The State of Tech Investing – Insights from Investors in and out of Silicon Valley
Below is a brief roundup of SuperReturn’s panel, “Land of the free home of the VC: where are the new hubs of innovation in North America?” The panel was moderated by Wan Li Zhu, partner at Fairhaven Capital, and panelists discussed the following topics: Which cities are providing the next wave of VC? What sectors have pockets of untapped potential? How can a manager unlock a new pipeline of talent and ideas?
The summarized discussion is below:
Boston Wan Li Zhu, a partner at Fairhaven Capital, proved that Boston is set up for success in the world of AI. It holds some of the world’s top universities including MIT, Harvard, and Boston University. MIT announced that it will create 50 new faculty positions dedicated to AI. The new additions make MIT’s computer science faculty the largest in the US. Boston thus provides a diverse pool of top-quality talent for early stage companies to pull from to thrive and grow. Furthermore, Amazon recently moved to Boston with 2,000 new corporate jobs. Google followed them in a similar capacity. They will lead the way by training the next generation of product managers and business leaders who will have the tools they need to build successful and innovative companies.
Silicon Valley Lu Zhang, a founder and MP at Fusion Fund shared that despite the COVID-19 pandemic, there is still a lot of capital in the market. Investing slowed during the first couple months of 2020, but as investors’ expectations around the longevity of the pandemic shifted, they began to adapt. Now there are many active investors in the market who have created innovative ways to connect with founders and to continue making investments. The pandemic has accelerated the growth of several industries including tech and pharmaceuticals while also pushing others to improve overall efficiency. Healthcare accounts for roughly 20% of the GDP and yet is still with many issues including availability, accessibility, and overall quality. Implementing and integrating healthcare technology into the industry can help dramatically improve many of its shortfalls. However, there are mounting concerns about the digital transformation in healthcare, as in any other industry, because of data privacy. Data privacy is a major risk for many companies and there has been an uptick in companies solely focused on protecting the many layers of data. Lastly, a new sector that has seen some growth, especially during the past few months, is tech surrounding mental wellness. Lu is hopeful that growth in this sector can help support the many individuals who are struggling with the current times.
Remote Teppei Tsutsui, a MP at GFR Fund who is focused on the gaming industry, is currently interested in virtual companies for two reasons. For one, virtual companies have an edge as they have the capacity to hire talent from a global pool of individuals rather than being restrained to hiring in select locations. Hiring from global talent also provides the benefit of potential cost savings. Secondly, virtual companies are better able to focus on their product development as they are not burdened with the same challenges that non-virtual companies face.
Los Angeles Emanuel Pleitez, a partner at East Los Capital, explained that LA represents a major part of the total US economy and yet it is still lagging in venture dollars compared to other rising VC hubs. However, LA’s proximity to Silicon Valley gives it a leg up in potential growth. Individuals only need take a 45-minute flight to commute between the two locations which gives the sense that LA is simply part of the broader Silicon Valley Community. In addition, LA investors are global in nature and there is a lot of positive to come from their presences. For example, big names like Elon Musk, Peter Thiel and David Lee live within the region and are helping the VC community grow by bringing their expertise and direct investments. A perfect example is the recent addition of SpaceX to Los Angeles. LA has also housed many successful bootstrap companies including ZipRecruiter, Grindr, and Onica. A major recent win for LA was the $4 billion dollar sale of Honey to PayPal, which shows the promise of the region’s future success. Like Boston, LA holds major universities such as UCLA, USC, & CalTech (who holds a consistently ranked computer science program) which provide a wealth of talent to inspire growth and innovation to further LA’s ability to become a major VC player.
New York City Brian Schuman, an Investment Professional at PepsiCo Technology Ventures shared that the food and agriculture tech space is experiencing a dilemma. The industry is growing, but the dollars just aren’t there. Investors are seeing huge multi-billion dollar exits, but not from this segment — which is discouraging them from investing in the industry. There is a hope that investors are beginning to see that companies in this space have real world impacts and that this realization will drive more dollars into food and agriculture tech. He named Impossible Foods and Beyond Meat as two recent success stories to show the potential in the industry. As for NYC as a whole, investment activity has been slower, but in other locations where agriculture is more main stage to the economy like the Midwest and New Zealand, food and agriculture tech has been experiencing growth.