Over the course of the past year, the Fundraise Concierge team has been fortunate to work, interact, and learn from more than a thousand startups. As GM of our team, I myself come into contact with over 3 new startups everyday and over a hundred each month between our fundraising bootcamp Atrium Scale, happy hours, conferences, and working with our current clientbase. Over the past few months, we’ve distilled all those conversations and summarized them into 5 key trends that we saw in 2019 as we prepare for what’s to come in 2020.
5 key startup trends:
- Startups that focus on helping other startups have seen a resurgence
- AI/ML is still a hot buzzword and there have been impressive advancements in what we see, say, and read
- Regulatory hurdles and uncertainty have affected—but not stopped—blockchain/crypto & cannabis startups
- WeWork negatively impacted real estate startups with physical locations but SaaS real estate startups are still disrupting existing processes
- The sharing economy continues to evolve
1. Startups that focus on helping other startups have seen a resurgence
We could be due for a recession any day now. So, it might be surprising that a trend we noticed in 2019 was the resurgence of startups that help other startups which I’ll call BFFFs—By Founders For Founders.
Since the funding environment for seed stage startups continues to stand robust, we’ve seen many of these BFFFs focus on seed or early stage companies and grow alongside their client base. The BFFF companies that have seen the strongest traction and interest have focused their efforts on core Needs vs. Wants for startups. This will be critically important when there is a slowdown and 2020 will reveal how and if those startups can continue to grow and expand with their client base. Core needs that have seen startup traction include addressing how to get started and how to scale/grow.
Just getting a startup off the ground requires several obstacles to overcome and many BFFFs focus on laying the foundation for a new company to get started. Here are just a few:
- Atrium provides founder-friendly legal services.
- Carta lets founders manage their cap tables.
- Gusto is still the easiest way to process payroll and benefits.
- Stripe, Square, and Zuora can all get you up and running with payment processing and billing.
- Brex provides business credit cards for startups and comes with an expense management tool.
- Pilot provides bookkeeping.
- And Vouch, which offers instant startup insurance, has now raised over $70M.
As startups scale and grow, there is another group of BFFFs that focus on providing efficiency in all facets of operating and running a business:
- Lever simplifies the process of hiring employees.
- TravelBank provides travel and expense management capabilities.
- Box and DropBox offer scalable storage solutions.
- TwineLabs provides analytics software for Chief People Officers & CEOs.
- Humi.ca provides scalable HR software.
- Lattice is a team performance and engagement software platform.
- Qulture Rocks provides feedback, performance, and development plans for corporations.
- Zenefits wants to be your all-in-one HR software.
- Guideline provides affordable 401K for small businesses.
- InterPrime makes cash management easy for startups.
- Apollo.io provides data-driven revenue growth.
- AppCues is a growth engine tool.
- OhMyGreen, ZeroCater, and others provide healthy snacks and meals for startups.
- Grammarly helps employees write, correspond, and—as a result—represent their teams better.
- Zoom provides conference line capabilities.
- DocSend lets you easily and securely share business-critical documents.
Of course, there are many more SaaS companies focused on other startups and this is a trend that will continue through 2020.
2. AI/ML is still a hot buzzword and there have been impressive advancements in what we see, say, and read
In the canon of James Cameron’s science fiction film franchise, Terminator, August 29, 1997 was the date that humans lost control of the artificial intelligence system, Skynet which sparked a war between humans and machines. Lucky for us, we’ve rounded 2019 and Skynet is nowhere to be found. In fact, the highly glamorized artificial intelligence capabilities that startups have been talking about have largely been less “Terminatoresque” and more product refinements around what we see, say, and read. 2019 showed us some pretty impressive advancements even if the buzzwords are still being used for practically every startup.
Facial recognition, machine vision, and especially deepfakes have utilized AI/ML tech to address what we see. Facial recognition is so commonplace now that we don’t even question it. Facebook automatically tags you and your friends in photos. SnapChat, Instagram, and Facebook offer facial overlay technology to modify your photos, videos, and chats. Apple’s iPhone uses your face to unlock it. The more concerning applications of facial recognition have also become a reality as China recently applied facial recognition software everywhere from airports to office buildings to trash sorting facilities for their social credit system (a concept straight out of Netflix’s science fiction show, Black Mirror) powered by SenseTime’s technology.
Within the startup realm, commerce/eCommerce has been a natural application of visual AI. We saw a major acquisition of this technology with PayPal acquiring shopping and rewards platform, Honey, for $4B (TechCrunch). But here are some other startups addressing this space:
- Vyking wants to create virtual try-on technology for footwear.
- Price.com leverages machine learning to help people shop better.
- Caper is offering autonomous checkout with smart carts.
