Hewlett Packard was formed during the Great Depression; Dr. Jonas Salk's hunt for a polio vaccine led to the founding of the Salk Institute for Biological Studies in 1960. These are just two examples of entities born out of disruptions; the future stars of the COVID era are just being brought forward now. While Moderna and Pfizer (and Zoom!) will no doubt be remembered for their COVID-era contributions and innovations, tomorrow's earth-shakers are just coming out of today's business accelerators. So, while some people are wondering will IT companies open after lockdown, others have rolled up their sleeves and gotten to work. At Proxet, we see the future of startups in 2022 as a time for leveraging expertise and the agility honed by answering the data engineering and regulatory issues of the past two years in particular.
Which sector will grow post covid
The question of which industry will grow after COVID-19 started to become answerable by late 2020, when the contours of the pandemic itself became clearer. Writing in Entrepreneur, Hans Christensen, Senior Director at Dubai Technology Entrepreneur Campus, saw five tech industries with bright futures at the time:
- Artificial Intelligence
- Health/biotech
- Space tech
- Edtech
- Fintech
Artificial intelligence stands out from the rest because of the way AI can be found in all of the other industries. Even outside of this list, the startups coming after COVID-19 will find AI/ML as a set of required, though specialized, tools instead of exotic add-ons, even if the connection seems tenuous at first. For example, at Proxet, we use AI extensively in our e-commerce solutions.
If this top-5 list were expanded, the number-six spot for top startups in the US for 2022 and beyond would almost certainly go to e-commerce. The pandemic created disruptions that whipsawed through supply chains and sales networks as well as permanent changes, and with both, opportunities. Platforms and applications that helped users adapt their purchasing and delivery to rapid changes had an overall use case that was suddenly on most minds.
The way that AI fits the needs of e-commerce did not go unnoticed in C-suites. An October 2020 survey by Statista showed that decision makers in North America and Europe saw more than one role for AI in e-commerce.The use of AI was predicted in a Statista poll by more than half of respondents to become an industry tool because companies saw it being used for:
- Personalization;
- Site search;
- Forecasting;
And more than one-third of respondents saw AI as also furthering e-commerce in:
- Marketing;
- Pricing;
- Customer services.
Top startups in the US 2022
Funding for startups in 2022 looks promising. Money flooded into startups in 2021, partly due to the disruptions of 2020 and plans that had been set aside. Regardless of the reason, early-stage funding did particularly well, with $201 billion reaching 8,000 companies, Crunchbase reported in January 2022. What kinds of companies will now be seeing investor and mentor attention?
Taking educated guesses is popular. Forbes does a good job of looking at problems that need solving. Fast Company has its own, more focused list of the top 15 tech startups for the year. They're very good at painting a broad a picture of the year ahead. However, like ignoring the fact that AI underpins successful platforms in the top verticals, looking at X number of individual companies misses the fact that unless a must-have, life-saving app (maybe it's time to put away the term 'killer app') appears, the top startups will be plugging into a changing ecosystem, and it's those changes that will be defining in 2022.
As for the startups themselves, early prognostications point to winners spanning a variety of industries. Some fill needs created by the COVID pandemic. Others sort out old problems in new ways, and yet others leverage new technologies in ways we haven't thought of before. Besides Hans Christensen's predictions, social media, logistics, media sharing, and DevOps platforms share the stage.
Partnerships for startups
The disruptions of the COVID and Great Resignation have brought a new environment for startups, but the problems that new businesses of all sorts face are still factors. Domain expertise, growth, administration, and financing are still part of the struggle. For many reasons, the pandemic brought out the entrepreneurial side of people, but the failure rate of new projects is still 90%, according to LinkedIn.
The solutions are still in place, too, such as including technical partners, incubators and business accelerators. The accelerator business model, made famous by Y Combinator and Techstars, is geared toward helping fledgling companies. This puts it further along the business maturation path than a startup incubator, which tends to be focused on dealing with the founder carrying a brilliant idea in her head and maybe a few employees. Both startup partnership examples can be sources for the connections, experience, and financing that startups need. But they're changing, and moreover, other forms of partnerships are emerging.
The differences between business accelerators and incubators, besides the maturity stage of the startup and the length of time the startup spends in the partnership, include the infrastructure available. In a TechRepiublic article written before readers began wondering, "Will IT companies open after lockdown?" the fact that incubators' tend to offer open-plan working space for their startups was a major difference. This may have permanently changed.
TechCrunch startup columnist Natasha Mascarenhas noted in her Jan. 8, 2022 article that the accelerator business model is evolving post-COVID. Some of the changes are predictable, such as a rethink on the necessity of Demo Day, when graduating companies showcase their achievements in hope of gaining the attention of investors.
Other changes, like automatically investing further into the companies that had gone through the program, were already in the works. Y Combinator announced that it was stopping the practice in April 2020, largely because the company was becoming a victim of its own success.
In the announcement, Y Combinator took stock of the situation: "Said simply, investing in every round for every YC company requires more capital than we want to raise and manage. We always tell startups to stay small and manage their budgets carefully. In this instance, we failed to follow our own advice.”
Startup partnership agreements are growing in scope, and IT companies now act as an incubator or business accelerator as well as a technological partner. The advantage of this is that it brings the money and the technology sides of the partnership under one roof, and can, in the case of complex regulatory issues, save a young startup from catastrophic miscalculations. It also helps tech companies looking to leverage their skillsets without having to spin up a new business unit and possibly overextending itself.
This stepping back from overextension and finding multi-faceted partners has an important place in the (almost) post-COVID era, when we should see a lot of new ideas enter the marketplace. Business incubators will be busy, but not everyone will have the vision necessary to focus on the real-world application of compliance.
“The complexity of today's startup environment points to the need to not just bring in the right people as employees or experts. Startups need the right partners, whether that's for marketing or industry know-how or the tech chops underpinning their product. And if they're fortunate, they'll find a partner who can do more than one of those things, and do them well.”— Vlad Medvedovsky, CEO at Proxet (ex - Rails Reactor) - a custom software development company.
Startup Guide 2022
On the one hand, the (almost) post-COVID environment is certainly more volatile and yesterday's agility may feel slow. On the other hand, the ecosystem for new companies continues to grow. Incubators, business accelerators, VCs and others that qualify as Hubspot for Startups partners can help their startups gain access to marketing tools that might otherwise be out of their reach.
The IT talent market was already tight before the COVID pandemic. However, the very impetus that has led to the explosion in startups in 2021 also made it even harder to find the workers needed in a timely manner. Companies are stepping in where a small team would previously have been formed.
Also, as companies continue to incorporate AI/ML into their solutions, the need for talent will drive an already tight labor market tighter. As a result, companies are going to need to create partnerships with firms specializing in AI development.
One example of what the top-startup lists largely ignore and the startup partnership examples barely touch upon is that companies working with personal data will need to take increasing regulation into account as well. From healthcare to financial services, large amounts of data are gathered which need to be protected. COVID has pushed data engineering further into the intersection of privacy, scientific need, and technology, and an interdisciplinary approach is needed to make sense of it all.
Conclusion
As the world emerges from the COVID pandemic, startups will have new opportunities to work with business and technology partners. At Proxet, pushing innovation while keeping data safe and private is one of our primary directions. Helping startups gain traction is another. With our experience in lifting 30+ startups and raising over $550 million in funding, we can help propel your company, too.
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