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Paulette Goddard, The Crystal Ball, 1943

Canadian Tech / Venture Capital Predictions for 2021

It has been my tradition for the last five or six years to spend some time looking backwards and forwards at trends shaping the Information, Communications and Technology (ICT) venture capital and startup sector here in Canada.

A review of my 2020 predictions is here (I scored 13 out of 19). What we saw is that, despite COVID, the Canadian venture capital and startup ecosystem not only survived, but thrived. In general most tech companies continued business as usual — their coders working from home, and marketing / sales functions simply moving to Zoom. While overall investments levels into Canadian startups were lower than the previous year as U.S. investors pulled back from Canada, investment from Canadian VCs into these Canadian companies actually increased during COVID. And finally, 2020 was a record year of exits for VC-backed startups, with the ICT sector exit total for the year coming in above $4.5B.

More generally, and despite the hugely negative impact of COVID on so many people during 2020, some incredible breakthroughs materialized in multiple areas throughout different parts of the world. As summarized in various articles, the following are of note:

With all that as backdrop, the following 2021 predictions focus on the Canadian startup and venture capital ecosystem, and are generally in the vertical areas that Wittington Ventures invests in — commerce/retail, healthcare and food (including any enabling technologies that can impact those areas). As a general rule, our thinking is that COVID restrictions will continue through the first 8 or 9 months of 2021, with things slowly opening up in the latter part of the year setting the stage for a “roaring 20s” redux in 2022 and beyond. The predictions below drew heavily on discussions with the full WV team (Megh, Qasim, Katie and Darian) and we plan to invest behind and write about them more through the course of the year.

Canadian Venture Capital Financing Environment

As mentioned above, the COVID shutdown for much of 2020 caused lower investment levels across all stages. Furthermore as the year progressed, U.S. investors reduced investment in Canadian startups, presumably because of an inability to travel, and this impacted early-stage investment more so than late-stage investment. Despite all this, investment by Canadian VCs increased as the year progressed, and, it was a banner year for exits.

I think these general trends will continue throughout 2021:

  • Prediction 1. Overall investment in 2021 will be lower than 2020 (as the COVID impact will extend throughout much of the year).

Regulatory / Political Predictions

The COVID shutdowns have given government the obligation to provide monetary relief in many sectors of the economy. This provides an unprecedented opportunity for the government to steer Canada in a positive direction, to build back better if you will. Some general thoughts on legislation over the coming year:

  • Prediction 5. We will see regulations and stimulus dollars aimed at addressing the climate crisis. (Venture will also do its part in this area.) 🙏

Retail / Commerce Sector Predictions

The Retail / Commerce sector was quite active within the Canadian startup world during 2020.

Within Wittington Ventures, Qasim, Darian and I tend to look at potential investments in the Retail / Commerce sector. You can read about some of the trends that Qasim has identified (and subscribe to his newsletter) here. Some predictions for 2021 in the Canadian tech ecosystem for this sector are:

  • Prediction 9. A backlash against big tech combined with build back better means more focus on local / curation / experience driven retail. Our investment in Chicago-based Foxtrot in early 2020 was based on this trend. We will see a large financing of a Canadian startup powering local during 2021 as well.

Healthtech Predictions

Megh and Katie tend to look at this area for Wittington Ventures and they led our investment in Nurx, a women’s health focused startup, earlier in 2020. Some things we think we’ll see during 2021 in this area are:

  • Prediction 13. Individual healthcare data and electronic healthcare records (EHRs) are the common denominator between patients, practitioners, payors, pharmaceutical providers, etc. Various efforts have launched to provide a common framework for this data, including most recently Amazon’s HealthLake. We think we will see some form of similar effort in Canada, catalyzed by a startup.

Food

  • Prediction 18. COVID taught every surviving restaurant to (i) be a dark kitchen, and (ii) to build a direct relationship with consumers to avoid erosion from ordering and delivery apps. With a “back to normal” starting in late summer, restaurants will be open for business but will also embrace a new direct-relationship consumer dynamic. Look for B2B2C white label startups to get financed to power this area.

Gadgets

We don’t invest in consumer electronics (the few times I’ve tried, I’ve failed…) but the sector is extremely important because it drives all other technology areas. Some thoughts on this area:

  • Prediction 21. The iPhone has pretty much reached its pinnacle wrt look and feel, features and sensors; subsequent iPhones will be better, faster, cheaper but I don’t really think they will they do all that much more. We’ll see Apple move more strongly towards services to capitalize on its installed base.

Let me know your thoughts on any of the above. I will try to have a look at these mid year to see how things are trending and then as always have a real summary at the end of 2021.

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