- Mashgin wants to make checkout simple and easy with AI based self check-out kiosks.
- Xailient wants to offer better computer vision and a platform for applying it to various verticals.
- Scope Media provides an AI suite of tools for eCommerce to boost conversion and transform the overall shopping experience.
- Original Stitch built a mobile-AI tailor to make your custom shirts.
- Mode AI wants to provide AI-based visual fashion inspiration, styling, and shopping.
- Syte AI helps retailers increase customer engagement and boost conversion rates and sales using image recognition.
- Skafos provides a personalization and visual search platform to make retailers’ products more discoverable.
- Trendalytics wants to help retailers make profitable decisions by aggregating and demystifying predictive data.
- Clarifai wants to provide AI-powered image and video recognition.
- Sentient/Evolv uses its AI-based evolutionary intelligence to provide real-time personalized shopping assistance.
- Semantics3 wants to provide a data and AI platform for eCommerce and logistics.
- Dor counts foot traffic and applies ML to measure how well stores engage customers.
And more vision AI use-cases are coming to fruition including startups addressing the sports, eSports, and adventure sports verticals:
- HomeCourt: breakthrough approach to basketball player development
- ShotTracker: provides real-time basketball statistics during practice and games using sensor-based technology
- BestShot: AI based tennis coach
- SwingVision: AI for tennis
- Reely: end-to-end content solution for sports leagues that leverages computer vision and deep learning AI
- Dojo Madness: tools and content that enables eSports players to master their game
- Mobalytics: personal gaming companion for League of Legends
- Revl: automatic video solution for adventure experiences
Deepfakes, fake media created with deep learning techniques, became even more mainstream in 2019. This all started in 2018 when a Reddit user named Deepfakes changed the internet by uploading a machine learning model that could swap one person’s face for another face in any video (FastCompany). Since then, several startups have taken that technology further by faking voices, faking avatars, and faking photographs:
- Topaz Labs: image-editing software
- Meo: makes 3D avatars from 2D videos
- Zao App: deepfake-style face swap app
- Morphin: instantly deepfakes your face into gifs
- Synthesia: generates localized and personalized videos using AI and created the global campaign showing Malaria survivors speaking through David Beckham (TechCrunch).
Similarly, AI/ML has been used on what we read, say, and hear with advancements in natural language processing, natural language understanding, and natural language generation. If you’ve used Alexa, Siri, or Google, you’ve seen this in action. But startups are constantly pushing the frontiers:
- Gong uses speech recognition technology to provide companies with insights into their sales interactions and announced $65M in new funding last month (Tech Startups).
- Fireflies.ai provides conversational AI that organizes transcriptions into action items and recently raised another $5M (VentureBeat).
- Modulate wants to unlock your voice using real-time voice skins, or vocal avatars.
- SoundHound is offering voice-enabled AI and conversational intelligence technologies for other services and devices outside of music recognition.
- Airbud is driving digital transformation with enterprise-grade conversational AI.
- AudioFocus has created a mobile app that helps you hear the voices of your friends and family in noisy places.
- Invoca provides AI-powered call tracking and analytics that gives marketers actionable data from inbound phone calls.
- Voysis is the voice AI platform that allows customers to search using voice.
- Speechly is building the next generation of voice UIs.
- DialogFlow is a conversational user experience platform that enables natural language interactions.
- Blue Canoe Learning uses AI and speech recognition to improve the pronunciation of non-native English speakers.
- Verbit offers transcription and captioning powered by AI.
- Speechmatics develops automatic speech recognition software based on recurrent neural networks and statistical language modeling.
- Fathom Health automates the medical coding process using AI.
- Trint creates searchable and editable transcripts.
- June.ai uses AI to reshape the experience of email.
- Kriya AI simplifies the customer acquisition process by utilizing smart emails that increase conversion.
Startups that have pushed forth new innovations in the virtual assistant space include:
- Text Mei is the world’s first mobile messaging app that includes an AI assistant designed to improve your relationships.
- Notable Health creates a physician assistant using AI to automate and digitize every physician-patient interaction.
- Aiva is the world’s first voice-powered care assistant.
- AI Cure wants to use AI to see, hear, and understand how patients respond to treatment.
- Tact.AI is developing the first omnichannel AI-powered digital assistant for sales teams.
- Sourceress wants to accelerate your sourcing and hiring by giving you an AI HR assistant.
- Xor.AI is creating a virtual HR assistant for recruiting.
- Mya has built the leading conversation AI platform and wants to be your HR assistant for hiring teams.
- Sherpa AI is the personal assistant platform that learns from you and provides you the information you need.
- Evie is the AI assistant platform for the next wave of intelligent enterprise automation.
