What have been the leading investing trends in IT since 2000?
It is intriguing to see how throughout time we can identify some trends and patterns in the investments driven by Venture Capitalists, may it be in the form that they take or the sector that they are directed to.
We hear everyday about Buzzwords such as Artificial Intelligence, Big Data or about this new ‘exploding sector’ of the industry. It is difficult to sometimes know wether people truly understand the challenges and dimensions of the new technology of the moment or if this emulation is mainly due to a sheep-like behavior in the ecosystem globally.
Hearing Carl Eschenbach, partner at Sequoia Capital, made me want to go back and explore how investors and entrepreneurs have been seing the future of the world in the past 17 years.
I find it incredible to think that Sequoia Capital has been participating since 1972 in shaping the VC world that we know today. I researched and interviewed different investors to capture in a very simple list their point of view about what were the identifiable major trends in IT these past years, and what people at that time really believed in to make our future better.
Software as a sure value
Since 1995 until before the Dot-com Bubble collapse, software investments were the main leading trend. Throughout time, software has always remained an important part of the global venture investments, with an average of 20% every year directed to the industry in funding.
10 years ago, CleanTech was extremely uprising and concentrated many investments in technologies that developed solar panels or electric cars, the investments in this sector have declined gradually since then.
After the Dot-com Bubble collapse, starting from around 2005, investments were very focused on e-commerce which seemed to be the most obvious and quickly profitable market at the time. However, from 2010 to 2016 e-commerce has exited from the main trends of the industry.
With e-commerce, online media and the emergence of social platforms such as Facebook or Youtube, the advertising industry has seen many changes and knew a real growth. However from 2010 to 2016 the investments lead in that sector declined of 100%.
One thing that is sure for all, is that the insurance industry has always been presenting incredible opportunities to find better models and processes. From 2010 to 2016 investments in that industry grew by 2000%!
For many of the actors I interviewed, FinTech can be compared to CleanTech 10 years ago, it will remain a trend.
For a time, people nurtured the idea that they could combine millions of computers seamlessly around the world to make processing power available on demande anywhere, rather like electrical power: the Grid. Very ambitious attempts were made but never resulted in a truly successful technology.
The particularity of biotechnology and any investments made in human science is that they are not affected by trends. The investment cycles are much longer (around 7-10 years), which makes this sector independent and always part of the global IT investments throughout time, whatever happens. The sector was not touched by the Dot-com bubble collapse in the early 2000’s.
Listening to Carl Eschenbach about this subject was clearly very interesting. Sequoia Capital only invested in one Open Source project. As he explains, Open Source is one of the toughest markets to find a successful business model: people are of course interested, but expect to have it for free and the bigger companies who could pay for it use custom solutions.
Of course, Telecom has been one of the most important trends in investment with all the opportunities that represented the construction of the infrastructures at the moment when the market emerged. While the sector represented 30% of the annual VC investments, it now only represents roughly 5%.
What about now?
The main trends that we can identify for the current investments are very oriented towards a real technological disruption: AI, Cloud computing, Internet of Things, and of course Blockchain (originally devised for the Bitcoin) which is the current main topic of discussion.
Globally, we have witnessed a huge growth in the number of accelerators and incubators everywhere in the world (independent, company founded, university founded…), as well as a desire for a maximum of diversity amongst the teams and the VC firms themselves (especially regarding gender). Corporates (not familiar at all with technology) have become more and more interested by the startup investments as it is the current tendance, the number of investments lead by these actors has exploded these past years, they usually adopt a sheep-like behavior and follow the biggest Tech VC firms with a distance behind. This has lead to an increasing desire of focus on investor eduction and on the early/seed stage funding professionalization.