Political and economic uncertainty
Political and economic uncertainty is expected to remain fairly high in several regions as a result of ongoing Brexit concerns, the continued US-China trade war and tensions in the Middle East, and more localised challenges in a number of jurisdictions. The November 2020 presidential election in the US could also cause some pullback toward mid-year as investors wait out the election cycle – although the election could also drive an uptick in early year IPOs from companies interested in exiting prior to the election.
Wariness over cash-burners
In the wake of the challenges experienced by WeWork, there has been a very clear shift in the focus of VC investors across most of Asia during Q4’19. Investors are moving away from companies that need to burn significant capital in order to drive traffic or increase their user base and are instead focusing their attention on startups with stronger business models and innovation offerings.
Hot areas for 2020
Fintech, biotech, and B2B services are expected to remain hot areas of VC investment. There’s also increasing investor interest in companies focused on deep technology, 5G and artificial intelligence. Deep technology innovation is seen as a very hot area of investment in China.
Interest in specialist platforms
Over the next few quarters, there is also expected to be an increase in interest from VC investors for collaborative economy platforms based around specialised industries – such as RigUp, which provides a platform for recruitment and talent management for oil rigs.
“Heading into 2020, companies looking to attract attention from VC investors are expected to put more emphasis on reducing their cash flow and providing clear paths to profitability. Investors are likely to focus their investments on companies with a strong and sustainable global growth model. Logistics, education, and ecommerce are all expected to remain hot areas of growth,” said Price.