In horse racing, the most reliable tips about which horse will likely win often come from the stable boys, since they’re the ones closest to the source.
So when we thought about the best ways to find out what’s happening in a particular sector, we figured why not get it straight from the horse’s mouth — the investors?
At TechCrunch+, we see investor surveys as a way to dig deep and put together a snapshot of a sector that founders and investors can use to understand their market. We ran 30 surveys this year, and the feedback we’ve received has certainly helped us improve our game and widen our scope.
With the end of 2022 right around the corner, here’s a look at some of the more interesting answers some of our surveys unearthed this year.
Where are you skeptical about no-code/low-code? Which aspects are overhyped?
Sri Pangulur, partner, and Paul Lee, partner, Tribe Capital
There are a few areas where we have some concerns about the no-code/low-code thesis at the moment. First, we do not think that pre-coded element interfaces are going to cover every edge case, and it’s really the edge cases that make the user depend on their current specific workflow.
Second, we think the no-code/low-code category is horizontally getting a little bit saturated. There is some level of user confusion, where a set of co-workers on a team may be pushing for collaboration to be done in one specific application and another set of workers may be pushing for a competing solution. This can slow down productivity.
No-code may work well in verticals with well-defined use cases and a huge pull from non-developers, or in cases where the target user is also the buyer. For example, there are several companies that now make it easy for designers to turn their designs into live mobile or web apps quickly through a drag-and-drop approach. This is highly desirable for designers.
However, when serving larger enterprise customers that require much greater customization, development resources are needed, as a drag-and-drop approach won’t be sufficient.
Read the full survey here.
Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?
Clarisse Lam, associate, New Alpha Asset Management
Embedded insurance is taking off. The embedded model makes even more sense in an industry where “insurance is sold, not bought.” A number of players have emerged in the field, most targeting the ballooning gig economy, but embedded insurance can be applied to so many more verticals like recruitment or mass retail. The sector has already attracted millions in investor money, and it will continue to do so as the value of embedded insurance is unlocked across all markets.
Insurance is still a very underdigitized industry. There is a big market opportunity for B2B SaaS players to drive innovation across the value chain (e.g., by improving claims processing, risk management, underwriting, pricing). Incumbents are still early in their digital transformation, and there’s a strong need for insurtech to address this.
We’re widening our lens, looking for more investors to participate in TechCrunch surveys, where we poll top professionals about challenges in their industry.
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Martha Notaras, general partner, Brewer Lane Ventures
There are several MGAs and technology-driven, full-stack insurance carriers that have built impressive premium bases, including in newer risk categories like cyber. Venture investors have recently become more selective about investing in MGAs before they achieve scale. This caution reflects current public-market trading, as investors project forward to exit.
[Editor’s note: As David Wechsler previously noted in a guest post, “a managing general agent (MGA) is a hybrid between an insurance agency (policy sales) and insurance carrier (underwriting and assumption of the risk).”]
I see investor enthusiasm for B2B insurtechs with a recurring revenue model. Many of these startups are delivering efficiency and cost savings to traditional insurers, and those existing insurers have become more receptive to bringing in startups to solve difficult operating problems.
Read the full survey here.
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
Momei Qu, managing director, PSP Growth
I think it’s a stakeholder problem. What owners want may be different than what GCs, subs, architects or lenders want. Technology that tries to cater to them all may struggle with a killer use case, while those who target one of those parties may struggle with scale and willingness to pay. When you have a solution that all (or many) stakeholders love, you get something special and a flywheel effect.
Sungjoon Cho, general partner, D20 Capital
Construction is a sector where “move fast and break things” is a strategy that does not apply. There are extreme consequences for a new technology “breaking things,” and so the conservative approach to adopting new technologies makes sense. However, large construction companies often have central innovation teams that test new technologies and champion the adoption of new technologies.
We are seeing the pace of new technology adoption increase rapidly, but due to the conservative nature of the construction sector, a characteristic of construction tech is low initial ACV (average contract value) with strong NRR (net revenue retention) as customers deploy the technology on a handful of projects and expand usage as the technology has a chance to prove itself.
Read the full survey here.
Which emerging climate techs, such as direct air capture or hydrogen-powered industrial processes, have the biggest potential for impact in the next 10 years? What are three climate techs that you see widespread by 2030?
Pae Wu, general partner, SOSV and CTO of IndieBio
Process-oriented technologies, like supplanting energy-intensive chemical production with scaled biology or electrically enhanced processes, will alter energy dynamics of heavy industry in the next 10 years.
2030 isn’t very far, so widespread adoption of what some may call bridge technologies is where I see real change coming. So many of our problems come down to human-level issues limiting implementation and a basic fear of change, so our disruptions need to keep chipping away at that fear of change.
What does that look like? Things like emissions-free, drop-in replacements for petrochemicals and materials for the built environment that are not dependent on a green premium. Some of these are far enough along to potentially make a run at petroleum.
Arguably, electric vehicles should be the easy answer to “widespread” by 2030. But look, this is still a huge problem that touches every facet of our lives, and 2030 is only eight years away. In 2014, Hong Kong pro-democracy protests were raging, Moderna was creating a vaccine for Ebola and Russia annexed Crimea and ratcheted up threats to Ukraine.
