This is a period of immense uncertainty but also a time for great opportunity. Some of the most well known companies were created during past periods of volatility. Apple and Microsoft were born during the OPEC induced recession of the 1970’s. Netflix survived the Dot.com bubble and came out stronger than ever, and Airbnb was born during the 2007-2008 recession. Fast forward to today and there seems to be two schools of thought on investing during the current Covid-19 pandemic. Either it’s batten down the hatches and conserve cash or let’s use this as an opportunity to double down on our winners and also invest in other startups that are booming due to stay at home restrictions. As we’ve seen in the public markets there are multiple bulls out there in certain sectors and the same theme applies to venture.
Here are some of the sectors that VC’s are focused on:
- Life sciences – this goes without saying, but the virus has brought on significant interest in healthcare. Teleheath, while growing before the pandemic, exploded as people sought care from the comfort of their own homes. As a public market comp, you can also look at the merger of Teladoc and Livongo with both separately experiencing a strong run up in stock prices over the last year. As more consumers use these platforms, the idea of patient first care from the convenience of your home is appealing. There’s a ton of white space here, a more favorable regulatory environment and a pull forward on demand all working to energize this sector.
- CPG/grocery – Kimberly Clark, the largest paper goods manufacturer could’t keep essentials in stock throughout Q2. Non-sexy categories are sexy again. Startups focused on classic CPG products enjoyed a boom thanks to stay at home orders and renewed interest in consumer staples. Private label solutions were seen as more suspect and consumers opted for brand names especially in cleaning supplies.
- Workplace solutions – As we face a future where many will be remote for the foreseeable future (if not indefinitely in some cases), there’s going to be renewed interest in building home offices. Additionally, companies will rely on innovative software solutions to make remote work more effective. This includes things like meeting management software and other productivity tools.
- Delivery/cloud kitchens – This is a crowded space already with a lot of deep pocketed players on the delivery front (DoorDash, Ubereats, Grubhub, etc) but there continues to be opportunity for cloud kitchens as traditional brick and mortar restaurants remain shuttered or at reduced capacity.
- Fintech – the pandemic has accelerated interest in investing especially among the younger cohorts. A new crop of consumer oriented stock trading apps like Robinhood has empowered those working from home to moonlight as day traders. And neobanks like Stash have attracted new customers who are tired of excessive fees from large, traditional banks and desire more control over their financial picture.