The last couple of years have been a whirlwind for startup investors. In the good news column, the industry has seen back-to-back record-breaking years in 2020 and 2021. Unfortunately, startups in 2022 are dealing with the consequences of that growth. Investments have slowed in the first half of the year, and startup recruiting is more challenging than ever.
For new startups, aspiring entrepreneurs, and investors, it’s a good time to step back and evaluate, not just the implications of the past two years, but where those will lead the sector moving forward. In that spirit, here are three developments that are likely to shape the startup landscape in the future.
Biotech is Booming
Biotech funding slowed in the first half of 2022, but it’s important to keep in mind what it’s slowing from. In 2021, a record 152 biotech IPOs raised over $25 billion globally. The $2.3 billion raised by in the 23 IOPs during the first half of 2022 is low only in comparison to the unprecedented growth the industry saw over the last two years. The sector is still projected to reach a total value of $1.37 trillion by the end of 2022, an increase of more than $300 billion over 2021.
Much of the biotech sector’s growth over the past two years was driven by the pandemic, which fueled an increase in drug development and vaccine delivery innovations. This is far from the only type of biotech startup thriving in 2022, though. New applications of DNA analysis, gene and cell therapy, genetic modification, and other new and emerging technologies are at the heart of startups across sectors, from agriculture to wearable tech and IoT.
This diversity within the biotech startup sphere is a likely sign of more growth on the horizon. While it’s yet to be seen how global inflation and economic uncertainty will impact this growth in the second half of the year, current trends indicate that biotech will continue to be a smart investment for venture capital firms and startup investors moving forward.
Sustainable Finance Goes Mainstream
As early as 2019, more than $30 trillion in funds were held in green investments, but it was still viewed largely as a niche sector. Over the past two years, ESG investments and initiatives have skyrocketed among both startups and established companies. Nearly $650 billion was invested into ESG funds in 2021, a 20% increase over 2020.
This growth has been driven from both the top and the bottom. More consumers today want to spend their money with companies committed to sustainability. Many business leaders and investors are equally passionate about safeguarding the environment by leveraging new technologies and altering their business practices.
One potential concern for ESG startups moving forward is the regulatory landscape. Government oversight of green initiatives has lagged behind the sector’s growth. Concerns over “green washing” have prompted calls for more standardization and verification of companies’ environmental impact. Startups in green tech and other ESG-centered industries will need to pay close attention to regulatory changes as global governments catch up to these market shifts.
No-Code and Low-Code Options Democratize Tech Startups
In the not-so-distant past, startups that wanted to sell apps or other digital products to customers would need a team of programmers and developers to create, troubleshoot, and maintain their products. Over the past few years, the emergence of low-code toolkits and platforms like Makerpad have started to remove this barrier, allowing startups to quickly design and release digital products with little to no coding knowledge.
This is a timely development given the current labor market. The push for increased virtualization across industries has exacerbated the programming and IT talent shortage, and a recent CNBC report indicates there are only about 65 potential candidates available for every 100 openings. It’s not just the American market feeling this pinch, either. Since December of 2020, job vacancies in blockchain technology in India and southeast Asia, for example, have risen to nearly 50%.
Startups already often have a more difficult time attracting top talent than established companies, and with so few professionals to go around that disparity only intensifies. Low-code development is one potential solution, and experts anticipate more than 65% of app development will happen on no-code or low-code platforms by 2024.
The Next Trends in Startups
It’s difficult to predict what the next few years will bring for any industry, and the dynamic, sometimes volatile nature of startups adds to that challenge. One thing that does seem certain, though, is that the decrease in funding and IPOs in the first half of 2022 is more of a pause than the start of a downward trend. The companies that capitalize on these emerging trends will be best positioned to lead the next wave of growth.