NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Michelle NG

As we continue to step into the new decade in 2021, the startup and venture capital ecosystems rode out the disruptive chaos of 2020, mainly due to COVID-19, into a more predictable state of change in the coming days.

Venture Capitalists (VCs) believe in capitalizing on disruptive innovation and developing technologies to displace older technologies, create new markets, and prepare the world for unexpected situations (e.g., global pandemics)–even if not all the startups and industries that VCs invest in may do so. There are many risks involved when investing in innovation, mainly attributed to the rapid pace of change, exposure across sectors and market cap, regulatory hurdles, political or legal pressure, and competitive landscape.

VCs risk capital and take on these risks in exchange for technology breakthroughs, substantial productivity gains, and sustained economic growth. Investment in innovations also creates tremendous employment opportunities. According to a study by Stanford University, 38 percent of the working population of America is hired by VC-backed firms.

Photo courtesy of Mimi Thian.