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How Venture Capital Will Change in 2018


We're finally getting settled into the new year (and getting used to seeing an 8 at the end of today's date instead of a 7). But it's always a good time to make some predictions about what lies ahead in the coming months. In particular, it's especially important to pay attention to the venture capital industry, which can reveal a great deal of insight about the state of the startup landscape.

While we don't have access to a crystal ball, we can still make some interesting predictions based on where the VC field went in 2017 and where we think it's going in the coming year. Ready? Buckle your seatbelts, and let's get started.

Geographical Expansion

For years, Silicon Valley has dominated the U.S. startup scene, but, of course, it can't stay that way forever. Rising rents, overcrowding and the sky-high cost of living mean that more and more would-be startup founders are looking elsewhere to launch their new business.

In fact, according to the Kauffman Index of Entrepreneurship, the top metropolitan area for startup activity right now is nowhere near California -- it's Miami and the South Florida region, with Austin coming in a close second. As the startup wave spreads across the country, both startup owners and investors will see diminishing returns if they stay in the Bay Area.

Blockchain Frenzy

Heard of an IPO? What about an ICO: initial coin offering? In 2017, a growing number of companies raised roughly $6 billion by selling "tokens" to would-be investors and consumers. These tokens represent amounts of cryptocurrency or services that the company will render at a future date.

It's clear that there's massive buzz surrounding ICOs and token sales right now; for example, the new web browser Brave raised $35 million in less than 30 seconds when it launched its ICO last May. ICOs and token sales are a highly promising, more democratic alternative to traditional VC, and we expect that they'll only continue to grow in popularity this year.

On the other hand, the future of Bitcoin and other cryptocurrencies without backing looks murkier. For 11 months, Bitcoin was set to be the success story of 2017, rising from around $1,000 in value in January to more than $19,000 in early December. Then it plunged back into the high four digits and has hovered around there ever since while remaining extremely volatile. With no inherent value, and with the persistent difficulties in using cryptocurrencies for real transactions, it's hard to see the substance behind the hype.

Industry Predictions

In addition to these broader trends, there are a few specific industries worth paying attention to. After remaining a buzzword for years, the internet of things (IoT) seems poised to explode this year, as businesses continue to see the utility for both consumer devices and industrial applications. The global IoT market is currently projected to grow at a rapid annual pace of 20 percent, to nearly $9 trillion in 2020.

Other industries may require a little more time in the oven. For example, it's hard to see a coming breakthrough for augmented and virtual reality, despite the obvious benefits and applications. Although there's the impending launch of Magic Leap's augmented reality system this year, the high price point may mean that consumers will wait for costs to come down as more competition enters the market.

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