As the year winds down, I’ve been thinking a lot about 2014. There are several trends I’m watching that should have profound impact on the venture capital landscape, in particular the growth stage (ie, Series B and Series C). These dynamics will also impact the IPO market. I’ll be writing about these trends in greater detail in ‘14:
(1) Here Comes China
- Big, powerful Chinese technology companies are not only spending more time in the United States, but also staffing-up here.
- These companies include the three big Chinese Internet companies (Tencent, Alibaba, Baidu), as well as the next most important players (Xiaomi and Qihoo).
- These companies will be very active investing in and acquiring (mostly mobile) startups in the US in 2014.
- The China influx will impact the venture capital business, M&A, and IPO scenes. These companies represent a brand new, well capitalized set of buyers and investors in tech.
(2) Hedge Funds As Tech Investors
- Hedge funds (and mutual funds) are the newest actors in the pre-IPO investment stage.
- What began as a trickle of hedge funds in venture this year will increase to a torrent in 2014.
- Companies now stay private longer — as a result, they’ll seek private rounds to fund growth.
- Hedge funds are structurally different than venture firms, and founders need to know the differences, which present both opportunities and risks.
(3) A More Serious Shift To The Cloud
- Incumbent technology vendors face serious headwinds, caused by the rise in public cloud computing options.
- IT spend will shift even further away from traditional technology capex spend to lower price opex with SaaS and cloud vendors.
- Losses felt by incumbents are potential gains for startups.
- Native mobile and cloud companies are surging ahead in this environment, stealing market share and exhibiting very high growth.
(4) A Wide Open IPO Window
- Native mobile and cloud companies benefiting from the shift described above in #3 will continue to be viewed favorably by public market investors.
- Expect several successful IPOs from mobile and cloud companies, especially those focused on the enterprise and SMB, in 2014.