Top Venture Capital Investment Trends

Venture capitalists pride themselves on being trendspotters and staying ahead of the curve. Despite many overlooked opportunities, history indicates that venture capitalists tend to be pretty good at identifying tech trends before the broader public.

Here, you can see how investor interest in blockchain picked up ahead of broader public interest.

And here, you can see how investor interest in virtual reality gained momentum ahead of broader public interest.

At a time when the venture capital landscape is undergoing rapid change and disruption, identifying the “next big thing” has never been more top-of-mind for venture capitalists. Here are three trends that VCs are betting their pocketbooks on today.

1. Cryptocurrency

Despite the fact that cryptocurrency’s total market cap declined in 2018 and has yet to overcome potentially crippling roadblocks such as regulation and security, there’s been a lot of venture capital hype around crypto in 2019. According to a report by Outlier Ventures, the total year over year growth of venture capital investments in cryptocurrency swelled to $2.85 billion through the first three quarters of 2018, representing a staggering 316% growth rate over 2017 levels. At the Digital Money Forum during the CES consumer electronics show in Las Vegas early this year, Matthew Roszak, co-founder and chairman of Bloq, a leading blockchain technology company, told attendees, “Crypto is alive and well”.

Caspian is one of many hot cryptocurrency startups. The company has built an institutional-grade full-stack cryptocurrency trading platform that allows users to build and control their own fund. Its crypto fund management suite serves more than 20 million customers, professional investors, and institutions. As well, it's already plugged into 25 crypto exchanges and has secured a partnership with Coinbase to enable it to scale.

Chainalysis is another crypto one-to-watch. It monitors cryptocurrency transactions for money laundering, fraud and compliance violations. The company has already raised $19M. Sarah Tavel, a partner at Benchmark Capital, explains, “[Chainalysis] is seeing significant traction, working with businesses (like banks and crypto exchanges) and government agencies (like the FBI and Europol) to investigate and understand blockchain activity.”

2. Sleep tech

From mattress providers to bed accessories to AI-powered wearable devices, sleep technology is seeing a flurry of activity. According to the Centers for Disease Control, more than one-third of American adults are sleep deprived on a regular basis.

Thanks to increased awareness of and concern for the impact and extent of sleep deprivation, venture capitalists are quickly jumping on the bandwagon. In 2019, Calm, which provides a mobile app that helps users address anxiety, depression, insomnia, and more, raised $88M in Series B funding to become the first mental health unicorn.

Another hot disruptor is SleepScore Labs, a private equity-backed company that offers an app and other products to improve sleep. The company was featured at CES and recently announced a partnership with Dr. Oz.

3. Insurance tech

The insurance industry has been mired by low consumer trust and confusing policies. The industry is ripe for disruption and venture capitalists have their eyes peeled for promising opportunities. In 2018, more than $4.15B was deployed into insurance tech startups globally.

Ethos is one insurance tech company that has enjoyed to a lot of interest from venture capitalists, raising nearly $50M to date. Etho’s simplifies the life insurance underwriting process, making it possible for customers to get life insurance in 10-minutes with policies that are backed by some of the industry’s most reputable names. Nate Niparko of Accel Partners explains the opportunity at hand, "Life insurance is a critical financial protection for families, but the buying process has long had a negative reputation due to outdated systems, extra doctors visits, and insurance agents who are incentivized to push expensive policies”.

Another disruptor is Hippo Insurance, which has raised more than $100M to date. Hippo allows customers to get a home insurance quote in as few as 60 seconds by answering three simple questions. Hippo monitors a wide array of data sources, including property records, aerial photos of roof conditions to make the application process more efficient. It also aims to proactively prevent damage by offering each customer a two-sensor smart home monitoring system.

In 2006, Byron Deeter of Bessemer Venture Partners passed up on an opportunity to invest in Tesla, despite putting a deposit on a Roadster. In 2016, he reflected, “[Missing out on investing in Tesla] stings every day I drive my (full priced) [Model] X to work!”

In 2008, esteemed investor Chris Sacca of Lowercase Capital passed on Airbnb because he thought renting a room in a house while the owners were still home was “too dangerous”.

And in 2009, Kevin Rose of Google Ventures passed on Pinterest because he thought a $5M valuation was too high.

Are you ahead of the curve with your investment philosophy for 2019 and beyond? By leveraging relationship intelligence and thinking strategically about the biggest trends and opportunities, you can position your firm for success. Don’t miss out on the next big disruptor.