There is nothing worse than a waffling investor. A true capital allocator has to have conviction in the future and be willing to be wrong. Below is a list of trends and themes for 2022 from my annual shareholder’s letter. If you’d like to read the full letter, please respond and let me know.
Vertical SaaS: The emergence of SaaS companies that address small markets will continue to dominate. The ability to bundle other business services(Fintech) through these platforms will create larger addressable markets. I predict that software platforms will start to be offered for little to no cost, exchanged for the complete monetization of customer payments.
Products within Products: Most businesses have digitized themselves, using spreadsheets and email for core workflow functions – i.e., CRM, ERP, marketing automation, and HR platforms. I see an emergence of products that can scale within other SaaS platforms continuing to generate value for the end-user. Ideas include AI/ML engines for predictive insights, natural language processing applications for business enablement, and so on. I believe the winners of this “Products within Products” category will be those with the strongest and most developer-friendly integrations.
Synthetic Data Generation: Scores of companies offer AI/ML applications for businesses. The issue is that most do not have enough datasets running through their “brain” to be commercially viable for the end-user. I predict a big need for companies that can artificially create synthetic data from existing data to help accelerate AI/ML’s learning to become useful to its customers.
Climate Tech/Frontier Tech: I believe there will be bountiful investments in these categories given the amount of private market capital. Companies that fall into these classifications generally have a long-term horizon to commercialization and are, therefore, patient investors. These companies will have milestones based on financing instead of revenue. Therefore, they cannot be adjusted by a discounted cash flow analysis. These categories will be stuffed with cash to avoid near-term expectations of liquidity. Remember that I love these categories; I am just predicting that the capital allocation in these companies will not entirely be altruistic.
Have a great Monday everyone!
