A Vancouver venture capitalist makes his best guess at what 2022 holds for startups
Jay Rhind of Rhino Ventures puts his prediction cap on.
“This is a damned if you do, damned if you don’t kind of thing,” laughs Jay Rhind. And, of course, he’s right. Predictions are hard to get right—unless they’re about whether my 10-month-old son will cry during his afternoon nap. (That’s a certainty, though we could have some fun with the over/under, which I’ll set at 29.5 minutes. Hit me up for action.)
But when they’re about something like tech venture capital in Vancouver, the Rhino Ventures partner has a point. Especially given the last couple years the industry has seen. Somehow, someway, we convinced him to give his best shot at shaking up his crystal ball.
How will 2022 be different from the last couple of years?
Rhind doesn’t foresee this year being as active as years past. Mostly because that seems technically impossible. “What took place in 2020-21 was the culmination of 10 years of incredibly hard labour by the entrepreneur class of building businesses to a growth stage,” says Rhind. “And that unlocked this insane amount of growth capital that cherry picked all the best growth assets.”
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Rhind points to companies like Klue, Trulioo and Clio as evidence of this. “What’s different about 2022 is that a lot of those businesses are incredibly well capitalized,” he argues. “It’s less of a fertile hunting ground for some of those growth names. You will have some graduation for the companies that raised Series A rounds in the last 2 years, maturing to that growth stage. But not that deep of a pool.”
So what might we see?
“My take is that the competitive dynamics are still extreme at the growth stage,” says Rhind, who predicts that companies will have to fight over local talent.
“You’re going to see valuations stay strong and some major rounds will take prominence in the local ecosystem. I think you're going to see an impact on supply and demand from an employee perspective really take hold in 2022. All these incredible, well-capitalized businesses are going to see wage inflation scenarios for 2022.”
What companies are positioned well?
“If you are enterprise, vertically-focused SaaS, there are 50 funds that you’ll get term sheets from, because it's become a commoditized space,” says Rhind. “That space will remain incredibly hot. And anything security, privacy-related—incredibly hot.”
Rhind also thinks that companies that haven’t been benefiting from COVID in some way will be primed for opportunity. “Whether you’re vacuuming up stimulus dollars if it’s an ecommerce business, or benefiting from the work-from-home environment in a more dramatic way than others, I think the ones that are really well-positioned don't have those headwinds of a reopening trading against them.”
So, overall less activity?
“Well, volume of deals is a different story than dollar amounts,” says Rhind. “Obviously there are companies maturing into the growth stage, but there are fewer of them. VCs have picked off multiple cohorts, but there are still record amounts of dry powder out there for pre-seed, seed and Series A companies. There are a lot of deals that will take place at that stage.”