When markets and consumers change, smart investors take note.
Not-so-smart investors don’t, so they keep investing in already half-sunken ships.
After the outbreak of COVID-19, certain ideas that seemed like great investments suddenly lost their potential — and profitability.
Remember WeWork? The startup that aimed to provide coworking spaces for entrepreneurs and companies, and was hailed as “the office of the future”? Yeah, I’m not so sure they’re doing well at the moment.
(There are certainly other reasons why the company failed. But I’m not sure that the company’s future would be any different if it weren’t for Adam Neumann.)
Since the outbreak, a lot of things have changed, including what consumers need and want.
I’ll give you a brief rundown of the three most important changes that took place during the pandemic.
Stick around until the end to learn which types of startups are worth your investment in 2021.
Three Big Changes That Are Influencing the Startup Market
The pandemic certainly brought about many changes. But I’ll focus on three I think are most important for investors and startups.
1. Consumer Needs Are Changing
Here are four ways in which our lives and needs have changed:
- We’re less mobile. We’re mainly staying indoors. Some of us no longer have to commute to work, and all of us are traveling less.
- We’re more health-aware. We became more aware of the things threatening our health. With more awareness came more fear of the possible consequences of not taking care of our health.
- We’re more home-oriented. Our homes had to take on new roles. They became substitutes for coffee shops, cinemas, restaurants, and more.
- We’re more technology-oriented. We buy groceries on Amazon. We catch up with our aunts and uncles on Zoom. We even work from home thanks to our computers and the all-mighty Internet.
2. New Businesses Are Emerging More Rapidly than Ever
Studies showed that a lot of startups started growing rapidly during the pandemic. But that’s not all. More businesses are being launched now than at any point in the past 10 years:
“In Q3 2020, there were about 1.5 million new business applications. That’s a 77% increase from Q2 and more than double any quarterly report from 2004 to 2017.”
Jack Tai, CEO & Co-Founder of OneClass
There are two main reasons why.
The first is that consumer needs are changing. We need new businesses to satisfy those needs.
The second is that, at its core, entrepreneurship is precisely about solving problems and bringing order in times of chaos.
The pandemic caused Chaos; the businesses are establishing Order.
3. E-Commerce Is Flourishing
More goods and services are bought online. One reason is that people want to stay at home more. Another reason is that there are simply more businesses online.
Most businesses that haven’t been online pre-pandemic became more active — or went more digital — in 2020.
In fact, e-commerce accounted for 17% of the global retail trade in 2020. In 2019, it accounted for 14%.
We’ll have to wait and see how that share rises in 2021 but I’m convinced it will rise.
Where Should You Invest Now?
I’ll list here four niches that are great investments. While the niches are profitable, a startup doesn’t have to be. It’s up to you to identify the startups that are likely to succeed.
Want more ideas? Watch this video on 15 profitable business ideas during the pandemic:
1. AI Startups
AI startups have been driving huge investments in the past few years. They’ll continue to grow and thrive during the pandemic, and probably later too.
Biotech companies are on top of the list of AI startups to invest in. They combine AI with the health niche, which is also growing rapidly.
Case Study: DnaNudge is a great example of an ultra-successful biotech startup:
The band extracts DNA-based information collected from your saliva. It then gives you personalized nutrition advice, i.e. tells you which foods you should and shouldn’t eat.
This graph illustrates the explosive growth of the DnaNudge:
The first spike took place in 2020. While the growth did slightly drop in 2021, it’s still double the rate the company had in 2019.
2. Food and Beverage Startups
Not all food and beverage startups will be successful. I think three types have the most potential:
- startups facilitating orders and deliveries
- startups facilitating supplies for retail outlets
- startups producing synthetic food and/or using sustainable resources
One trend I haven’t mentioned (because it didn’t start with the pandemic) is the rise of the Conscious Consumer.
This is the 21-century-consumer that cares deeply about issues like sustainability and equality and expects brands to be actively involved in resolving these issues.
Case Study: Orbillion Bio produces cell-cultured meat. Though they’re certainly not the only startup growing meat in the lab, something else makes them unique: they’re not focused on producing chicken and pork, but rather bison, elk, and lamb meat.
Here’s how their investment report looks:
3. Blockchain Startups
Everyone loves crypto. But, relatively recently, people started loving NFT too.
Most NFT markets — if not all — accept only crypto, and are based on the same blockchain technology. With crypto becoming more widely used (and accepted by banks), blockchain has a bright future ahead.
Case Study: Solve Care combines blockchain with yet another explosive niche — health. It allows patients to pay health care providers with Care.Coin, arrange appointments, process claims, or even book rides.
But it also makes life easier for administrators and clinicians by removing the bureaucratic hurdles from the process and making it more transparent:
Solve Care was founded in 2017 and was named one of the most promising blockchain startups in 2020 by the EU-Startups.
4. Health Startups
With consumers being more health-focused than ever, it makes sense that health startups are good investments. Besides that, a lot of health startups combine several trends, like blockchain and AI, making them almost bulletproof investments.
Case Study: Novoic is just amazing. No other way to put it.
The startup is developing AI-based speech analysis that could detect signals of neurological diseases years before the first symptoms show up. Apparently, our speech patterns begin to change earlier than any physical symptoms show up.
Novoic has seen rapid growth (and a significant cash inflow) in 2020:
I don’t think you can go wrong with Novoic, even if it weren’t for the pandemic. But a lot of smaller, transmittable-disease-oriented startups have a bright future ahead as well.