There’s no use sugar-coating it: COVID-19 will make it much harder for a lot of startups to survive.
Even as the world begins to emerge from lockdown, the economy is likely to be sluggish in the months to come, even if we’re fortunate enough to escape another major surge in infections.
However, there are some industries that may benefit from the way the pandemic has reshaped the economy and society. VCs will likely have their eyes on businesses in the following domains.
EdTech
The past few months have been an unprecedented shock to education, from pre-school to college. With students stuck at home, schools and universities have been forced to pivot to a brave new world of online instruction. Despite the ample frustrations the experience has caused, it has also opened people’s eyes to the potential of remote education.
The rise in the cost of a college degree in the U.S. has far outpaced inflation over the past two decades, forcing students to accrue crushing amounts of debt. As universities ponder what classes will look like next semester, many students may also be wondering whether the traditional campus experience is really worth that much more than obtaining a degree remotely. Universities will likely be under pressure to offer increased remote options at lower prices.
A similar conversation is happening in other countries, including China and India, where hundreds of millions of people will be seeking higher education in the coming decades but may seek affordable, flexible alternatives to the traditional product.
This year two Indian EdTech startups, BYJU’s and Unacademy, raised $400 million and $100 million, respectively, with backing from major venture funds and tech companies. Meanwhile, Chinese VC spending on EdTech hit $3.5 billion in 2019, more than twice the $1.7 billion spent in the U.S.
Cybersecurity
Cybersecurity has emerged as a major challenge during the pandemic. Organizations that track cybercrime have reported major increases in cyberattacks. Meanwhile, remote work arrangements have made it much harder for employers to protect themselves from attacks.
More than anything else, however, COVID-19 has raised the profile of cybersecurity simply because it has reminded business leaders that all it takes is one devastating virus to turn the world upside down, whether it’s biological or digital. The prospect of a cyberattack that brings down an employer’s digital infrastructure is more terrifying than ever.
So it’s no surprise to see VCs focus on cybersecurity. Cyberstarts, an Israeli VC fund focused on cybersecurity, raised $100 million at the end of May. A couple weeks earlier, Expel, a B2B managed security service (MSS) provider, raised $50 million from CapitalG, Alphabet’s venture fund.
Healthcare tech
Like other industries, healthcare has had to rapidly adapt to a new reality in response to COVID-19. While hospitals in many areas have been overwhelmed dealing with coronavirus patients, even those that have not been hard hit have had to cancel elective surgeries and other medical services that they depend on for revenue.
The silver lining may be more healthcare systems embracing telemedicine options that allow patients to receive many critical medical services from the comfort of their homes. While telemedicine has long-been touted as a way to make care more convenient and less costly, health care is by nature a risk-averse industry and many practitioners are reluctant to engage with new technology. However, the pandemic has forced even the most old school doctors to recognize that times are changing.
As a result, venture funding for telemedicine startups has skyrocketed to $788 million in the first quarter of the year, a 258% increase year-over-year. One example of the surge in telemedicine funding is Wheel, an Austin based telehealth company that received a $13.9 million Series A funding in January of this year. The broader category of digital health startups also saw investment soar to $3.6 billion in Q1 of 2020, a 79% increase. One vertical in the healthcare