2021 is the year ventures solving social problems will have a capital raising advantage
If not now, we’re screwed
Why now is the time to start that new venture if you focus it on the Big Problems facing humanity
Hi there, brilliant entrepreneur. Yeah, you with the fast growing startup ready to exit, or an idea for the next category killer. That’s right, you with the huge ambition to build a great product and hopefully earn enough money to retire and live big.
Well, here’s the thing: if you do not start building something now that will solve the problems facing our people and our planet, we’re screwed.
2020 was bad. 2021? Well, as a holiday gift, the planet just gave us a preview: an iceberg has gone rogue. COVID-19 is mutating. Famine is at the front door for billions of human beings. 2020 was not just a bad luck year. It was a dress rehearsal for the rest of the decade. Even with the vaccine on the horizon for many of us, COVID-19 is far from behind us. And even once we’ve tamed the virus, its aftereffects will demand reconciliation; mental health and child development to name a few.
If you had the good fortune to have been relatively able to forge ahead professionally this past year (which I admittedly have had), I’m sorry to say, it won’t last.
Despite the market being awash in cheap money, the inconvenient truth for us love-to-disrupt entrepreneurs is that our ability to disrupt rests on the assumption of an industry with solid foundations. Promises of more value or lower costs cannot woo customers from pre-existing paradigms if those paradigms have broken. So while yes, there is more money now, there are definitely more problems, problems I fear are growing exponentially, outpacing what even a massive war chest can solve.
For all of the social disruption of 2020, things leveled out pretty quickly for most of us. The next decade with its overlapping crises won’t be so kind. As a heating climate changes weather patterns, the global logistics and supply functions we are used to (and which were not affected by COVID-19) will be disrupted. Physical infrastructure will be destroyed. As people get back to traveling after the vaccine rolls out, we’ll see even more zoonotic viruses enter into circulation, triggering PTSD flashbacks. As the Big 5 Digital Empires seek to increase market dominance, new regulations by sovereign States seeking to fight for their independence will make the world a less predictable place for building a company that only scales 3–5 years from now. As the economies come back online after COVID-19, the effects of the step-function jump in global inequality and the shuttering of small businesses on communities will trigger an even bigger wave of populism whose effects are unknown. In other words, we entrepreneurs are about to face a world that disrupts us.
This uncertainty does not affect all actors in the startup ecosystem equally: the burden for this uncertainty will be placed almost fully on the founders. VC, on the other hand, for the near future, will continue to have access to large amounts of capital due to historically low interest rates coupled with institutional investor interest in investing in businesses who may have a chance to peak farther into the future when, they’ll hope, things will level out. This will enable VC to gain the upper hand in negotiations as they seek to gain more equity for less money to overcome growing market uncertainty.
Generally, we founders would counter that pressure by increasing our revenues or market share, to enable us to negotiate from a point of strength. Yet as we’ve just experienced, periods of great uncertainty make it very difficult for most companies to kill their KPIs. This inequitable effect of risk will reduce founder ownership and control, increase pressure on companies to do what’s right for VC as opposed to other stakeholders, and make it even harder for the 99% of founders who do not have a massive exit in their near future to return their own investment in the company (because we all know our lost income from low-wages during the founding period is, after all, a massive investment). This will make it harder and harder for founders to build towards their dreams — and make the freedom and opportunity sought by most founders (the reason we get into the game to begin with) ever more unattainable.
Unless — here is my call to action — you focus your new enterprise (or refocus your existing one) on the big challenges facing humanity in this coming period of disruption. In doing so, you can bank on the growing need for products and services that address those big challenges, unlock complementary capital from the government grants and incentive programs to help support needed ventures, and build on revenues that can be earned by successful solutions. Which, incidentally, also can help reduce the pain and suffering that will be felt by humanity in the decades to come. Think of it as an Invisible Hand High Five. I’ll explain:
As 2021 brings with it the inevitable natural disasters and economic catastrophes, governments and global public institutions will deepen their commitment to modern monetary theory and invest ever more deeply in applying available solutions to the challenges they will be facing. Multinational corporations will join this effort to protect their workforce and their customers, understanding that they cannot keep churning out quarterly profits if their consumer base doesn’t have food to eat or water to drink or vaccines. Consumers will of course keep seeking distractions online (primarily), but consumer spending on services remains depressed — and one can imagine will be further depressed as more shocks hit our system.
Let’s pause on that for a moment: if you’re into history, and know European/Western history, think of COVID-19 as World War I. Thanks to the vaccine, it looks like we’re almost at the end of that war. The post-pandemic period will most certainly be similar to the post-WWI period in which governments and consumers both thought that the worst was behind them … which of course it wasn’t. Nevertheless, the ‘Roaring 20s’ we remember happened because then, similarly to now, elites were isolated from the widespread suffering of the calamity. Reality, however, caught up to the elites: the start of the Great Depression followed quickly on the heels of the end of WWI, and the only reason anyone came out of that mess was the irresistible pressure to re-organize once the markets realized the world was fundamentally different than it was before. Similarly, we today are just a few years away from a generally accepted understanding that deep investment in manufacturing and infrastructure will be needed if we are to pull the world out of the mess we made of it (For the purpose of sanity, let’s avoid the question of WWII).
All of this is to say that 2021 finds us only years away from some of the largest public investments in fundamental infrastructure shifts in our short history as a species. Which means that if you have the opportunity to start a venture in 2021 that addresses humanity’s needs in that post-war drive you’ll have a good chance of a welcoming customer base if your product can actually solve some of the myriad challenges we will face.
That was the market based explanation. Here’s the moral one: if we don’t get brilliant people such as yourselves building solutions now to the problems we are about to face, no amount of bitcoin you’ve saved up is going to save you from the massive disruption to life as we know it. The days where we could count on real estate rising in coastal cities fueling capital investments in manufacturing paid for by willing consumers who know where they’ll get their day’s bread are coming to an end. This isn’t cassandrish. It’s already happening.
So here is my request, dear brilliant entrepreneur: in your plans for 2021, think about the children. If you don’t have children, think about mine, and the billions of others that need a builder to create vehicles for new innovations and inventions that cut to the heart of our suffering to help us overcome the looming tragedies of the decade to come. Address the issues in Healthcare, Education, Water, Food, Energy, and Personal Security that we simply will not be able to survive without. Build those solutions for an uncertain era, for shaky supply chains and questionable availability of international trade. Develop new business models and value-adding mechanisms to enable the public to benefit from your creations.
Do it for yourself, because you will benefit from welcoming markets. Do it for others, because a year of social distancing has taught us that without others, our lives are not nearly as precious. And do it now, because if not now, we’re screwed.
