Written by: Anirudh Mannattil
Many of us might have heard of the story of the rags-to-riches rise of several people from different walks of life. However, not all paths were the same. Some had to climb huge mountains whereas others were gifted with an immense skill that they utilized to maximum capacity. Out of the former group, several of these ladies and gentlemen were start-up founders. Start-ups are a common term nowadays, but what exactly are they? A start-up can be generally referred to as a form of entrepreneurship or the launching of a new business idea by a group of people or an individual, with the hope of enlarging the scope and capability of the start-up. While there is a lot to understand and learn about start-ups, our primary focus in this article will be on the major trends in the start-up industry today, and what these could potentially mean moving forward.
To begin, let us explore the new normal of Venture Capitalist (VC) firms investing in start-ups that are enjoying sufficient profitability rather than focusing on developing new technologies and innovation. We need to first understand what VC firms are. A VC firm is a corporation that, when approached by an enthusiastic entrepreneur with a potential business idea, decides whether to invest in this idea and hence acts as the financial backbone for the initial funding of the start-up. As per the contract between the entrepreneur and the VC firm, the firm receives a portion of the profits the start-up makes. Though a start-up is often regarded as a product of innovation and a means of furthering mankind's potential, VC firms are tending towards financial security these days. Therefore, they prefer to invest in start-ups that have already been doing pretty well financially. This is especially vital for those delving into AI and Deep Tech, as the R&D (Research and Development) budget required to implement and launch products is extremely large, thus acting as a red flag for VC firms. One example of a failed start-up is WeWork, which was losing around 2 billion annually. Nevertheless, VC firms continued to invest in WeWork until its business model, which was doomed to fail, as well as the internal financial practices employed, came to the public light, shattering its public image. The case study outlined above is a glimpse into the chief issue start-ups face; employing a strong business model which can attract consumers and generate profits. Indeed, profitability is a key consideration in the minds of several potential VC investors when considering start-ups.
The next major trend which is currently happening in the start-up industry can be termed 'The Green Wave'. This phenomenon is often described as the wave of eco-consciousness that has spread across the globe, which gives much-needed yet delayed consideration to environmentally-friendly practices. As facts come to light that points towards the gradual destruction of Mother Earth, innovative start-ups have found it in their inventions and core to utilize this Green Wave as a means of attracting consumers and potential funds alike. For instance, it is common to see start-ups employ the use of electric vehicles rather than petrol, as EVs are seen as the future of transportation. Much research is being funneled into this idea, which is meant to revolutionize the world. As such, the trend of the Green Wave is another key point to look out for.
Thirdly, banking shake-ups have been creating new opportunities for growth in fintech fields. Tightened regulations worldwide as a result of the recent financial crises brought to light several issues within major financial companies, which has led Fintech start-ups to innovate. For instance, models of payment such as 'Buy Now Pay Later' have emerged. These will continue to grow, along with a greater focus on cryptic technologies and peer-to-peer banking. This is definitely something to watch out for.
Last but not least, understanding the rise of applications and cybersecurity in the IOT (Internet of Things) space is critical. IOT refers to a system of interrelated computing devices, objects, or digital machines which exchange data and connect over the Internet. These systems are often employed in homes, such as Amazon Alexa or Google Homes. However, as the growth of opportunities for IOT increases, the severity of threats rises as well. Cases in point include Amazon Alexa utilizing a 'Skills' feature to allow users to build their own applications like a marketplace through open source technology, as well as the increasing emphasis on cybersecurity solutions for IOTs (Mai Fenton from Digital Risks openly stated that connected devices are huge targets for hackers since accessing weakest technologies in the chain can allow for infiltration of the wider networks).
All in all, the aforementioned trends are definitely things to look out for in the coming years.
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