How Digital Startups Are Taking the Lead In Innovation
Global demand for innovative products and digital services is surging, making it an attractive opportunity for both non-traditional and traditional funds to look for new investment opportunities
The global pandemic has resulted in a surge in startups, with the number of new businesses incorporated in the last couple of years reaching record highs. Startups are attempting to respond to shifting consumer demand in the face of a rapid shift to digitalization. The majority of new technology businesses are related to fintech, although effective attempts to digitalize real estate, marketing and pharmaceuticals have also been made. With hedge funds entering the private funding market and investing billions of dollars in disruptive businesses, there are currently more than 900 digital startup companies worth $1 billion, up from only 80 in 2015. Hedge funds and other non-traditional investors are pouring money into startups, resulting in greater valuations and more leverage for entrepreneurs. Non-traditional investors were involved in 42 per cent of startup funding deals, according to Pitchbook, and those deals accounted for more than three-quarters of the invested capital last year.
Hedge funds have been more significant in private finance in recent years, with Tiger Global outperforming typical VCs in terms of private market investments. Tiger Global made 335 investments in 2021, according to Crunchbase, and landed some of the year's biggest venture capital acquisitions, including Patreon, a subscription platform for content creators, Hinge Health, a healthcare company, and Side, a real-estate tech firm. As fund managers started investing directly in startups, investment in US startups for the first half of 2021 reached $150 billion, surpassing the levels seen before 2020. According to CB Insights, the number of startup fundraising rounds involving non-traditional VC investors and zero venture capital funds increased to 126 per month last year, up from an average of 35 per month from 2016 to 2019. With more possible investment opportunities for fund managers in small companies, competition in tech and digital startup development and innovation has intensified. Massive fundraising rounds in smaller tech startups are also a major driving factor of digitalization trends. Crowdfunding has also grown in popularity for soliciting investments in sectors where demand has been high, such as online conferencing, messengers, fitness apps, etc. With a seemingly endless number of new companies entering the market every year, innovation and healthy competition can be seen in every business sector today.
Below are some industries and business sectors that are seeing rapid adoption of technologically advanced solutions, and a few startups are leading the charge in introducing innovative and effective solutions to help this cause.
Today, many businesses are trying to incorporate machine learning-driven services within their products to embrace the latest technological advancements. However, deploying machine learning models in production is a difficult task. Qwak, an Israeli startup formed in 2021, simplifies the implementation by removing data science and engineering friction and enabling faster iterations, scalability, and configurable infrastructure. The company allows teams to rapidly onboard their models with only one line of code. Team members can also monitor, analyze, and manage their machine learning models regardless of how they were developed, deployed, or hosted. Everyone sees the model from the infrastructure to the business outcomes, complete with metrics, performance, and costs.
Because of the shift to providing products and services online rather than in-store, the programming market has seen significant growth over the last few years, and the MLOPs market is expected to reach $4 billion by 2025, according to Deloitte. Qwak has successfully commercialized its machine learning engineering platform, which automates MLOPs processes and enables businesses to manage models in real-time. The company is rapidly expanding, having recently opened an office in the United States and intending to expand in Europe.
The management platform designed for machine learning models in production is backed by Leaders Fund, Amiti Ventures, StageOne Ventures, and other angel investors, and has raised a total of $19.4 million. With increasing digitalization across industries, Qwak aims to become a go-to tool for ML implementation.
Real estate financing
With the growing importance of digitalization, the real estate industry has also begun to embrace digital solutions, particularly after property viewings were diverted to the online environment in 2020 due to social distancing measures. Some startups have recognized this trend early and begun offering industry-specific services. LoanBase is one such example. This company is working to modernize the commercial real estate financing industry to reduce the time and cost involved in the traditional method of real estate investment. LoanBase, which was founded in 2020, uses cutting-edge technology to connect borrowers and lenders. The platform enables direct communication between the two parties for maximum transparency which saves clients time and money by allowing them to identify the best financing option for their property in a fraction of the time and cost associated with traditional solutions.
We are also seeing a major innovation in the traditional communications industry, where startups like Spike, are revolutionizing email and workplace communication with instant messaging capabilities, and an uplift in effectiveness, as well as providing an all-around shared workspace that includes note-taking and tasks management in one app. In a sense, it resembles the innovation Twitter did in the publishing industry, where journalists have a much more direct, fast, and effective way to communicate with their readers, instead of relying on the time-sensitive editorial process.
The investment management industry
As every industry transforms and enters the next chapter of the Internet, so does the world of investment asset classes and trading platforms. In response to the rising digital asset and crypto market, many startups, including Exberry, are working to provide advanced and secure solutions to support the adoption of digital assets. Current financial institution infrastructure lacks transparency and also blockchain and Web 3.0 capabilities. This puts tremendous pressure on stock exchanges, marketplaces, and trading platforms to keep up with the dynamic changes seen in the financial services industry.
Exberry, an Israeli startup incorporated in 2017, provides trading technological expertise to stock exchanges, banks, and digital marketplaces, allowing them to keep up with the rapidly changing and expanding financial markets. Trading platforms can use the company's deep-tech trading infrastructure for exchanges, banks, digital securities, and marketplaces to quickly establish new digital asset trading platforms without having to start from scratch.
Design digitalization is not new, but artificial intelligence is improving it. renovai, which was founded in 2019, is an AI-powered designer platform that provides a hyper-personalized shopping experience for lifestyle brands and furniture e-commerce retailers. Its platforms allow customers to complete a short questionnaire before designing and visualizing the space in a 3D lifelike model based on their needs, requirements, and taste. The company's AI product includes renovai Scout, which advises a specific product based on a customer's taste and current room design, and Complete the Look, which suggests items that match what they are buying.
ConclusionGlobal demand for innovative products and digital services is surging, making it an attractive opportunity for both non-traditional and traditional funds to look for new investment opportunities. Entrepreneurs, on the other hand, are making the most of these favorable macroeconomic developments to raise funds and achieve their growth targets. Some of the start-ups that are making steady progress today are likely to become big winners in the future.