VC money flows to collaboration start-ups as remote work booms

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Collaboration software, which one analyst said was a “white-hot category pre-COVID” for investors, is “now hitting the stratosphere.”

VC money flows to collaboration start-ups as remote work booms

Investment in collaboration and productivity software start-ups, which was already on the upswing before this year’s pandemic, is set to grow as businesses seek new ways to connect remote workers. 

“Even before COVID, some of the trends were pretty positive on that, and I think it will just get better,” said Jean-Francois Marcoux, managing partner at White Star Capital, a venture capital firm that has invested in a number of digital workplace start-ups – including virtual-reality meetings app Spatial.

“It will become more competitive – a pricier environment for investors and the like – but from a market option opportunity stand-point, we expect this to be a fast-growing sector in the next few years,” Marcoux said. “We think [investments are] going to increase from a volume standpoint, and the valuation of those businesses will increase. We definitely see  quite a shift. What we’re seeing out there is a kind of a perfect storm when it comes to adoption.”

That perfect storm – a global pandemic that has pushed companies everywhere to focus more on collaboration software and tools – meshes well with investor interest.  Venture capital firms have long been drawn to start-ups selling cloud-based workplace apps, with hundreds of millions of dollars flowing into software-as-a-service (SaaS) companies such as Slack and Zoom in recent years.

Investment growth that began in 2013 has continued, according to a report from White Star Capital, with the highest levels seen during 2018 when Slack announced a $427 million round ahead of its stock market flotation. In the last three years, $35 billion of VC money  has been invested globally in collaboration start-ups, according to White Star Capital, with U.S.-based start-ups seeing increases across all stages of funding.


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