The Digital Diaspora 3rd Edition: Quick Takes From NFX’s 2021 VC & Founder Predictions Survey

The Digital Diaspora - 3rd Weekly Edition

Welcome to the third edition of The Digital Diaspora, a weekly short column covering the rise of new tech hubs outside of Silicon Valley. This week’s post will center on reactions to the results of SF-based venture firm NFX’s 2021 VC & Founder Predictions Survey.

NFX asked 526 founders and investors about a broad range of topics, and published some of their findings this week. This column will focus only on those findings relevant to tech founders in their consideration of whether to HQ their companies in Silicon Valley or elsewhere — but I encourage you to read through the full report as well.

Quick Takes From NFX’s 2021 VC & Founder Predictions Survey

In 2020, a global pandemic thrust remote work upon the technology industry and created newfound acceptance of distributed teams. This caused a major shift in the paradigm of whether it was viable to build a high growth tech company outside of Silicon Valley.

With 2021 upon us and vaccination programs underway, an interesting storyline will be which changes prove to be part of our “new normal”, and which snap back to the way things were pre-pandemic.

For some educated guesses, let’s dive into a few of the notable findings from NFX’s 2021 VC & Founder Predictions Survey, and evaluate what they might mean.

  1. Founders Predict “Remote Work” Will Be The Hottest Growth Sector In 2021

    • Why It Matters: Remote work, a key enabler of the digital diaspora, has not yet reached its “final form”. Productivity would be materially worse without Slack, Zoom, Asana, and other tools built with remote use cases in mind. Some of the founders currently building in the space will create companies that continue to change the game.

    • Also Note: Investors were less convinced than founders, only ranking “Remote Work” 5th hottest behind (i) “Blockchain & Crypto”, (ii) “CleanTech & Environment”, (iii) “Artificial Intelligence”, and (iv) “Biotech”.

  2. Amongst Those Surveyed, 35% of Founders and 20% of Investors Are Leaving The Bay Area in 2020-2021

    • Why It Matters: The survey doesn’t tell us where they are going, but we know they are going somewhere! There is an argument that “social proof” — the relative dearth of identifiable hot startups led by founders who have fled the Valley — is one key obstacle preventing the floodgates from opening. With this many founders leaving, that obstacle is unlikely to remain in place for very long.

  3. Startups Are Leaning Into Remote Hiring; 69% of Startups “Definitely Likely” to Do So in 2021

    • Why It Matters: The ability to build and scale remote teams relies on your willingness to hire teammates without meeting them in person. Historically, startups were more comfortable doing this with entry level roles, but being able to make mid-level and even senior-level hires remotely is a newer phenomenon.

  4. VC Sentiment Toward Investing In Companies HQ’d Outside of Major Tech Hubs Is Hot; 68% of Investors “Definitely Likely” to Do So in 2021

    • Why It Matters: Stodgy Sand Hill Road investors’ bias for investing in Bay Area startups has been an argument many founders cite for their apprehension about leaving the Valley. This data point is a promising counterargument.

  5. Most Meetings Will Be Zooms, Even Post-Pandemic: 80% of Founders and 84% of Investors Agree

    • Why It Matters: For founders based outside of Silicon Valley, a major pain point prior to the pandemic was having to fly around to meetings with customers and investors who were not centrally located. More Zooms and less flights will save a lot of time, as well as a lot of cash runway.

  6. Founders and Investors Expect to Return to The Office In Q3:21 or Q4:21

    • Why It Matters: Many early-stage startups (including us at ValueTrace) are using widespread remote work as cover to delay their decisions on where to headquarter. The industry-wide return to the office will be a forcing function for many of these startups to make a decision about their longer term plans.

Thank you so much for reading this week’s edition of “The Digital Diaspora: Is Tech Really Fleeing Silicon Valley? And to Where?”.

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About The Columnist: Matt Levine is currently the CEO & Founder of ValueTrace, an enterprise software startup built to help Finance and BizOps teams keep their company’s SaaS spend under control. Prior to founding ValueTrace, he worked on the operating team at Andreessen Horowitz, and as an M&A banker advising technology clients at J.P. Morgan.