As the year draws to an end, Silicon Valley investors are looking for the next wave of technology after social networking.
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For VCs, it’s not enough to build an addictive mobile app or game: Investors expect to see more, something worth building a venture-funded company around. So in 2013, get ready for mind-blowing, nerdgasmic tech, whether it’s augmented reality, 3D printing, self-driving cars, or space travel.
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For later-stage startups, 2013 will be the year all hell breaks loose. The IPO pipeline is already brimming with contenders: Venture-funded companies like Twitter, Box, and Square are ready for Wall Street. With heated competition for customers and users, there may also be some mammoth failures when some venture-backed companies that have received hundreds of millions of dollars simply buckle.
Most of the investors we spoke to agreed confidence in the tech industry is sky-high and 2013 is a year to take bigger risks. This time last year, we predicted entrepreneurship would be an engine to drive jobs creation and stimulate economic growth. With the global economy beginning to stabilize, we’re ready to take more risks and push technology into new verticals, like education, government, financial services, and health care.
Financial firms will finally embrace innovation
David Blumberg, managing partner, Blumberg Capital
“The financial services sector should be highly attractive to IT entrepreneurs and investors for its size, growth, high margins, and dramatic need for greater innovation and efficiency. At more than 8.5 percent of the global GDP, the industry is measured in trillions of dollars.
“Despite rapid growth, the financial industry is burdened by outmoded IT systems and legacy software, extensive and increasingly punitive regulations, and taxes as well as a negative public image as being too expensive, inflexible, and inefficient. It is an industry consumers and politicians love to hate — hence it’s ripe for innovation to improve outcomes for all.
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“And fortunately, startups are leading the way forward. Go for innovation in financial services, young entrepreneur — it’s where the money is!”
Ones to watch: Square, Credorax, Lenddo, LendUp, SoFi, Addepar, Zanbato
Computers will get smarter and more autonomous
Mike Maples, founding partner, Floodgate Capital
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“I’ve been thinking a lot recently about the next big tech cycle after social networking. One of the things we did right as a firm is to see that trend early [Editor’s note: Maples is an early investor in Twitter and Reputation.com]. We use the term ‘hypernet’ to describe this notion that technology will no longer be characterized by one world wide web or one search engine.
“Computers will exist in billions of nodes and millions of clouds. In 2013, people will expect to be hyperconnected on the hyperweb: They will want to manage content on any device. We will see user experiences that are no longer assumed to be windows on a computer screen or a smart phone. Some of my favorite examples are Google’s self-driving car or Nest‘s thermostat, which learns the temperature you like and turns it down when you’re away.”
Ones to watch: Nest, Google’s self-driving car, IFFFT, Grok, Genwi
‘Big data’ won’t be a buzzword; it will be part of life
Ross Fubini, venture partner, Canaan Partners
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“‘Big data’ is the buzzword of the year, but 2013 will be the year that big data will be a reality across many application areas.
“Big data allows the user to experience magic. Anyone can ask questions of the data, and soon we’ll be using these technologies for everyday decision-making, whether it’s pricing, hiring, or managing our finances. These new applications are going to require more than an open-source computing framework like Hadoop. The shift to ‘big data’ will herald an entirely new set of infrastructures to store and process all that data.
“Data has been a big deal and a big market for years — SQL, hello!. But ‘big data’ is a big deal because of the sheer volume of trackable data and because it’s cheaper than ever before to build an application to make that data valuable. By the end of the year, we will see some big winners emerge leading up to some splashy 2014 and 2015 IPOs.”
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Ones to watch: Kaggle, Splunk, Platfora, Grok, Intuit, Quid, LendUp, GNS Healthcare
Storage will get even sexier
Bipul Sinha, investor, Lightspeed Venture Partners
“The enterprise storage market is experiencing a tectonic shift led primarily by virtualization and storage media disruptions. The incumbents are slow to respond, and the startup activity is at an all-time high. The new year will witness two significant trends: an acceleration of storage and compute hyper-convergence and a bifurcation of performance and capacity tiers for shared enterprise storage.
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“These trends will eventually commoditize the storage layer of the enterprise information technology stack and essentially propel the emergence of software defined, agile enterprise datacenter.”
