholeheartedly expect this trend to continue in 2021 as more venture funds both adapt to investing via Zoom and more unicorn-caliber companies emerge from tier 2 cities around the globe, fueling a virtuous cycle of experienced VCs establishing themselves in these smaller geos to generate deal flow which, in turn, increases the amount of capital in those hubs and the likelihood that local startups can break out of their regional markets and generate big outcomes which, in turn, attracts more VCs to the area, and so forth.