As many smaller tech firms and startups fight for survival, the more fortunate are prospering and venture capital firms are seizing opportunities.
Technology giants with online services that meet the needs of people and businesses under lockdown have a clear advantage in the pandemic. But for Silicon Valley’s innumerable tech startups, the outlook is mixed and job losses are mounting. More established firms are looking to take over rivals. Uber, for example, has a ride hailing business that is dwindling, a meal delivery service that’s growing, and billions in the bank. It is reportedly angling to acquire GrubHub.
Venture capital firms and entrepreneurs are scrutinizing their portfolios and placing their bets. Californian tech firms and their backers were among the first in the U.S. to take COVID-19 seriously, and for the latter this includes re-evaluating their holdings to determine which firms are well-positioned enough to survive or agile enough to pivot.
Venture capitalists also have their feelers out for new opportunities, including firms whose valuations have dropped but are worthy of fresh capital. As The Economist reports, “More than one sees the tech industry’s sweet spots moving from services that cater to consumers and involve the physical world, such as electric scooters and online ticketing, to offerings for business that are delivered virtually, including specialised web-based software and digital infrastructure.”
Recently venture capital has been flowing toward companies in corporate data management, as well as areas such as telemedicine and online education. Data from PitchBook show that investments in America are down by only 25% compared to pre-pandemic figures.
Speculation about future impacts of the pandemic also extends to Silicon Valley itself as a monolithic tech hub, and to the tech industry overall. As working remotely becomes the norm, there is good reason to question the necessity of living and working in the Bay Area, with its ultra-high cost of living and many distractions. This is an acceleration of existing trends: Many tech startups were already “fully distributed”, and big firms like Facebook, Google and Twitter have been extending their remote working arrangements.
Likewise the industry of venture capital, being so entwined with the technology sector, could see profound and lasting change. It too could go virtual. Disrupters like NFX, an online venture firm, are already at the gates.