Ones to watch: SimpliVity, Nutanix, Zadara, Exablox, Bitcasa
The developer ecosystem will go mainstream
Peter Levine, partner, Andreessen Horowitz
“The shift from the web to an app-based computing architecture is reinventing the entire developer ecosystem. Until recently, Microsoft and Java controlled all software development and services because developers could only write for those APIs. With 2013 on the horizon, we believe those days will soon be over.
“The old way of computing has been eroded by and replaced with special-purpose, easy-to-integrate backend services. These best-of-breed services also innovate at a breakneck pace, which means applications can take advantage of many additional services, thus paving the way for a new developer ecosystem.”
Ones to watch: GitHub, Mixpanel, Pixelapse, Okta, Parse, Bizness Apps, Urban Airship
Hardware companies will raise larger rounds
Naval Ravikant, founder, AngelList
“The declining cost of building tech startups has finally reached hardware. We’re seeing accelerators like Lemnos Labs turning out very interesting seed-stage hardware companies.
“Some of the coolest I’ve seen this year include Momentum Machines, which builds burger-flipping robots; UnmannedInnovation, which builds an operating system for UAVs; NanoSatisfi, a Kickstarter-funded project to launch and rents CubeSats; and Nomiku, which makes sous vide [machines] affordable.
“It used to be that for a hardware company, you’d have to raise lots of money from the get-go. But now you can start small with a seed, as AngelList alum Leap Motion did, and then go on to raise significant rounds from large investors later.”
Ones to watch: Maykah, Goldiebox, OpenRov, Momentum Machines, Unmanned Innovation
Indoor location will be the next billion-dollar market
Don Dodge, developer advocate, Google; advisor, Google Ventures
“Indoor location will be bigger than GPS, which only works outdoors. We spend 90 percent of our time indoors, whether it’s in shopping malls, offices, schools, restaurants, and so on, where GPS doesn’t work or is inaccurate. In 2013, you’ll use your smartphone to find the exact store aisle location for every item on your shopping list.
“With indoor location, you can find people, products, or services plotted exactly on a floor plan with walking directions to get there. You could receive coupons, advertisements, or free offers for products based on where you are in a store. Imagine playing indoor location games like capture the flag, tower defense, or other games based on real-life indoor locations. There are thousands of applications in many different market segments that will be built using accurate indoor positioning technology.”
Related: Read VentureBeat’s roundup of indoor location technologies.
Ones to watch: WifiSLAM, ByteLight, Neuaer, IndoorAtlas
Health care will begin to feel personal
Cameron Teitelman, John Melas-Kyriazi, and Divya Nag (pictured, left), StartX leadership team
“In the medical space, advances in bioinformatics, genomics, regenerative medicine, and proteomics [the large-scale study of proteins] have propelled us into an era of truly personalized medicine. Many med-tech startups are harnessing innovation in these fields to prevent diseases, increase health outcomes, and tailor medical engagement on an individual level.
“With a rising number of med-tech companies launching personalized medicine platforms, we are going to see a greater demand for individual treatment options around the world as these options become increasingly accessible.”
Ones to watch:Morpheus Medical, Ubiome, Wellness FX, GenapSys, Numedii, The Chordoma Foundation
A.I. and human-computer interaction
Brian Singerman, partner, Founders Fund
“We are always highly suspicious of trends. The best investments are often in companies and industries that others do not consider hot or trendy. Therefore, a theme for 2013 will be to not invest in trends, but rather long-lasting value. Trends come and go, but the best companies will be the ones that buck the trends and don’t look like all the others, companies that don’t appear to have much competition.
“To that end, we think 2013 will see some major technological breakthroughs through new ways of interacting with machines. Interface breakthrough Leap Motion will change the way we think about and operate computers of all types. Google will make huge strides in self-driving cars. We will even see the beginnings of a sophisticated A.I. The new year will be a true revenge of the nerds year, with product giving ground to actual technological innovation.”
Ones to watch: Leap Motion, Metaio, Ouya, Deep Learning technologies, Google Glass, self-driving cars, anything involving space travel
Top image courtesy of Smileus, Shutterstock
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