What’s Next: Trends in Innovation and Technology for 2021

A new year is just around the corner and it comes along with renewed optimism to find new challenges and opportunities. 2020 was the year of COVID-19, and undoubtedly the black swan of the century. It has affected almost every geography of the world and all the industrial and economic sectors. Certainly, there are multiple learnings that we can get from the current situation that will lead us to improve in the future.

Despite this year’s health and economic crisis, humanity didn’t stop, we have found innovative technologies and disruptive business models to address today’s challenges. Some of the main trends we were able to observe throughout this year were the following:

Trends of 2020 — The year of virtual reality:

• Healthtech: Technology within the health sector has grown by approximately 37% this year, from USD$38.5bn in 2019 to an expected USD$52.5bn by the end of 2020 in Venture Capital investment. This increase is proportionally related to the COVID-19 crisis, as technological solutions were globally sought to address the global pandemic, from which we highlight telemedicine, IoT in medical devices and AI used to track the spread of the virus.
• Direct to consumer: The multiples and long lockdown periods led people to change their consumption habits, resulting in the closure and fewer visits in stores and restaurants, forcing these businesses to give a try into new online platforms to provide delivery service. Within the food sector, multiple solutions excelled among virtual supermarkets, digital wholesalers and distributors, as well as on-demand delivery platforms that helped the world’s population migrate to a virtual reality. For further information about the Digital Retail Food Services industry, direct to this article.
• Offline to Online: Digitalization accelerated in today’s context; traditional businesses found the need to digitalized. Within these efforts, there are startups that have allowed this transformation process to be easier for businesses through tools enabled by Artificial Intelligence, Machine Learning, Natural Language Processing, Big Data, etc. For example, some startups driving this change are: Mmuze in Israel, Intouch in Ireland, and LoveLocal in India.
• Social Distancing: It is the most obvious result of this pandemic. From work-from-home tools to online events platforms, technology development increased to drive this trend. Some technologies that are used within the future of work are: augmented reality, virtual reality, and mixed reality. Some examples of startups in this space are Magic Leap, Spatial and Tandem in the US.
• Ghost Kitchens: The restaurant and food sector experienced a profound transformation this year, derived from the confinements and the need for restaurants to serve the masses of customers who shifted to the digital world, from which it has been notorious the adoption of ghost kitchens, virtual restaurants, kitchensas-a-service, kitchen aggregators and prop-kitchens. Some startups creating this ecosystem globally are: Mimic in Brazil, Kitopi in UAE, Nextbite and Kitchen United in the US. For further information about the Kitchen Multiverse, please direct to this article.

2021 is presented as the year of the renaissance to the new normal. The expectation is that the pandemic will continue at least the first half of the year and daily life will gradually re-establish under a hybrid reality. It is important to emphasize that some habits established during the pandemic will be perpetual, and some others will return to normal.

Nonetheless, there are trends that we’ll see next year that are driven by the unprecedented context and some others that have been driven by the natural development of the market. We also consider that the level of popularity of each of them varies according to its impact expectation. The trends we consider will arise in 2021 are shown in the following graph:

Trends of 2021 — Year of Hybrid Reality

1. Embedded AI

2021 will be the year of Embedded Artificial Intelligence, with its application being a reality in any industry or business process due to advanced infrastructure and scalability. By integrating artificial intelligence into any business, reliable data that can be interpreted through robust models will be extracted, achieving improved performance, and making several processes more scalable. Some companies are developing this technology in the retail sector such as Pensa Systems and Udelv, both in the US.

2. Internet of Behavior (IoB)

Mostly driven by the acceleration of the Internet of Things (IoT) and digital technologies, where behavior patterns, characteristic features of individuals, and sometimes their emotions are captured, and this data is used to influence consumers and change their habits. Some startups that are entering this sector are: Breinify and Pivot in the US, and Healum in the UK.

3. Branded content and social commerce

In a fully digitized world, it is of great importance for brands to have a foot within the digital platforms to reach a larger customer base. As a result, branded content and social commerce are born, where brands leverage content on social networks to generate visibility into their products and increase customer conversion rates. In addition, social commerce drives the integration of individuals into social platforms to sell products and have another source of income, mostly supported by marketplaces built on top of them.

4. Hyper-data analytics and micro-marketing segmentation

Tech development and Big Data applications have allowed the almost immediate analysis of large amounts of data. One of the underlying solutions that surge out of this is the commercial segmentation of customers at the individual level, promoting certain specific products or services and directing personalized offers to each client, thus maximizing commercial profitability. An example of a startup in this field is the Brazilian fintech Olivia.

