If you’ve been around in the startup world for a while now, you’ve probably noticed the fact that developing technologies represent the main focus of any entrepreneur. I don’t blame them. It’s such an innovative and creative field, with such a huge potential, especially today, when venture capitalists are more and more interested in tech.
According to the National Venture Capital Association, “the majority of venture capital is invested in high technology companies including software, biotechnology, medical devices, media and entertainment, wireless communications, Internet, and networking”.
Silicon Valley, the heart of tech investors?
Silicon Valley is well known as a startup hub, especially for tech companies. Pinterest and Uber are just some of the big names that emerged in the San Francisco area. According to CB insights, over the last 5 years, $31.5 billion have been invested in tech startup in the Silicon Valley area. LinkedIn and Yelp were also founded there.
What are the main industries trusted by venture capitalists?
The Global Venture Capital Confidence survey, which was released in August, clearly shows that venture capitalists are drawn to the tech industry. NVCA and Deloitte, the two companies who created the report, interviewed more than 300 VCs from all around the world. They were also interested in finding out what are the industries that they trust the most.
Among all the categories, cloud computing won by far, with a 4.11 ranking, out of 5. One of the main reasons cloud computing is so desirable is because it requires less money to develop than other categories. Mobile technology was on second place, with a 4.02 ranking, while health IT and services were on third place.
Disruptive technologies on the rise
This year has proven to bring out the maximum potential of VCs investing in tech. Marc Ferranti took a closer look at how disruptive technologies manage to attract venture capitalists. According to the MoneyTree Report, there have been much higher investments in private software companies than in 2013. 2014 is not even at its end, and it seems that VCs have already invested $13.9 billion.
Uber and Airbnb are two examples of disruptive technologies that managed to attract investments up to hundreds of million of dollars. As Marc says, disruptive technologies have the potential of creating new industries.
A new tendency is also represented by Internet based startups, which require less investments to go global. Mark McCaffrey, global software leader and technology partner at PwC, says that an Internet based company “can go global before they go public”.
This is only the beginning
As far as I can tell, the interest that VCs have in the tech industry is only in its infancy. A few years is basically nothing at all to what is about to come. I am confident that these numbers will rise every year. Unfortunately, other industries will have to compete with technology based startups.
If you are planning to start your own tech based startup, and find venture capitalists to support your business idea, then you’re lucky. Of course that not all tech startups manage to raise investments from VCs. Only the most innovative ones. If you have any experience whatsoever with VCs, let me know how it went, and what are the main ingredients they’re looking for.