The tech sector, which has been one of the most resilient and innovative industries during the COVID-19 pandemic, is now facing some challenges as it tries to recover from the economic and social impacts of the crisis. A recent conference in Boston, organized by Underscore VC, a local venture capital firm, revealed some of the insights and trends that are shaping the state of the tech sector today. Here are some of the highlights from the event.
Funding is harder to get
One of the main challenges that tech startups are facing is the difficulty of raising capital from investors, who have become more cautious and selective in the post-pandemic environment. Kevin Colleran, a Boston-based investor at the firm Slow Ventures and an early Facebook employee, said that he had not made a new investment in 20 months, and instead focused on helping his existing portfolio companies survive. Similarly, David Chang, an entrepreneur and member of the group TBD Angels, said that angel investors were less willing to take risks and join the hype. Investors are also raising their expectations and standards for startups, demanding higher revenue, growth, and profitability metrics.
Startups are struggling to survive
Another challenge that tech startups are facing is the pressure to stay afloat and avoid bankruptcy or acquisition. Maia Heymann, a founder of the Boston venture capital firm Converge, said that many startups were doing everything they could to cut costs and persuade existing investors to invest more. She also said that startups under stress were talking with potential acquirers, even if they only wanted a piece of their technology or team. However, she noted that there were not many bankruptcies or closures in the tech sector, as startups were “living to fight another day”.
Location is less important
One of the positive trends that emerged from the pandemic is the increased openness and flexibility of investors and startups to work across different geographies. The shift to remote work and online communication has enabled venture capitalists to scout for deals anywhere in the world, and startups to access talent and customers from diverse markets. Heymann said that although most of Converge’s employees were in Boston, the three startups it had backed most recently were in New York, California, and Washington. A Silicon Valley investor in the conference said that nine out of his 10 most recent deals were outside of the valley.
Valuations are less relevant
Another positive trend that emerged from the pandemic is the reduced emphasis on valuations as a measure of success for startups. Valuations, which reflect how much investors are willing to pay for a stake in a company, can be inflated by hype and speculation, and do not necessarily reflect the actual performance or potential of a business. Many startups have learned to focus more on building sustainable and profitable businesses, rather than chasing high valuations that may not last. As Heymann put it, “startups are done bragging about their valuations — for now.”
AI is a double-edged sword
One of the most exciting and controversial topics in the tech sector is artificial intelligence (AI), which refers to the ability of machines to perform tasks that normally require human intelligence, such as understanding language, recognizing images, or making decisions. AI has been hailed as a powerful tool for innovation and problem-solving, but also as a potential threat to human dignity, privacy, and security. The conference featured a panel discussion on the “superpowers” and “hazards” of AI, where experts debated the ethical and social implications of AI development and deployment. Some of the questions raised were: How can we ensure that AI is fair, transparent, and accountable? How can we prevent AI from being used for malicious purposes? How can we balance human and machine intelligence?
The tech sector is undergoing a period of transformation and uncertainty as it recovers from the COVID-19 pandemic. The conference organized by Underscore VC provided a glimpse into some of the challenges and opportunities that tech entrepreneurs and investors are facing today. The tech sector will need to adapt and innovate to overcome these challenges and seize these opportunities.
