Venture Capital 2012: A Year in Review
A few weeks ago, I had the good fortune to talk with Lizette Chapman of The Wall Street Journal about 2012’s venture capital landscape and my outlook for 2013. You can read that interview on the WSJ blog, but I’d also like to address the topic here, as Lizette’s questions caused me to think broadly about our industry over the past year, as well as the issues, trends and innovations that will continue to impact us in 2013.
2012 was an incredible year for innovation and venture capital. We experienced nothing short of a revolution in the democratization of entrepreneurship: as the cost to start companies declined, entrepreneurship became increasingly accessible to more people around the world. We witnessed the scale of the social web, best manifest by the staggering growth of young companies like Facebook, Twitter, WordPress and Goodreads. We also witnessed the early potential of everyday life in the new mobile world, and we began to see significant opportunity emerge in health, education and the “Internet of things.”
Mobile had an enormous year, in terms of its impact on both society and across enterprise and consumer computing. Mobile is powerful not because of the “speeds and feeds” that have historically characterized technology, but because of its ubiquitous and intensely personal nature. The mobile web is with us 24/7: in our pockets, on the bedside table, and always within reach. It’s so personal that we’ve started to talk to it (Siri), and we’d sooner leave home without a wallet than without our phone. We don’t yet fully understand what it means to live in a completely connected world, but if you have watched a video on Showyou, ordered a car service with Uber or synced your daily Fitbit steps to your iPhone, then in 2012, you experienced hints of the power of the mobile Internet. This is just the beginning, and in the year ahead, we expect mobile to continue to drive enormous innovation in large markets like personal health, education, the physical web and enterprise computing.
2012 also saw our brightest entrepreneurs shifting time and attention to fixing enormous problems in health and education. The stakes for our country are incredibly high in these industries, but these two markets have long been difficult for entrepreneurs and VCs because of regulation and entrenched incumbents. This began to change in 2012, and I predict that we will continue to see startups successfully break into health care IT and education over the next year. In health we see quantified self, data platforms and mobile as large drivers to new ideas. True has invested in several companies that are lowering costs and moving care away from treatment and toward prevention: tiny startups that can save our country billions of dollars each year. In education, we are excited by developments in analytics, horizontal data platforms and mobile content delivery. Students now have almost ubiquitous access to the greatest minds in the world, and smart entrepreneurs are figuring out ways to educate across place and time.
Another bright spot will be devices and connected consumer hardware, often referred to as the “Internet of things.” Over the past six years, True has been a leader in this market with investments in Fitbit, MakerBot, littleBits, Sifteo and 3D Robotics, to name a few. These companies are changing the world by bringing the power of the Internet to everyday items. They make the “invisible visible” and bring computing power to everyday life. One incredibly exciting byproduct of “hardware as the new software” is that we are witnessing a return of manufacturing to the U.S., as startups prefer to be close to the development of their devices, especially in the early days. This has enormous potential for the country and our economy, and we think it is an incredibly exciting aspect of this movement.
In terms of weak spots for the year, clearly the economic uncertainty that partisanship has created in Washington has hindered our country’s optimism and opportunity. This is unfortunate, but fixable—if both sides of the aisle can come together on pro-growth tax and immigration reform designed to reward America’s risk-takers and builders. Annual venture investment represents less than 0.2% of national spending, but venture-backed companies generate annual revenue equal to a whopping 21% of U.S. GDP. There is no bigger bang for the buck than venture capital and entrepreneurship, and what’s even more exciting is that both these industries are uniquely American. Washington needs to recognize that technology, biotech and energy innovation are remarkable products of American creativity and ingenuity. These industries need to be encouraged by pro-growth policies that fuel investment. Creative entrepreneurs and supportive venture capitalists create the future and they create jobs. Good jobs.
As we move into the next year, I’d like to encourage our industry not to shy away from taking big risks. For the first time, venture capital is funding companies whose products and services have the potential to impact billions of people. This is unprecedented in history. What is so magical about what we do as an industry is that we routinely envision a better future, and then invest and work hard to create that future. This is an enormous privilege and responsibility, and we must take it seriously and think bigger.
I believe that living in the Valley today is the modern-day equivalent of living in Florence during the Renaissance. The speed of thought and innovation is blinding here, and we are experiencing an industrial revolution of tremendous scope and impact. I hope our industry strives to harness this revolution to tackle the tough problems in 2013: health, education, hunger, energy, happiness. The role of venture capital is to take the biggest, boldest risks in the U.S. economy and to think long-term. Let’s use our collective talents for enormous impact. Let’s strive to build better lives for our customers. Let’s make people healthier. Let’s think big, empower our nation’s creative entrepreneurs, and endeavor to create companies of lasting impact and long-term meaning.