The 2010s were a wild ride for startups and the investors who poured money into them. This Business Insider article reveals which ones they are.
As the decade began, smartphones were becoming ubiquitous, connecting billions of people to the Internet, many for the first time, and paving the way for a wave of innovative business models.
Online marketplaces and sharing economy platforms (Amazon, Facebook, Uber, Airbnb, and many more) demonstrated the power of network effects and, in doing so, completely changed the way people and businesses interact with each other.
Businesses took advantage of the constant stream of real-time, location-based, personalized data that consumers voluntarily offered through a growing list of smart devices to provide them with faster, more convenient services.
Entrepreneurs had the wind at their backs, thanks to a flood of venture money and access to technical infrastructure, Amazon Web Services, meaning they could scale and expand their startups like never before. Unicorns seemed to pop up everywhere, and tech IPOs excited investors.
But the tides began to turn in the second half of the decade as a spate of scandals shattered the idea that tech companies and tech founders are inherently good. Public investors were skeptical of the premium price attached to some tech companies, and the batch that went public in 2019 had a rough time.
Four months into 2020, the unprecedented coronavirus pandemic has rocked the global economy and the startup world, leading to at least 30,000 layoffs at venture-backed companies and even impacting unicorn tech darlings like Uber, Lyft, Airbnb and Peloton as funding and sales have dried up.
After speaking with five venture capitalists about how things have evolved since 2010, some clear lessons emerged—as well as some clear examples of those lessons. While it would be impossible to include every major startup, below are the companies that investors say have had the biggest impact on their industry over the past 10 years.
Uber’s Travis Kalanick, Theranos’ Elizabeth Holmes and WeWork’s Adam Neumann: All were hailed as charismatic, visionary founders who sought to change the world, but each was eventually forced out of their respective companies amid scandal.
When Holmes resigned in 2018 amid criminal caricatures and reports of fraud at Theranos, “Everyone in the company really questioned their own diligence”Kristin Gunther, director of Revolution, told Business Insider. Gunther added that it made her reflect on how she gets involved as a board member.
«In a context where, for a couple of years here, special offers moved very quickly and people could get funding based on two PowerPoint slides, it became even more important to say, ‘Hey, okay, this is a special offer, but I’m going to miss it because it’s not worth cutting corners,’» said Gunther.
Kalanick was also ousted for cutting corners. In 2017, investors arranged for his resignation at a time when Uber’s public image had plummeted. Once a company that every investor wanted a stake in, critics began alleging that Uber enabled workplace harassment, skirted local regulations, and that Kalanick’s own behavior had led the company on a crash course.
Neumann, WeWork’s eccentric founder, resigned earlier this year after the company’s failed attempt to go public led to reports of his extensive conflicts of interest, mismanagement and bizarre behavior.
The three companies epitomized Silicon Valley’s obsessive focus on growth and the celebration of ambitious founders, which often ignored problematic behavior and business practices.
“I think we’ve abandoned values in terms of not just how we invest, but how we manage companies.”Elliott Robinson, a partner at Bessemer Venture Partners, told Business Insider.
The ubiquity of social media and digital advertising has given companies powerful new ways to connect with their target audiences and has helped direct-to-consumer brands emerge.
Anu Duggal, founding partner of Female Founders Fund, told Business Insider that social media “They have allowed brands to have a direct conversation with those consumers and have an impact on the current design of their products.”
Duggal highlighted brands like Warby Parker and Glossier as companies that have effectively leveraged conversations with those consumers to inform product development.
Jenny Lefcourt, general partner at Freestyle and founding member of All Raise, said another reason these brands have been so successful is because they have created an “authentic community” among their consumers.
“Maybe you go to Glossier because you love makeup and you start connecting with the community about that and before you know it, you start making friends and you’re sharing travel tips,” Lefcourt told Business Insider.
However, these companies did not initially seem like safe bets. Gunther pointed to online retailer Jet.com and its acquisition by Walmart as an important proof of concept, and said that “It showed the way out for some of these direct-to-consumer companies where it really was a question.”
It’s no secret that venture capital firms (and, as a result, the entrepreneurs they fund) suffer from a lack of diversity. A recent survey by RateMyInvestor found that the typical founding team was a “two-person, ‘all male,’ all white, college-educated American team residing in Silicon Valley.”
But over the past decade, with several women-led companies reaching multi-billion-dollar valuations and Stitch Fix founder Katrina Lake becoming the youngest founder to take a company public, investors are finally taking notice.
“Venture capitalists are role models”Lefcourt said. “Seeing these women take these companies from inception to IPO and be incredibly successful allows other venture capitalists, whether they are men or women, to change their mindset about what success looks like.”
Venture capital firms still have a long way to go both in terms of who they invest in and who is investing, especially when it comes to racial and educational diversity. But, at least when it comes to female-led startups, Duggal said investors are “recognizing the fact that there are real gains to be made.”
The RateMyInvestor survey also found that venture funds have a strong geographic bias, with nearly half of all investments over the past five years directed at startups based in Silicon Valley. But in recent years, several companies have revealed the untapped potential of other markets, particularly outside the United States.
«There have always been great companies and great innovation outside the United States»Victoria Treyger, general partner and managing director at Felicis Ventures, told Business Insider. But before Shopify, she said, “There was a belief that venture capital-backed companies outside the United States came out on top.”
Ottawa, Canada-based Shopify stands out for its outsized role in empowering small and medium-sized businesses. Robinson, who invested in Shopify, said that by building e-commerce tools and “Multiple revenue streams from a really large user base, that really changed the way people thought about (software as a service)”.
Atlassian, a Sydney-based enterprise software company, also put Australia on the map. “I just saw how many (Atlassian) alumni are in that ecosystem,” Treyger said, noting how employees at pioneering companies like Shopify and Atlassian often go on to start their own companies.
Israel has also become a hotbed of entrepreneurial activity. It has produced household names such as Waze (which was acquired by Google) and, in 2018, 61 companies emerged with an average size of $81 million.
Within the US, cities like Chicago, Seattle, Denver, Portland, Atlanta, and Washington, DC, have also seen a massive increase in both investment and startups.
Fintech was another sector this decade that saw major disruption and a surge of startups achieving massive valuations. Startups took advantage of the rise of smartphones, digital banking, and machine learning to bring more consumers into the financial system and change the way people spend, earn, borrow, and exchange money.
“When you look underneath, there is real technological innovation”Treyger said. “It’s really exciting to see that dollars have gone to companies that have truly transformed the financial services sector.”
As just a few examples, Stripe and Square helped change the way businesses get paid, Lending Club and SoFi took on established fees in the personal lending space, and Robinhood reinvented how everyday consumers invest.
