Presented by Alumni Ventures
The days of waiting for an IPO are over. Getting in early on an investment is now essential for the opportunity to get the most significant returns — especially in those areas that are gaining tremendous traction because of a world in upheaval. COVID-19 has impacted trends in ways that couldn’t have been predicted, causing new markets to emerge, disruptions across industries, and heightened interest in investment from all quarters.
“The pandemic dramatically accelerated existing market trends, causing an increased interest in technology and innovation,” says Mike Collins, CEO of Alumni Ventures. “More people want to participate in that economy as entrepreneurs and investors.”
At the same time as markets are shifting, so is the landscape for venture investing. There’s been more democratization of the venture capital asset class, according to Collins. Historically, VC was designed for large institutions, endowments, pension funds, and similar organizations. That’s changing as more individual accredited investors are looking to diversify into venture and finding some disruptive providers, like Alumni Ventures, ready to serve them.
Also changing is the ready availability of capital for private companies. They no longer need to go public to raise that same amount of cash. And because there’s significant cost and hassle involved with being a public company, companies are more than willing to wait a long time before taking on the costs and regulatory burdens — if they even decide to take that step at all. So companies going public now are often far more mature, with much higher valuations. Twenty years ago, companies would go public at a $500 million valuation; now they might IPO at a valuation between $25 to $50 billion.
In other words, more of the value being created is from the time a company launches to the time it goes public.
Collins observes, “If you wait for the IPO, you’re ignoring opportunities for value creation. We want to offer that opportunity to investors. We think about venture like any other asset class, with its own risks and rewards and as just one part of a diversified portfolio. We want to offer investors a chance to allocate a portion of their portfolio into venture — just as they do cash, real estate, equities, maybe some fixed income.”
So which trends are Alumni Ventures watching? Here’s a look at some investment areas that are gaining traction.
Health care, education, and how we live and work
“Health care and education are huge parts of the economy, and they need fixing,” Collins says. “Technology is going to be critical to that fix, changing the health care and education experience over the next five to ten years.”
Collins predicts that early interventions and many specialties like dermatology will be handled with a telemedicine approach, while records will be shared and secured with better technology. In education, big tech will disrupt professional training and specialty institutions, with possibly even some of the tech giants building innovative platforms that will change how learning is delivered.
Collins sees similar tech innovations in the lifestyle segment of the economy. The seismic move toward screens and digitization will continue. Changes in the way people work will accelerate, with a lot more flexibility in the 9-to-5 in-office routine. And the balance of digital vs. physical lives will tip. As Collins notes, “Digital natives are looking for their life experience to be a combination of the physical and digital worlds.”
Some examples of innovations in these areas:
- Oura, developer of a wellness ring and software application, gained attention for its ability to detect early signs of COVID-19 infection — even being credited for a successful NBA reopening.
- Tembo Health is a provider of telemedicine services intended to connect nursing home patients with specialty services.
- Tract is leaning into the trend of student-directed learning by creating the first “for kids, by kids” online content marketplace.
- Lessonly offers enterprise learning software that gives companies the ability to create content, deliver trainings, and assess and improve performance of their employees.
- Hydrow has created a connected-fitness platform focused initially on a rowing machine that’s addressing consumer interest in remote conditioning.
- BeyondHQ, a workforce and workplace planning platform for distributed teams, is well-positioned to harness the trend toward remote, dispersed, and hybrid workforces.
Blockchain technology, which shouldn’t be confused with Bitcoin, is still in its infancy, Collins says. However, in his opinion, the technology stack has incredible applications. “There are exciting developments in finance, retail, logistics, banking, law, government — even art. Don’t underestimate the power and uses of the tech. I think it’s similar to the early days of the internet, which was often overhyped in the short term, but also underestimated in the long term.”
Just one recent example of a blockchain-related success: Coinbase, an online broker of cryptocurrencies, was listed in April and started its first full week as a public company at a valuation of ~$65 billion.
A few other blockchain companies to keep an eye on:
- BlockFi, which provides diversified financial services for cryptoassets, recently raised a $350M Series D round at a $3 billion valuation.
- Algorand is a next-generation blockchain technology centered around a novel, more scalable, faster, and more efficient consensus protocol based on Proof of Stake (PoS).
Big data and AI
“There’s also a lot of hype around big data and AI,” notes Collins, “But we’re continuing to see software and computers take over things that they can do better than humans. It’s a wave that’s inevitable.” Indeed, AI and machine learning are often viewed as the most transformative technologies of the 21st century. Many investors are looking to get in early, and the roster of startups in the space grows at a steady clip.
Watch out for:
- Conversica offers an AI-based sales automation platform designed to improve customer engagement.
- Vyrill’s AI tool focuses on video insights, licensing, and content marketing.
Energy and life sciences
“Energy is another high-impact, high-value sector,” Collins says. “Looking back over the last couple hundred years, you’ll see that many changes in society have been driven by developments in energy. There’s more of that to come — even in the span of the next decade.”
Life sciences is another deep tech area where exciting work around health and longevity is being done, according to Collins. The evolution of deep technology, which enabled the recent rapid vaccine development, is just one signal about how the speed and impact of deep tech is increasing.
“It’s a golden age, where there are lot of problems, but a lot of smart people with profound technologies working to solve those problems,” Collins says.
Up-and-coming energy companies:
- Freewire develops and manufactures mobile energy storage systems to transform energy delivery.
- Linear Labs manufactures electric motors and generators that create more power while using less energy for applications from electric vehicles to micro-mobility solutions to HVAC and more.
The future of venture capital investing
For Collins, this period of venture capital is the story of diffusion and democratization. VC investing is becoming more global. It has already moved out of traditional hubs like Silicon Valley and Boston to other regions. Entrepreneurial ecosystems are developing and growing around the world, boosted by access to cheaper tech, remote talent, and international capital infusion.
And that kind of transformation is impacting investors too. Collins says. “More investors have greater access to venture — and not just at the local level. They can be participants and contributors in the global venture economy.”
Collins concludes, “Putting it all together, this is a time of more venture deals from more sectors, accelerated by significant societal trends, with a compelling valuation argument to invest pre-IPO. At Alumni Ventures, we think that adds up to powerful venture opportunity.”
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