- Mezi is AI for travel and wants to be your personal travel assistant.
- Yummly is building the smart, personal, and seamless platform for taste to help answer the age-old question of “what’s for dinner.”
- Tara AI wants to use AI to automatically scope and resource your next project.
3. Regulatory hurdles and uncertainty have affected—but not stopped—blockchain/crypto & cannabis startups
While US states continued to grapple with the implications of legalizing cannabis, investors were piqued by its potential opportunity and poured money into the space. Many investors were encouraged by Canada’s legalization and most likely just saw legalization as inevitable. Whatever the reason, billions were invested in this space.
Nothing highlights what happened in the wider vaping industry better than Altria’s investment of $12.8B in Juul for a 35% stake at $38B in December 2018 (CNBC) and then its subsequent $4.5B writedown of that investment in October 2019 (CNN). What has been a strong area of focus for startups, however, has been on the infrastructure needs for the cannabis industry:
- Meadow creates compliant POS for cannabis dispensaries.
- Treez wants to be the platform that joins brands and distribution with retailers and cultivators.
- Eaze wants to provide cannabis delivery for everyone.
- Nabis is the leading distributor of cannabis products.
- Indica Online provides an all in one medical marijuana POS software.
- Cova Software creates cannabis retail software.
- GreenBits is the leader in retail cannabis POS software.
One particular company to note is Zeuss Technologies because it sits at the intersection of an infrastructure need for the cannabis industry utilizing blockchain-based KYC and AML solutions. By bridging cannabis and blockchain, this company has braved the regulatory complexities of both industries.
The crypto/blockchain industry went through a similar ride. The good news is that the ICO madness we saw in 2018 did not continue in 2019. The bad news is that even solid blockchain companies with incredible founding teams are having a tougher than expected time raising capital. Overall, what that means is that there are less scams and hype and more companies being built that have substance.
The original intent for Bitcoin was to fundamentally change the financial services industry and there are still startups addressing this area including:
- Bitpay is a platform for accepting bitcoin for online payments.
- Synaps applies blockchain to syndicated loan trades.
- Request operates an open network for transaction requests.
- Ripple is a global digital payment system.
Blockchain technology has also been applied to betting and gambling with startups like:
- Zensports: peer-to-peer mobile sports betting
- Bethereum: free sport and eSports betting
- Wagerr: anonymous betting
- LetsBet: crypto price predictions
- Betr: peer-to-peer betting
- Cashbet: crypto-ready iGaming platform
- Edgeless: online casino
- FunFair: blockchain solutions for gaming
- Augur: decentralized oracle and prediction marketplace
Whereas in the past, companies have struggled to commercialize blockchain technology as a product by itself, it continues to be applied to all sorts of industries and verticals for purposes like security and traceability. Companies like Blade, Tassat, and EMX are developing derivatives exchanges that allow users to trade and bet on futures with cryptocurrency and blockchain assets. So, despite regulatory complexities and overall uncertainty, it’s clear to me that both industries are here to stay and we will see much more from startups in these areas in 2020.
4. WeWork negatively impacted real estate startups with physical locations but SaaS real estate startups are still disrupting existing processes
There’s no way to talk about the trends in real estate and PropTech in 2019 without first addressing the elephant in the room—WeWork. There are tons of articles about what went wrong (Guardian), their layoffs (CNN), and how SoftBank gave Adam Neumann $1.7B to step off the board (Business Insider). The ramifications of WeWork’s rapid fall extend far beyond just real estate and Proptech as billions evaporated (WSJ), investors re-evaluated startup valuations (Battery Ventures), and everyone questioned the long-term viability of once-hot startups (The Atlantic). But as it relates to real estate and PropTech, WeWork’s fall is having the greatest impact on startups that have physical locations.
One area that has been red-hot for startups is addressing the future of co-living. While many are still raising money, like Zeus receiving an additional $55M in December (TechCrunch), it is clear that there’s an increased need to demonstrate good unit economics and long term margin potential for these companies to separate themselves from WeWork. The startups in this realm will need to showcase their ability to do this in 2020:
- HubHaus: shared housing
- Ollie: all inclusive co-living
- Common: city living made better
- Cohabit Labs: co-living reinvented
- Sonder: beautiful spaces built for travel and life
- Zeus: business travel
- OpenDoor: shared homes in the San Francisco Bay Area and Portland
- Lyric: a new way to live while you travel
SaaS platforms remain interesting to investors especially within Construction Tech, PropTech, and location data.
