By investing in startups, you get a chance to make a profit and support socially useful projects. But what are the best companies to invest in? Below, there is a list of the business trends that venture capitalists and angel investors pay primary attention to. If a startup belongs to one of these categories and has good management, it should have high odds of achieving considerable growth.
Net-zero emissions
National governments and businesses strive to achieve net-zero emissions, and startups can provide them with helpful solutions. Innovative tools are required to change the ways people produce, store, distribute, and consume energy.
Startups can come up with cloud tools, business intelligence, AI, and advanced analytics instruments. For instance, tech companies can contribute to combating environmental concerns by
- improving energy management,
- boosting production efficiency,
- increasing transparency.
To make informed decisions, governments and businesses need data. As organizations embrace automation and digitization, startups are building solutions that will enable them to store and process this data more efficiently.
Examples of startups: Hive Power, Sync Energy AI
Cryptocurrencies
The crypto industry has been destigmatized and is no longer associated with money laundering. In 2022, lobbyists will continue explaining to national governments the necessity of legalizing and regulating the crypto industries. Indeed, national governments realize that crypto is here to stay, so a lot of exciting opportunities can open. However, some investors remain skeptical about this payment method.
If a startup creates a new cryptocurrency, it should be backed up by a unique technological concept. Businesses embed crypto assets into their services and products so that users can easily access them. Alternatively, a company can offer the following types of solutions:
- Compliance
- Custody
- Lending
- Intermediary
- Exchange
Examples of startups: Yuga Labs, Binance.US
Telemedicine
By 2028, the global telemedicine market size is expected to reach $78,960 million. People turn to digital platforms to take care of their physical and mental health. Telemedicine startups are beneficial both for doctors and their patients.
Startup founders need to convince consumers that they can trust their platforms for online consultations. They should provide tools for selecting the best doctors. Startups can introduce rewards programs to motivate both medical professionals and their clients. They might come up with suggestions for cutting down costs — for instance, a patient might get a discount for booking a virtual appointment of a certain duration at a specific time of the day. Compared to an in-person visit, a remote consultation can save the patient over 100 minutes of their time.
Physicians, for their part, increasingly struggle with burnout. Remote work gives them a chance to spend more time at home and have rest. A startup can provide physicians with opportunities to give virtual consultations without sacrificing their income. Plus, doctors should be able to improve their reputations by getting high ratings and positive reviews from clients.
Examples of startups: Amwell, Kry
Metaverses
“Metaverse” is one of the main buzzwords in 2022. By 2029, this market is expected to reach a valuation of $1,527.55 billion. Metaverses will open new opportunities for remote work and studies. They will make our world more decentralized. An ideal metaverse would transport you into a virtual reality where you can act just as freely as in the real world, without the need to cope with the limitations of our physical universe. Sounds fascinating, but this technology requires hardware innovation, so there is still a long way to go until we’ll be able to relocate ourselves to a virtual world of metaverses.
This breakthrough will require huge investments and a lot of brainwork. That’s why skeptics think metaverses will be monopolized by tech giants. However, startups will be able to get their share of the pie thanks to the greater use of the blockchain, acceleration of the decentralization movement, IP/content rights, and changing power structures.
Examples of startups: Zepeto, NextMeet
Globalization in reverse
In the past two years, we’ve witnessed that political emergencies, climatic change, and pandemics can suddenly disrupt the global supply chains the world relies on. Consumers and businesses are getting more focused on local goods and services. Around one-half of consumers prefer food made of locally produced ingredients. European and American companies face $1 trillion in expenses to relocate their Chinese supply chains.
Previously, companies would manufacture their products overseas because of the access to a cheap labor force. But they had to invest large funds in logistics and transportation. Today, businesses can cut down costs by manufacturing goods in their area, using smart factories. Such facilities benefit from automation, cloud platforms, and other advancements that enable them to create products of higher quality in larger volumes and with fewer expenses.
Startups help consumers find products that were manufactured locally. They rely on the blockchain technology to trace the origin of each item and all the steps of its journey to customers. Other companies build browser extensions for online shoppers. When a person opens a large marketplace, the extension lets them know where they can get local analogs of the products they’d like to buy.
Examples of startups: USA Strong, Cultivate
The YOLO economy
The YOLO acronym stands for “You only live once”. People don’t want to spend most of their lifetime at work. They strive to find a better work/life balance, achieve greater job satisfaction, and be able to focus on things they’re genuinely interested in. When considering investment opportunities, you might want to pay attention to two types of startups.
- Those that support the YOLO culture. For instance, they might introduce a 4-day work week without any pay cut.
- Those that create solutions to promote locational flexibility, creative working-week structures, and other aspects of the YOLO culture.
The happier the person, the more productive they are at work. That’s why YOLO startups have good odds of success.
Examples of startups: Atom Bank, Yolo Insurance
European startups
Previously, European startups used to get funding from their own region, while US investors were focused on their country. But since then, the US market has become increasingly competitive and saturated. Compared to 7–10 years ago, it’s much harder now to launch a successful American business with minimal investments.
That’s why American investors actively provide financial support to European entrepreneurs. The innovation market in Europe is not as crowded, with less competition and challenges. Typically, capitalists from the US take part in later funding rounds while the earliest rounds remain dominated by local investors.
Examples of startups: Bitpanda (Austria), Acronis (Switzerland), Lunar (Denmark), Rohlik (Czech Republic)
Venture investment
The VC model emphasizes rapid, transformational growth and scalability. That’s why it can efficiently tackle the challenges our society needs to face. Traditionally, businessmen factored in three aspects when predicting the future of their industries.
- Current societal trends
- Known technology challenges
- Examples of existing inefficiencies or bottlenecks
This data would serve as the foundation of innovation.
The world is becoming increasingly more dynamic. Human behavior is often driven by misunderstanding or fear. A political agenda or ignorance might trigger resistance to change. The VC mentality can cope with these challenges better than any other.
Examples of startups: Admitad Projects
Factors to focus on when investing in startups
Regardless of the industry and the startup you want to invest in, you should analyze the four parameters of each potential asset:
- Team
- Product
- Size of the market
- Valuation
While investors own a certain part of the startup’s shares, it’s the team members who determine its development strategy and carry out the everyday work. A perfect team consists of technical and business-oriented co-founders that are trying to fix a pain point they used to have themselves. These professionals should complement each other and have experience in the industry.
The startup team should provide their potential investors with essential metrics of the product. Most likely, you’ll be assessing an MVP, not the final version of the product. Without metrics, you’ll need to rely either on your gut feeling or your previous experience.
To be able to get a large return on your investment, you need to make sure the startup you invest in will be able to get a considerable market share. The founders need to show you the results of their marketing research to prove the demand for their product can be big enough.
The valuation reveals how attractive the business might seem to investors. Investors strive to fund companies with low valuations to be able to buy a large share of the startup at an affordable price. Founders, by contrast, want their businesses to have a high valuation to preserve more control over them. But if the initial valuation of a startup is high, the founders will need to work hard to justify even higher valuations in future rounds of financing.
It would be wise to invest in startups coming from the industry that you understand well. This way, it’s easier for you to assess the potential of the company you’re planning to support.
Final thoughts
Hopefully, now you have a better understanding of which companies to invest in in 2022. You might want to start investing in companies that promote net-zero emissions, the YOLO economy, and globalization in reverse. You can focus on such industries as venture investments, cryptocurrencies, metaverses, and telemedicine. But no matter the industry, always pay attention to a startup’s team, valuation, product, and the market share that it can occupy.
