Venture capitalists at SoftRock, CrossLink Capital, NEA, Bain, and DCM give Inc. their predictions for the coming year. Here's what you need to know.
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A year ago, few would have predicted that a pre-revenue company could have been acquired for a $1 billion, or that start-ups in the middle of the country would have access to Internet 100 times faster than the rest of the country, or that, Groupon, once the world's fastest-growing company with the highest valued tech IPO since that of Google, is now valued at essentially nothing more than its assets.
In other words--and at the risk of stating the obvious--the future is difficult to predict.
For example, Bessemer Venture Partners, the 101-year-old firm with 104 IPOs under its belt and a premier reputation in the valley, famously keeps an "anti-portfolio" available for the public to see--the companies Bessemer said "pass" on, that, years later, have become massive companies. (A few you may have heard of--HP, Apple, Ebay, Fedex, and Google top the list.)
Nonetheless, for venture capitalists, their business entails banking on a vision of the future. The best venture capitalists (that is to say, the ones that are actually making money these days) are constantly forecasting future trends and developing, redeveloping, and reshaping their theses around consumer behaviors, buying patterns, and how technology will affect our lives. So Inc. asked several venture capitalists to talk about some trends they expect in 2013, what they're interested in investing in, and some general predictions of what might happen in the New Year.
1. We will see a $10 billion marketing company | Ajay Agarwal, managing director, Bain Capital Ventures
One statistic in a recent Gartner report stuck out to Agarwal, who joined Bain in 2003 to focus on early stage mobile, internet, and software investments: By 2017, CMOs will be spending more on IT than CIOs. Driving this massive shift, Agarwal says, is the customer data that simply did not exist a decade ago.
"There's so much data that exists, but now marketers can now actually measure its efficacy," he says.
Bain has already funded a few companies that leverage big data for marketing purposes, including BloomReach, a cloud marketing platform, and TellApart, an innovative predictive customer analytics platform.
2. We will see a 16-year-old get funding | Patrick Chung, partner, NEA
Patrick Chung is the co-head of venture firm NEA's seed-stage investing practice and the founding partner of NEA and Harvard's Experiment Fund, and he does not say this to be glib: He genuinely believes a 16-year-old will get significant funding for a company he or she is building.
After all, it's not that much of a stretch. In November 2012, the 17-year-old founder of Summly, Nick D'Aloisio, picked up $1 million in seed financing, in part from Hong Kong billionaire Li Ka Shing.
"For us, we had real-life and then we had a television or a computer," Chung says. "Technology is not a peripheral anymore--kids are growing up natively online and so it's natural for them to create something virtual, just as it was natural for you or I to build our own skateboards or tin-can walkie talkies. The brains are wired differently by technology."
Chung also believes that education has changed as well, and kids today are more focused on "doing something to learn" than "learning to do."
"From a young age, you're pushed ever more into this mode of creation and buinsess building in a way a generation ago you never would have been," he says.
3. We will see a successful start-up that reaches 10 million users without having taken a dime of venture or angel money | Patrick Chung
"If there's one thing that we've seen at NEA, it's that the costs of starting a company are asymptotically approaching zero," Chung says.
In other words, you (technically) need little more than an Internet connection and some coding skills to start a consumer Web company. Chung calls it the "Zuckerberg effect"--the idea that a young person starting with absolutely nothing is able to create something massive simply out of his or her dorm room.
"Because the tentacles of social networks are so deep into everyone's consciousness and brain and every day life, it's possible that once you've built the company to go out there and build a brand and acquire customers for almost no money," he says. "We've seen amazing brands be built for essentially no marketing expense whatsoever. If you get a name and it catches you can have that name propogate over large swathes of the population."
4. Next-generation marketplaces will be huge | Eric Chin, general partner, Crosslink Capital
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