The United States has inaugurated a new president last week. And even though we try to stay as a-political as possible we are aware that Joe Biden's policies will affect our favorite and rebellious startup world. So we prepared this article to review what to expect of 2021, share with you what are we excited about, and what to be conscious of new taxes, new rules, immigration law, and industries that will be propelled in the next 4 years.
Disclaimer: We are not pro-Trump neither pro-Biden. We are pro-technology and mission-driven entrepreneurs.
This is an important time for the whole world as the US plays a massive role in macroeconomics and sets the tone for many conversations happening around global climate change and social crisis. As well as decisions around which technologies will fly or die in the next decade.
Biden has been a long-time favorite of a Silicon Valley community. We remember Sam Altman, best known as the president of Y Combinator, contributing $250K to support the democratic party. Now Biden is bringing "one of us", a person from venture capital, to the White House. Ron Klain, an attorney who serves as EVP at venture investment firm Revolution, now will serve as Biden’s chief of staff. This fact gives us hope for the strong backing of a VC and innovation ecosystem from the White House.
Below are 5 main areas, that we believe will have the mightiest impact on the innovation economy.
Taxes
Big tech companies have done very, very well during the Trump years. Apple and Alphabet—got special treatment in the Trump Tax cuts of 2017, where their corporate income tax rate dropped from 35% to 21%.
Democrats are likely to push for higher taxes for high earners and businesses, including via increased capital gains taxes and raising the corporate tax rate back up to 28%.
As Fastcompany states: A Biden tax plan could change the venture capital business model. Right now, the wealthy people who invest money in the funds of VC firms can pay a lower capital gains tax rate on some of the proceeds they earn from the fund’s investments. But Biden’s tax plan would tax long-term capital gains as ordinary income for people earning more than $1 million per year.
If that happens it means that less money will go into VC funds, and as a result, we will see smaller funds, with less capital and even harder terms for startup founders to get capital. We are assured that funding won't be getting easier and the whole VC business model might be shifting towards a more hands-on approach and chasing profitable companies with fewer multiples but higher chances of bringing a return.
Immigration policy
The previous administration has cut down immigration of all sorts, including the H-1B visas for highly skilled workers. In contrast, Joe Biden released a policy statement pledging to reform the H-1B system and remove limitations on the number of green cards issued. As well as provide fast-tracked green cards for foreign students who receive a doctorate-level degree in STEM fields and a job offer upon graduation. We might experience international brains flowing to US startups again!
A 2013 study by the National Venture Capital Association found that one-third of U.S. venture-backed companies that went public had at least one immigrant founder. Another study found that immigrants helped found more than half of U.S. unicorn startups.
If you were considering moving your startup or yourself to the US - this year will be a good time for doing that.
Inclusion
Tech, historically a male-dominated industry, started a march towards diversity and inclusion a few years ago. 90% of our calls with VC investors are still with white males. But we also meet more and more female founders and diverse teams.
Biden supports the trend and now we are seeing a huge transition from Trumps' white male administration into a diverse Bidens' team. We believe that a startup community and the whole world will benefit from seeing more female role models and people of color making massive decisions, handling power, and bringing new opinions to the table. If you still not taking advantage of diversity in your team, you should do it now!
Cleantech breakthrough
As we were mentioning in the video released in early 2020 Cleantech and Health tech are the areas of focus. Although, there is no solid plan on cleantech yet, as Crunchbase News columnist noted in her most recent article, many of the cleantech areas that Biden talked about early on in his campaign, include more pedestrian-friendly infrastructure and electric cars.
The former vice president has mentioned the beginning of phasing out of carbon-producing industries like coal while putting significant federal resources into developing renewable energy sources like solar and wind.
Salut to our cleantech startup founders and investors! In our company we choose to focus on impact-positive companies, including cleantech and healthtech mid-2019, 2021 is just a year to recommit to it and go big! Cleantfounder can also look into government grants and support.
Healthtech focus
Biden is a regular visitor of a big tech conference - StartupHealth and has clearly been indicating his support to the healthtech industry.
Biden and Vice President Kamala Harris stated that dealing with the virus is their No. 1 priority. It is hard to heal the economy when people are getting sick. There is a big chance that the COVID-19 vaccine will be widely distributed at the market very soon, but this pandemic highlighted massive problems with the US healthcare system.
Luckily more than $10 billion were invested in disrupting every corner of healthcare will be put to work in the next years and we will see a positive change in the quality of life, disease treatment, and prevention, accessibility of healthcare.
We would say both public and private companies will be experiencing interest among investors, high valuations, and high growth. All 2020 we spent selecting and accelerating health tech startups, and we will continue doing so.
Of course, there is more to this conversation, but we want to know WHAT are you most excited about for the next 4 years? Drop us your predictions in the comments!