Venture investors tend to get out ahead of technology trends. In retrospect, it’s a point that’s blindingly obvious. It’s all but in the job description for technology investors – particularly those focused on early-stage companies – to not just keep abreast of new tech trends, but to get out in front of them.
Last week, we looked at four of the hottest tech trends from the past decade: drones, VR, AI, and blockchain. By comparing venture deal volume data from Crunchbase against search interest data extracted from Google Trends, we were able to see that venture investors do pick up on tech trend buzzwords earlier than the general public.
But who, exactly, are the venture firms to pick up on one of these trends first? Which investors, as Everett Rogers’s theory of innovation diffusion categorizes, are the “innovators,” “early adopters,” and “early majority” for becoming involved in a new technology trend? Finding out who is in the front half of these waves sounded like a fun and interesting question, so we decided to tackle it here.
A very quick disclaimer: This is by no means a scientific analysis, and it shouldn’t be taken as such. Instead, it’s a fun look at market trends through the lens of the buzzwords that companies use to describe themselves and what they do.
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Here’s how we approached the challenge of finding the “early birds” in a particular tech trend. First, we found the set of companies that use a specific buzzword (like “drone” or “artificial intelligence”) in their Crunchbase descriptions. For each of those buzzword-using companies, we found all of the rounds that they raised. We then sorted that list of rounds chronologically (oldest to newest). Because we’re trying to identify the venture investors in the first half of the wave, we took the first half of the deals and found all of the investors involved with those deals. Finally, we counted the number of deals each one of those investors was involved with.
We did this for each buzzword, and because it seemed like a good idea at the time, we combined all of these lists to come up with a general (and imperfect) Grand Unified Ranking of early bird investors, subdivided by buzzword.
Proceeding in loosely chronological order to our unscientific rankings, let’s start with who was in front of the virtual reality craze.
In the chart above, we limited the number of investors ranked. Many firms have fewer than five companies that mention VR in their descriptions. Down the list, we find nine investors with four drone-mentioning companies, 24 investors with three drone-mentioning companies, and 53 investors with two companies of the same ilk. The chart would be unreadable with them all.
It’s not surprising to see some big corporate investors here, as many of their parent companies have made VR products a priority. GV (formerly Google Ventures) has invested in a number of VR companies, including AltspaceVR, that align well with Google’s broader strategy of building VR experiences on top of its smartphone-based Daydream platform.
SamsungNEXT Ventures is in a similar camp. Its parent company was among the first to release smartphone-driven VR headsets to the market. Intel also had a brief dalliance with developing a “mixed reality” headset, which came to an unceremonious end this fall. However, Intel chips can be found in products from major VR hardware makers like Oculus, HTC, and OSVR.
Below, you can find the investors who were most active in the first half of the drone craze.
This chart is similar to the one above in that it displays a relatively small number of investors. There were eight firms with four companies that mention drones, seventeen investors with three drone-mentioning companies, and 49 investors with two companies.
Here we see a much more balanced mix of accelerator programs, traditional venture capital firms, and a few corporate VC groups. Y Combinator leads the pack in this analysis, with seed investments in companies like Airware, DroneBase, and Aptonomy. These startups tend to avoid making Drone hardware. Instead, they build on-device software and external application stacks to make drones useful for tasks beyond recording video.
In slightly more specific application areas, Andreessen Horowitz’s investments in Zipline and Matternet point to an interest in drone delivery. Meanwhile, Qualcomm Ventures, with portfolio companies like Skycatch and 3D Robotics, appears to be increasingly focused on funding drone-based imaging systems.
With some “has been” tech trends out of the way, let’s get to the buzzwords that are top-of-mind today. We’ll start with artificial intelligence.
Here, too, the population of investors was so large that there was a fairly high threshold for making it onto this chart. From the first half of the wave, there were seven investors with six companies that mentioned artificial intelligence, twelve investors with five, nineteen investors with four, 55 investors with three companies, and 129 investors with two companies that refer to artificial intelligence in their descriptions.
When we looked at VR, we said it wasn’t surprising that there were a lot of corporate investors on the leading half of the trend. In the case of AI, corporate VCs’ absence isn’t surprising either.
By and large, big corporations already control most of the engineering talent and data necessary for building great artificial intelligence applications. They’re more likely to acquire AI and machine learning companies than to have their venture arms invest, as Crunchbase News found in August 2017. In the case of VR, corporations were building the hardware platforms, but those platforms needed content.
Khosla Ventures takes the lead in this particular ranking of investors in AI. Back in 2010, Kholsa led the series A round of MyLikes Inc, later renamed Post Intelligence and acquired by Uber in June 2017. In 2013, Khosla also led a series A and many follow-on investments in AI-driven cybersecurity provider Cylance, which joined the billion-dollar valuation club in 2016. The investment has further cemented the firm as an early comer to the trend in AI investing.
And finally, let’s close with blockchain, the technical backbone of magical internet money like bitcoin, emerging platforms like ethereum, and all manner of digital securities offerings of questionable legality today.
Here are the venture investors who got into blockchain before it was cool.
Blockchain is still an emerging technology, much more so than AI, VR, or even drones. The three technologies we previously discussed each have decades’ long histories of academic research, military applications, early (and abortive) attempts at mainstream commercialization, or some combination thereof. Hype aside, blockchain technology is comparatively new, dating back only to 2009.
This might be part of the reason why some of the most prolific venture investors in the blockchain space (at least by this ranking) are firms specializing in the new technology. The names of Digital Currency Group and Blockchain Capital alone are enough to signal these firm’s specialties. Jointly, these firms have invested in Coinbase, which thanks to the latest exuberance over bitcoin and other cryptocurrencies, now has more users than the second-largest retail brokerage in the US. Other investors early to the blockchain craze include BoostVC, founded by Adam Draper. In 2014, Adam’s father, Tim Draper, won the first and second auctions of nearly 32,000 bitcoins seized by the FBI from the Silk Road.
As blockchain technology continues to proliferate and mature, more generalist investors are likely to enter the mix.
The Grand Unified Ranking Of Early Bird Investors
So where does this leave us? After examining the investors who consistently find themselves in front of the curve of buzzword trendiness, let’s see how they all stack up.
NEA, a Menlo Park, CA-based VC firm, has ranked at or near the top of most of our rankings for each buzzword. It’s a trend that’s partially attributable to its investment cadence. Because of this, NEA also ranks first in our Grand Unified Chart. But the group of investors in this also ranges from accelerator programs like Y Combinator, 500 Startups, and Techstars, to big generalist firms like Andreessen Horowitz.
Again, this is far from a scientific ranking, but it does point to some of the most active players in certain trendy markets. Given the portfolios of many of these firms, it also shows that it pays to be ahead of the curve.