Angel investors certainly each have their own ambitions, interests, networks and value-add that lend themselves to different preferences in terms of sectors, however we have been analysing at some of the recent investment data and can see some interesting trends appearing.
By SAM KEISNER, Partner at Go10x Ventures
Inherently, early-stage investing has its own risks and limitations which lend successful angel investing to certain sectors and industries. Angel investing really works well when working in sectors with low barriers to entry, high potential upside, the ability to really add value to teams and the opportunity to play a larger role as part of a smaller team. Because of this, technology start-ups really lend themselves to this investing style, as opposed to other industries with higher fixed costs and barriers to entry. We looked at a list of 400 unicorn companies and saw predominantly companies applying technology to create a new market or solve an existent problem – a few examples of this are AirBnb, Bytedance, Revolut, Coursera. However, they all work in different sub-sectors, ranging from SaaS to FinTech to Edtech. In this post we will be analysing which sectors are trending at the moment and how this has changed over the past six months.
We will not analyse the different stages of investment separately because Series A investors follow the patterns set by seed investors and vice-versa, or at the very least, both tend to invest in the same markets at the same time. We have identified a few sectors that are most talked about sectors in equity investment, not only in the UK but worldwide. We will also give some examples of exciting players in these sectors that we encourage everyone to keep an eye on.
The way we see the doctor is changing and this process has really been accelerated by Covid-19. People are more and more aware of their physical and mental health and are looking for convenient, personalized and data driven health applications that replace the conventional face-to face doctor visit.
There are already some companies trying to apply artificial intelligence in remote examination of patients and others that are introducing wearable fitness equipment, such as Apple Watch (Fun fact: Tim Cook recently announced in an interview that he would pivot Apple towards being a healthTech company). Even despite the pandemic, the sector would have seen a growth in interest as the world population is ageing and having innovative tools to take care of their own wellness has become a priority more than ever before.
Babylon Health: The UK start-up offers a digital healthcare app using a mixture of Artificial Intelligence and video and text consultation with doctors in order to bring an accessible and affordable health service to everyone. The total global patients registered on Babylon stands at 4.4 million and the company is valued at $2 billion.
We have certainly also seen some exciting early-stage startups in this space as well, EverMind is looking to bring affordable and accessible mental health therapy from emerging nations to diaspora communities along with those that cannot afford the high price of private health care. As well as this, Hepian is looking to modernise internal administration in hospitals, making them smarter, more efficient and more effective – a change that I’m sure will certainly be welcomed!
The FinTech industry has been hot for years and is certainly threatening the more traditional financial services institutions. In fact, FinTech start-ups have a flat hierarchy that enables them to innovate and apply changes much quicker than traditional banks.
Millennials and Gen-Z are changing the way they invest, save and borrow and FinTech companies are answering these changes with innovative solutions. The competition in this field is fierce but there are many successful companies and we expect the trend to remain hot for the next decade.
Ant Group: The Chinese fintech company was founded in 2014 and recently received approval for its IPO with an evaluation up to $35B. The reason behind this high valuation is its impressive success in having a platform business model that facilitates mobile payments and makes investing, borrowing and buying insurance accessible to everyone.
We have also seen some exciting new startups in this space, really looking to change the way Millennials and Gen-Z are interacting with their own finances. Topia is empowering their users to manage their finances towards achieving a goal of ‘financial freedom’ and Zedosh is understanding users’ spending habits to push them more relevant ads, giving them autonomy over the ads that they watch, and then paying their users to watch them! We can’t wait to see how some of the new players in this space are really set to make waves.
Fitness & Wellness
Another sector that we are seeing growth and innovation in a big way is the fitness & wellness space. Even before the recent pandemic, people all over the world have become increasingly mindful of themselves and increased their willingness to spend money on fitness, diet and mental health and they are also looking for new ways to help them keep their mental and body fitness. Covid-19 has accelerated this growth and changed it at the same time, we all remember the “out of the stock” sign next to yoga mats and weights in April/ May and the majority of us may have downloaded a fitness/wellness app. The application of new technology will certainly shape this industry as our devices get to know our body better and the efficiency of exercise can improve dramatically with ground-breaking technologies.
Headspace: the wellness application makes meditation accessible to everyone to relieve them from stress and let them conduct a happier life. The application was launched in 2010 and currently have millions of users in more than 190 countries. It recently raised $93 million in equity and debt to receive a clinical validation of the benefits associated with mindfulness and meditation.
We are also seeing some new and exciting businesses launching products in the fitness space that are really set to revolutionise this sector – Remote Coach is bringing a platform to personal trainers that allows them to work with their clients and manage their performance remotely and RacketPal is connecting people that play racket sports with opponents of similar proficiency that are nearby.
As the amount of data shared online is increasing, our privacy is at risk more than ever before. The increased EU regulations on data security and the Cambridge Analytica scandal are evidences of privacy breaches and solutions. Hence, cybersecurity has assumed increasing importance and the investments in UK in cybersecurity start-ups have nine folded since the start of the pandemic as working from home posed more challenges on the IT systems of corporates.
Axis Security: The American cybersecurity company was launched in 2019 with the aim of helping contractors and third parties to remotely access a company’s system in a safe way. Its software has been used in a big way during the pandemic to maintain the security of the systems when employees where working from home. The company recently announced a $32M Series B investment.
E-commerce is a huge sector with already present major players such as Amazon, eBay and Alibaba. The industry was booming already before the pandemic as individuals’ shopping habits have been constantly changing with the surge of new technologies.
Online shopping gives easy access to the global market and makes understanding consumer preferences and providing tailored recommendation easier whilst reducing to zero the cost of having a retail shop in the high streets. This sector is certainly super competitive, and investors should be looking for companies with a reasonable aim and a product-market fit. The Covid-19 pandemic accelerated this process even further as people were forced to shop online, turning, for example, Jeff Bezos, into the richest man on earth.
Shopify: Shopify is a Canadian cloud-based SaaS (Software as a Service) shopping cart solution that allows businesses to set up an online store and sell their products online with ease. The firm has showed to be extremely successful during the pandemic as it supported many SMEs in bringing their businesses online.
It has long been predicted that education would be able to move fully online thanks to new technologies. However, when schools and colleges tried to adopt this system, they failed in making remote teaching successful as human interaction was shown to be one of the key elements for spreading knowledge and researchers doubted the possibility of having an efficient online education system.
The pandemic completely changed this – it is now appreciated that the amalgamation of ICT in the education sector can ensure teaching quality and perhaps even replace in-person teaching. There are also many problems regarding inequality and accessibility to resource that must be considered, and many start-ups are working towards making education accessible to everyone.
Brainly: This Krakow-based start-up tries to make it easier and faster for students to find an expert or a peer when they get stuck on a system using a points-based system. The company uses a freemium model and has 150 million monthly users from more than 35 countries. We are super excited about these hot sectors and will certainly keep a close eye on some of the new players in these areas. Watch this space!