Not much changes in eight years. In 2030, the U.S. will have exceeded expectations if even 15% of our light-duty vehicles on the road are electric by then — 15% is tiny.
I sound very gloom and doom, but all I’m saying is it’s all hands on deck, and we need lots of solutions to hit at this from all sides. There won’t be a silver bullet, and if we investors are lucky/smart, we’ll get a whole bunch of climate tech Googles and Amazons — name your favorite giant disruptor — to bring to market while also successfully staving off the worst of climate change. We need everyone to be a winner.
Read the full survey here.
Many people are calling this a downturn. How has your investment thesis changed in the last several months, and are you still closing deals at the same velocity?
Addie Lerner, founder and managing partner, Avid Ventures
We started slowing our investment pace in early Q3 2021, while many other firms were continuing to deploy rapidly, given the exacerbation in the disconnect we were seeing between valuations and traction achieved by early-stage companies. We have been measured in our deployment since our first investment in February 2020, and Avid Fund I will actually have a four-year deployment period given our unique investment strategy.
We believe our investment approach is uniquely suited for the current market environment. Our strategy is to get to know the best founders well ahead of their Series A, back them before or at the Series A with a flexible “toehold” check alongside top-tier lead and/or insider investors, and then add meaningful value as a “strategic finance adviser” post-investment. This enables us to earn the ability to write a much larger “double down” check in the next round, once we’ve built conviction over time. In a market environment with more time between rounds, as well as founder and insider openness to round “extensions” and “in-between” rounds, our flexible and patient investment strategy will enable us to pursue unique opportunities. So, we are actively making new investments at the same measured pace.
Read the full survey here.
We’ve heard that first-time fund managers will struggle to raise a second fund now that the business cycle has turned. Do you agree with that perspective? If not, why not?
Giuseppe Stuto, co-founder and managing director, 186 Ventures
It certainly may not be as easy to raise a second fund today as it may have been over the last two years. We do not look at it as binary or in the sense that it will be an absolute struggle for firms that have developed a great platform and differentiated approach to attracting early-stage founders to work with them.
It’s a multidimensional question that factors in many variables. Ultimately, professional LPs understand that although we’ve entered a market where assets, particularly alternative assets, may be priced lower, having meaningful access to the venture asset class is incredibly important over the next few decades.
Furthermore, we will likely see (and already are seeing) incredible pricing and terms in the months and years ahead. You could miss out on exposure to investor-friendly valuations if you aren’t deploying into firms that have developed a solid foundation.
Of course, LP commit sizes will naturally decrease, and they may instinctually favor managers who have been at it for a longer time. But we are in a multidecade arena, where getting access to newer managers will continue to be a priority for many professional LPs looking into alternative assets.
Read the full survey here.
What sectors are you finding edtech crossing over with these days? What’s the latest overlap that has you amped up?
Jan Lynn-Matern, founder and partner, Emerge Education
We’re seeing some really interesting new players across fintech and edtech. Our latest investment, mattilda, is a Mexico City-based startup offering financial services to schools. Its core product is a guaranteed revenue SaaS platform in which schools receive a monthly fixed payment, and mattilda streamlines their invoicing and collection processes.
We’re also excited to see what’s happening at the intersection of health tech and edtech, entertainment and edtech, and productivity tools and edtech.
Ashley Bittner and Kate Ballinger, Firework Ventures
We are seeing edtech intersect with so many different verticals. Within our current portfolio, there are examples of businesses that operate at the intersection of edtech and fintech, HR tech, diversity, equity and inclusion, and many more. Right now, we are especially excited about edtech’s overlap with climate action and web3.
Climate action: We believe that climate action and economic mobility are the two most pressing challenges of our time. Addressing climate change not only requires the invention of new technology, discovery of new sources of energy, and adaptations to how we live and operate on a daily basis, but it will also create millions of new jobs.
The half life of most technical skills today is less than three years. Rapid innovation and the shift to a green economy is only decreasing the half life of skills further. It’s estimated that 85% of all jobs in 2030 haven’t even been invented yet. Preparing people to succeed in these new green jobs is key to addressing both the need for climate action and improved economic mobility.
Web3: There has been a rapid proliferation of web3 applications in the past few years. We are specifically looking for web3 applications that further our thesis (creating access and opportunity, and driving economic and social mobility). Specifically within our focus on skill building, we are looking at learn-to-earn models, metaverse learning (tangentially considered web3) and learning DAOs.
Read the full survey here.
How big is the market for cloud providers to provide extra services beyond their core offering?
Shomik Ghosh, partner, Boldstart Ventures
I’m not being facetious when I say infinite. For proof, just go to AWS and look at its product catalog for all the various services listed. It would take years to fully comprehend all that it offers.
And if we expand the terminology of “cloud providers” beyond the compute and storage layer, pretty much every public and private company delivering a cloud service has multiple product offerings at scale.
Liran Grinberg, co-founder and managing partner, Team8
It starts to diminish. Cloud providers get very good at most things they do, but they can’t build the best of everything. More and more non-cloud-provider vendors get a huge market share of components that traditionally used to be part of the cloud providers — Snowflake is a great example of this. I think this trend will continue given the increasing complexity of modern technology and the rate of innovation.
Read the full survey here.
Source @TechCrunch