5. Frictionless digital payments

One of the biggest impacts of the COVID-19 crisis has been the development of frictionless digital payments, which has achieved the deployment and implementation of practical, effective payment methods that do not require contact in traditional establishments. These solutions are based on proximity technologies such as Near Field Communication (NFC), biometric identification, facial recognition, and sound wave sensors. Saffe in Germany and Tonetag in India are two startups developing these technologies.

6. Hyper-automation in supply chain

It’s been a while since we know the potential that Industry 4.0 will provide, and how the fusion of technology and industry could disrupt the market. One of the greatest use cases of this transformation and developing trend is the hyper automation of the supply chain, which consists of intelligently connecting and streamlining the entire industrial process; from processes in the warehouse, to route planning, product dispatch and last-mile delivery. Examples of startups in this sector include Eiratech Robotics in Ireland and Bringg in Israel. For further information about the Last-mile Logistics Revolution, please direct to this article.

7. Micro-fulfilment centers (MFC)

Derived from the rapid growth of e-commerce, this year the use of dark-stores as an extension of the supply chain increased, and by 2021 we expect the accelerated growth of these micro distribution centers. These micro centers seek to improve the distribution processes to the business or end consumer, efficiently moving the supply chain and somehow transferring the logistics capabilities that large companies like Amazon have to small and medium-sized e-commerce businesses. Flowspace in the US and Estoca in Brazil are building MFC’s networks and are driving this trend.

8. Hyper-localization

The e-commerce and the increase of applications based on the gig economy force businesses to become more efficient in the distribution and dispatching process, hence hyper-location technologies will become of great relevance within the e-commerce sales cycle. These technologies allow individuals to outline the most effective route to collect multiple products within a warehouse or supermarket. In Israel there are startups such as Oriient, Intraposition and Walkout that begin to develop these solutions.

9. Reverse supply chain

A trend that derives from e-commerce is the process to return any product. The more online purchases, the greater the need for returns and refunds. For this purpose, technologies and new business models are emerging to reduce the cost and time of this process and improving the return process experience. Some startups developing these solutions are Returnly and Cricket Returns in the US, and Leap Return in Israel.

10. Cybersecurity: data and process protection

As the world digitizes, the need for cybersecurity is more evident each time. The increasing volume of digital banking transactions, virtual events and documents stored in the cloud, have increased the risk of information and the integrity of digital operations. On one hand, we find solutions that directly take care of protecting user data; and on the other hand, companies thatfocus more on protecting the integrity and execution of the processes. SecuredTouch is an Israeli company innovating in the latter one.

11. Embedded fintech

One of the trends that had a gradual development before the pandemic, was accelerated by it and from which we will see a further increase in 2021 is Embedded Fintech, where companies of any industry use financial technology within their processes or as a mechanism to increase their sales. There are companies that are developing solutions to make financial technology integrations easier for these businesses, such as the US-based Banking-as-a-Service fintech Galileo. For further information about Embedded Fintech, please direct to this article.

12. Blockchain

On October 31, Bitcoin turned 12 years old and with it also came the anniversary of the blockchain technology. This technology has grown from being known as part of a fishy alternative and decentralized payment method to a technology applicable to almost any industry. In the last couple of years, we have seen interesting developments and new applications based on blockchain such as smart contracts, transactions validation, supply chain traceability, among others. We will certainly see developments in this space in the near future, as we have seen recently with Ruty that improves the traceability of fresh products in Mexico or SKUx which is disrupting the retail digital incentives in the US by using blockchain to trace the transactions and give personalized promotions.

The following year will be full of great challenges and opportunities for those who have the vision to capture them. Market dynamics are becoming more accelerated and require agile and aggressive entrepreneurs and investors with long-term vision and with a capacity of fast adaptation to the context to develop solutions that will drive the new hybrid reality.

“The first step towards getting somewhere is to decide you’re not going to stay where you are.”

J.P. Morgan

Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.

Gonzalo Soriano. Investment analyst at ACV.

ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

Stay updated about Venture Capital, innovation, entrepreneurship and more! Sign up for AC Venture’s monthly Newsletter.

Follow us on LinkedIn: ACV_VC

Follow us on Twitter: acv_vc

Follow us on Spotify: ACV_VC