Three reasons Silicon Valley is feeling optimistic
Rene Musech is Managing Director of Brands2Life US
The second half of 2016 saw many Venture Capitalists in the US pulling in their reins. The uncertain political and economic climate led them to believe that “winter was coming”. But, as Spring starts to bloom here in San Francisco, so too has a sense of optimism for the year ahead and here are three reasons why…
1. AI and machine learning are continuing to get VCs excited
2016 was the year that big names, such as Amazon, Facebook, Google and Microsoft, were able to monetize their AI and machine learning investments. Consumers were quick to embrace the first semi-autonomous vehicles and intelligent household assistants like Amazon Echo. And now every tech CEO worth their salt is touting their organization’s AI capabilities or strategy. It’s no wonder that investors we’ve been speaking to are excited about the potential of the AI startups in this market and see it as a key investment area for the next five years. In addition, the large amount of cash being put to work by companies including Oracle, Microsoft, IBM and Salesforce through aggressive acquisition strategies in the AI space means that VCs have hope for quick, high-value exits. Over 200 private companies using AI algorithms across different verticals have been acquired since 2012, with over 30 acquisitions already taking place in Q1’17 alone.
2. Trump isn’t yet affecting tech as much as anticipated
Silicon Valley was highly vocal and engaged in the 2016 election, with 145 tech leaders signing an open letter opposing Trump. Research from VC and entrepreneur Mark Suster amongst the community shows VCs are particularly concerned about Trump’s policies around international trade (especially China), cyber security and immigration. Yet VCs still don’t seem to think that Trump will have a huge impact on the tech ecosystem, believing that his bark is worse than his bite.
3. There’s a greater focus on tangible growth
There has been a recent shift in Silicon Valley toward a focus on annual recurring revenue and strong unit economics, and away from an approach focused on customer acquisition at all cost. In addition, whereas in 2016 where annual IPO proceeds dropped 37% to their lowest level since 2003, 2017 promises to change that as several “decacorns”, unicorn companies valued at tens of billions of dollars, make their market debuts. With Snap, the parent company of Snapchat, going public in early March, other consumer tech brands like Airbnb and Spotify are expected to follow suit.
It’s an exciting time to be a part of this community, growing our new San Francisco office. We look forward to helping our clients transform these positive feelings in the market into better stories that lead to bigger business impact. If you’ve got any questions or points to add to the above, then please let me know in the comments section below.