5 risk investment trends for a post-COVID-19 world

Not everything in the today’s economic outlook is grim. The pandemic has had a favorable impact on certain sectors. These sectors are becoming true poles for attracting investment as a result of the changes in consumption habits and supply chains, new needs resulting from the phenomenon and what is expected of the new normal.

Despite a historic 2019 in terms of risk investment in Latin America (in number of transactions and their total volume), in the first quarter of the year such investment declined. This largely reflects reduced seed rounds because of investors’ caution in the face of uncertainty. The vast majority of funds are currently focused on strengthening existing portfolios and helping already-funded companies to survive this stage, rather than looking for new investments. Even factors such as travel restrictions, the pause in events and the disruption of certain industries have complicated the search for investment opportunities.

However, due to the very nature of the venture capitalist, this cautious stage is expected to be short-lived. Those who invest in innovation and technology are always looking for ways to find an early position in future opportunities. If we see sectors such as retail, entertainment, travel and real estate declining, what investment trends are emerging in these times?

1. Healthtech - Investment in startups that combine health and technology was doing well prior to the pandemic, but has accelerated since, and healthtech already represents one of the most attractive sectors to invest in. Resources are flowing into companies working to save lives, such as makers of medical devices, vaccines, tests for different diseases and digital tools, and there is a significant rise in investment in telemedicine solutions. This sector also includes the growing demand for mental health, wellness and fitness solutions, which have increased in popularity during the days of confinement.

2. Online purchasing and home delivery - Due to the effects of the health contingency, startups associated with electronic commerce have boomed in recent months. Beyond the big players, the market has opened up opportunities for new proposals in online shopping, ranging from groceries, medicines, clothing and entertainment, to tools and articles for daily consumption. The need to have goods delivered to the door also reflects favorably on home-delivery and last-mile shipping companies.

3. Fintech - The fever for fintech that ran high prior to COVID-19 will not stop. On the contrary, the pandemic is generating a new wave of technology adoption and financial inclusion, creating a virtuous circle for tech-finance startups. Systems for purchasing, payment, savings, and loans, among others, continue to gain traction and are making their way in the traditional financial system.

4. EdTech – A revolution in the education sector has been in progress for years. The way of consuming, producing and accrediting knowledge had been gradually evolving, but suddenly, in a matter of months, we have all found ourselves educating ourselves online. This is definitely shaking up the paradigm of the educational system and creating spaces for startups in the field, in areas such as distance learning, credentialing and AR / VR solutions.

5. Cybersecurity - Digitization is not without its challenges and threats. As the world moves into the digital era, the need for mechanisms to ensure that information is moved, sent, stored, transformed, consumed, interpreted and handled in a safe and reliable manner becomes increasingly evident, in order to preserve privacy, integrity and precision. This trend will continue to advance as connected devices increase in tandem with the Internet of Things.

Special mention must also be given to other sectors that are beginning to emerge, such as artificial intelligence startups for recognition and identity, or the Zoom phenomenon, which is pushing other startups to create vertical and horizontal solutions to join the success of the popular video-conferencing tool.

Risk investing is a long-term game and, in times such as these, the role of entrepreneurs is critical for the world to get ahead. Some business models will be redefined and new ones will be created. Products and services must be reimagined according to new consumer preferences.

This period is testing us all in many ways, but venture capitalists are always looking to foresee the future. Although the investment world proceeds with caution, it always has its eyes wide open in search of the opportunities that will shape the new normal.