There is a supply-demand mismatch with respect to the size of the market for construction tech, with there currently being more demand than supply. Construction accounts for $10T annual global spend and employs 7% of the global workforce. So, it’s no surprise that startups have taken notice:
- Terane App: connects builders and construction professionals
- Basis: centralized bid management for automating construction workflows
- Buildstream: an OS for construction equipment operations
- Constru: lowering prices and reducing schedule overrun on construction sights with AI and machine vision
- Curri: construction supplies delivered on demand
Similar interest has been taken in property/building managers:
- Rezi: lets landlords and tenants rent apartments instantly
- EXR: secure, modern payments platform for paying deposits, broker fees, and monthly rent
- Astorian: streamlines procurement for building managers
- Yardi: develops and supports investment and property management software
- RealPage: property management software
- Homebase.AI: solution for automated property management and resident engagement
- Juniper Square: investment management for real estate
And a renewed interest has been taken in utilizing data to assist with making smarter decisions on location:
- Locate.ai: location intelligence platform for retailers using AI
- Uppercase: connect online data to predict physical store locations and de-risk real estate
- Estated: bulk data about residential real estate
- Lofty AI: predict property appreciation in exchange for equity
- Obie: free analytics for commercial real estate to sell insurance
A large opportunity I see in 2020 is in automating the real estate transaction process. Natalia Karayaneva, Founder/CEO of Propy (real estate transaction management software) noted in her Forbes article that this will become a $100B opportunity. And we’re already seeing some fast-growing startups addressing the buying and selling process with iBuyers like OpenDoor, FlyHomes, Homelight, Properly, Perch, Offerpad, Knock, Qualia, and Felix Homes. We’re also seeing startups addressing other elements of the real estate transaction process and I see this area as a focus area for 2020:
- Zumbly: helps buyers make better home choices
- Divvy: turns your monthly rent into a down payment
- Zerodown: provides homeownership solution
- RentBerry: makes the long-term rental process transparent and efficient
5. The sharing economy continues to evolve
Only Airbnb knows whether or not they will IPO in 2020. Brian Chesky has said that “We [Airbnb] don’t need to raise money, and so we haven’t been in a rush,” (CNBC). But regardless of their IPO plans, their impact on the sharing economy is undeniable. In 2019, we saw startups continuing to apply that idea of sharing to more verticals.
Pied Parker (parking solution), AirGarage (monetize extra parking space), and MeterFeeder (parking payment) all believe that parking is the next big area of focus. Neyborly (transform empty storefronts into gathering hubs that can be rented by the hour) and Storefront (pop-up retail spaces, showrooms, and event venues) believe in retail storefronts. Globe (Airbnb by the hour) and Breather (workspace rentals) believe that providing you the option to rent by the hour is the way to go. Rent the Backyard (have an apartment built in your backyard and split the rent) believes that you could be earning $12,000/year just renting out your backyard. This continued idea of sharing your home has also enhanced interest in prefab and modular construction startups like Node (backyard cottages in 10 days), Rize Modular (design, build, and deliver modular multi-tenant structures at scale), and Mighty Buildings (3D printing tech and automation) that reduce the costs of creating additional housing options.
But sharing also extends beyond physical spaces and goods. We’re also starting to see new areas of sharing such as WifiCoin, which turns global WiFi networks into a tradable resource and Nodle, the world’s largest ecosystem of connected devices.
The sharing economy evolved into the on-demand, gig, and convenience economies in some verticals. In those areas, we’ve seen consolidation:
- Getaround acquired European car rental platform Drivy for $300M (TechCrunch).
- DoorDash acquired Caviar in a $410M deal (Pymnts).
- Postmates didn’t acquire anyone in 2019 but did explore the option of selling to Uber/DoorDash instead of going public (Vox).
- Higher Ground acquired Cozykin (nannies on demand).
Despite the trend of consolidation, I expect 2020 to bring a continued group of startups that utilize the “Airbnb/Uber of” taglines.
To recap what we’ve learned in the past year, startups that focus on helping other startups have resurged, with startups that focus on the core needs of those companies, rather than the “wants,” seeing the strongest traction. AI/ML is still a hot buzzword and there have been interesting applications in commerce, sports and eSports, new kinds of Deepfakes, natural language, and virtual assistants. In the face of regulatory complexity, both the crypto/blockchain and cannabis spaces have continued to progress and produce new applications in financial services, betting and gambling, and the needs of cannabis infrastructure. And although it seems clear that there’s an increased need to demonstrate good unit economics and long term margin potential for real estate startups, co-living solutions, and innovations on the property transaction process continue to attract investment capital. Finally, the sharing economy continues to evolve with applications in parking, retail storefronts, prefab and modular construction; and also continues to consolidate into the on-demand, gig, and convenience economies.
While these 5 trends demanded a lot of attention in the startup environment of 2019, our discussions with startups also highlighted trends to watch in 2020.