By Tanya van Lill, Southern African Venture Capital and Private Equity Association CEO
VUCA, an acronym which stands for Volatility, Uncertainty, Complexity and Ambiguity, was first used in 1987 based on the leadership theories of American scholars Warren Bennis and Burt Nanus. However, the term became main stream in the late 2000’s after the 2008 Global Financial Crisis and was not only taught in business schools but also frequently used by politicians and business leaders to describe the changing political, social and economic conditions of that time.
For most of us, we could relate to VUCA in some shape or form. But never before has VUCA moved from mainly a theory to a more tangible reality, with what the world experienced in 2020. Never before have we experienced such volatility, uncertainty, complexity and ambiguity which have all been thrown together in one great cocktail, in such a short space of time. At the start of 2020, the dawn of a new decade, there was renewed energy and vigour for what 20Plenty had to offer.
What we didn’t anticipate was the VUCA business and life lessons we were going to learn during 2020. Lessons of vulnerabilities, inequalities and how some of our personal and business behaviours have become unsustainable. Regardless of how tough 2020 was, it did leave us with food for thought. My expectation for 2021 is that we reflect on the lessons learnt and we implement the changes we want to see personally, in our businesses and ultimately in the world. From a private equity and venture capital perspective, our expectations for 2021 are as follows:
- Although fundraising has slowed down in 2020, we expect to see it pick up again in 2021 as fund managers adapt their fund strategies to meet new market demands and opportunities;
- Fund managers that have been able to raise funds and have dry powder, will continue to invest and we expect the 2020/2021 vintages to outperform, similar to what was experienced with the vintages post the Global Financial Crisis;
- We will see a spurt of new innovations for venture capital fund managers to invest in, given changing consumer behaviour and vulnerabilities that were exposed during the 2020 crisis;
- With the changing world of work and remote work being proven as a productive alternative, we may see more flexible working conditions and arrangements – which would not be unique to the private equity and venture capital industries as an employer, but it may present unique investment opportunities for fund managers to invest in solutions that address the changing needs of the world of work;
Fund managers will continue to emphasise Environmental, Social and Governance (ESG) as part of their investment and due diligence policies, and value creation strategies.
However, we also anticipate an increased focus from mere responsible investing to more Impact Investing, intentionally investing to generate positive, measurable social and environmental impact alongside a financial return.
The year 2020 amplified the social inequalities and we anticipate more investment into addressing these inequalities, as well as expect increased investment into industries such as education, healthcare, telecommunications, energy and industries related to food security.
I am sure we are all excited to wave goodbye to 2020 and would prefer not to hear the following words or phrases in 2021: “You’re on mute”, “unprecedented”, “new normal”, and so on. But one gift we can take from 2020 going into 2021 comes from the wise words of Charles Darwin who said: “It is not the strongest of the species that survives, or the most intelligent; it’s the one most adaptable to change”.