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Startup Sectors That Declined in 2019

Startup Sectors That Declined in 2019

With 2019 closed, there were many startups that thrived and boomed for the year. Many of these got robust venture funding in areas like the U.S. and other regions. Among the sectors that gained much for the year include real estate, insurance, and automation. 

However, there are also a number of venture sectors that did not go well this year. These categories suffered from each year showing declines. As 2020 marches on, here is a look of the startup sectors that did not fare well in 2019. 

Hardware 

Investment for the hardware sector showed a decline in 2019. With U.S. investors backing away from startups that develop consumer electronics, networking hardware, and other devices. Through the late-stage venture funding rounds within the year, U.S. hardware raised about $1.97 billion in seed. 

Among the reasons behind this is due to having fewer supergiant funding rounds in the hardware category for 2019. So far, there are two companies that managed to raise $100 million or more. One is Fungible, known for creating hardware and software platforms for data centers. The other is Kinestral Technologies, which develops kinetic glass. 

One thing to note is that this does not include robotics or autonomous driving deals. Factoring those startup funding rounds would result in higher totals for the category. 

For instance, look at the startup Nuro (known for its autonomous robotic vehicles). The amount raised by this startup in February 2019 was at $940 million

There are still chances that the totals would still change. This is with some of the rounds having late reports. Though it still stands with a dismal total to punctuate the year, when compared to the $3.46 billion total in 2018. 

Startup Sectors That Declined in 2019
Hardware

Crypto and Blockchain 

There had been a series of lows with bitcoin prices a year ago. Although bitcoin managed to recover from it. This was not the case for crypto and blockchain when it comes to dealmaking activity. 

For several quarters, investor enthusiasm for crypto and blockchain remains to be far at the low point. The period between late 2017 to early 2018 was the peak of dealmaking activity. This was when cryptocurrency prices continued to soar. During that time, blockchain went around as the buzzword of the day. 

For the first two-thirds of 2019, the amount raised was at $2 billion across at least 472 known rounds. This does not include initial coin offerings. For the remainder of the year, initial data shows that it still garnered some deals but at lower yields. 

This also includes companies that have crypto and blockchain as a business component. One such example is the company Robinhood. This is best known as a commission-free stock trading app. But it also offers cryptocurrencies. 

On Robinhood’s Series E round, the amount raised was $323 million. Thus, making it one of the largest crypto-related funding rounds for the year. 

Startup Sectors That Declined in 2019
Food Delivery

Food Delivery 

Food delivery poses difficulty in making profits. Though there have been some lucrative gains for this category in recent years when raising venture funding. With 2019 closing, this particular sector is coming to a slowdown with its momentum. This becomes apparent with the venture and seed funding obtained for the year. 

Food delivery companies brought in the venture and seed funding amounting to $3.85 million across at least 125 funding rounds on a global scale. Compared to $11.1 billion across at least 223 rounds back in 2018, that is a considerable drop. 

Rappi managed to get the largest single venture capital funding round in 2019. This Columbia-based food delivery company mustered $1 billion in its Series E round. 

In the US, the food delivery company DoorDash managed to get the same amount as well. They raised a total of $1 billion across two separate funding rounds. 

Although despite the growths, food delivery also had some problems within the year. DoorDash, for instance, came under fire due to their tipping practices. 

Uber came off with a rather lackluster performance post-IPO. The company was banking on growing its delivery business. 

Food delivery companies still continue to raise big sums for their funding. This means the food delivery sector still continues to move forward. 

Electric Vehicles 

The electric vehicle industry has a lot to offer. Companies under this category provide a high return of investment. A good example of the high returns is how Tesla came with a $70 billion deal.

Despite this, the electric vehicle category is also a two-edged sword. It also poses high risks due to how these companies stand out as being capital-intensive. 

The bulk of electric vehicle investments did not turn out well with profits. Combine this with the slowdown in supergiant rounds in China. What you get is a sector-wide funding slowdown on a global scale. 

2019 venture investment for electric vehicle companies runs at a total of $8.88 billion. From it, $5 billion went to Chinese deals. Not as well as how it went back in 2018 when investors put $18 billion in funding for that sector. From that, China-based companies took in about $14 billion. 

Startup Sectors That Declined in 2019
Electric Car

The Continuing Shifts and What Comes Next 

There have been notable shifts in other startup sectors as well. With some tilting towards a decline. Among the sub-sectors showing such a decline include Edtech and Digital Media. As well as Gaming, and Adtech. 

With these in mind, there have been common denominators between these categories. Most of these operate in the physical world. This happens to be the case for food delivery companies. As well as electric vehicles and hardware. 

When you look at crypto and blockchain, the decline shown here was due to the bubbly parts evidenced from the prior years. 

As 2019 closes and with 2020 rising into the forefront, the trend towards software revenue models still has money flowing into its streams. This part has not changed and there might be more still coming for this new year. 

This shift may come in the way of changing cultures and paradigms inside and out. Categories with great potential may also come with greater risks. Tides can still shift for various businesses. It’s time to look at 2020 with anticipation.

Also, check out these 21 Most Active Early-Stage Investors in Los Angeles

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