Tomasz Tunguz - 5 Predictions for 2021

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5 Predictions for 2021

Dec 16, 2020 04:00 pm

Every year, I make a list of predictions and score last year’s predictions. 2020 is a year that defines the long tail events, twelve months in which black swan after black swan event seemed to hit the press. Each morning I held my breath as I checked the news wondering what headline could top yesterday’s bombshell.

Here are my predictions for 2021

  1. Working remotely for a year changes how we work forever. Meeting in person remains important for advancing careers, critical meetings, and team cohesion, but the days of the 9-5 daily commute from Monday through Friday are gone for most knowledge workers. Two days per week in the office? Three days per week in the office? Working remotely for a quarter instead of taking 20 days vacation? I’m not sure where it will settle, but working patterns won’t return to pre-2020 behaviors.
  2. 2020 becomes the decade of data. The 2010s were the decade of software and SaaS, the era when Salesforce become the first SaaS company to sail past the $100B market cap mark. The 2020s will be the era of data companies boosting massive markets. Database startups, data movement startups, data quality startups, data lineage startups, machine learning startups will be the zeitgeist of the decade as they shape the next wave of massive innovation.
  3. M&As and IPOs continue at torrid rates. The stated long term, low interest rate policy of the Fed maxes out DCF models, whipping a frenzy around high growth companies. The merry retail investors using Robinhood bolster the passive investment wave, and their market-shaping forces sustain stratospheric multiples in the public markets. Acquirers, emboldened by higher stock prices, brace themselves and outbid each other with premium multiples for high-growth startups.
  4. Blockchain technologies become mainstream driven by the adoption of national reserve banks. The US Dollar continues its decline as the global currency of trade. In response, other national reserve banks introduce Blockchain based currency creation and control systems.
  5. Product-led growth becomes the standard GTM for software and infrastructure companies. The path to the enterprise starts in the mid-market which builds a strong foundation for serving the largest customers in the world. More companies adopt the idea of qualifying buyers through a product embracing the benefits of product-led growth including faster sales cycles, greater ARR per employee, and quicker account expansion make PLG the dominant GTM strategy.

Scoring last year’s predictions:

  1. The direct listing becomes the standard path to IPO. Wrong. Most high-profile IPOs have followed the standard procedure, rather than direct listings. The IPO market hasn’t been this hot since at least 2012, but likely since the dot-com era. And IPOs represented the largest share of venture-backed exits in dollar terms in the last decade.
  2. The M&A market continues to surge. Sort-of. 2020 venture-backed M&A volumes are basically the same as 2019, but I think the spirit of my prediction suggested 2020 would eclipse 2020, which it hasn’t.
  3. Distributed work becomes the norm. Correct, but not for the reasons I anticipated. I thought the remote trend would be a powerful recruiting advantage; I didn’t foresee a global pandemic obligating companies to work remotely.
  4. Public software multiples remain at elevated levels. Dead on. Current forward multiples have set records. Companies with greater than 30% annual growth trade at 25x forward revenue, a figure that would have been met with unadulterated incredulity five years ago.
  5. The fundraising environment remains strong. Correct. 2020 could be the best yer ever for startups. 2021 could be even better, particularly since fundraising momentum is now a global phenomenon. European and Asian startups enjoy fundraising markets with seemingly insatiable demand for growth, paralleling the US market.

So, 3.5 of 5 in 2020, which is pretty good! I hope everyone has a great end of the year. If you have other predictions, please send me a tweet. I’d love to hear them.


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