Venture capitalists reveal the startups that changed everything in the last decade

The pervasiveness of social media and digital ads has given companies powerful new ways to connect with their target audience and helped enable the rise of direct-to-consumer brands.

Anu Duggal, founding partner at Female Founders Fund, told Business Insider that social media has "enabled brands to have a direct conversation with those consumers and have that impact their actual product design."

Duggal highlighted brands like Warby Parker and Glossier as companies that have effectively leveraged conversations with those consumers to inform product development.

Jenny Lefcourt, general partner at Freestyle and founding member of All Raise, said another reason these brands have been so successful is that they've created "authentic community" among their consumers.

"Maybe you go to Glossier because you love makeup and you start connecting with the community about that and before you know it, you start becoming friends and you're sharing travel tips," Lefcourt told Business Insider.

These companies didn't initially seem like sure bets, however. Gunther pointed to online retailer Jet.com and its acquisition by Walmart as an important proof of concept, and said it "showed the exit path for some of these direct-to-consumer companies where that was really a question."

It's no secret that venture capital firms — and, as a result, the entrepreneurs they fund — suffer from a lack of diversity. A recent survey by RateMyInvestor found that the typical founding team was a "two person, 'all male,' 'all white,' U.S. university-educated team residing in Silicon Valley."

Over the past decade, however, with several women-led ventures reaching multi-billion-dollar valuations and Stitch Fix founder Katrina Lake becoming the youngest female founder to take a company public, investors are finally taking notice.

"Venture capitalists are pattern matchers," Lefcourt said. "Seeing these women take these companies from start to IPO and be incredibly successful enables other venture capitalists — whether they're men or women — to change their view on what successful looks like."

Venture capital firms still have a long way to go both in terms of who they invest in and who is doing the investing, especially when it comes to racial and educational diversity. But, at least when it comes to women-led ventures, Duggal said investors are "recognizing the fact that there are real returns to be made."

RateMyInvestor's survey also found that venture funds have a strong geographical bias, with nearly half of all investments in the past five years going to startups based in Silicon Valley. But in recent years, several companies have revealed the untapped potential of other markets, particularly outside of the US.

"There were always great companies and great innovation outside of the US," Victoria Treyger, general partner and managing director at Felicis Ventures, told Business Insider. But prior to Shopify, she said, "there was a belief that VC-backed companies outside of the US exited earlier."

Shopify, which is based in Ottawa, Canada, is notable for its outsize role in empowering small and medium businesses. Robinson, who invested in Shopify, said that by building ecommerce tools and "multiple revenue streams off of a really large user base, that just really changed the way people thought about [software as a service]."

Atlassian, an enterprise software company out of Sydney, similarly put Australia on the map. "I just see the number of [Atlassian] alums that are in that ecosystem," Treyger said, noting how employees of pioneering companies like Shopify and Atlassian often go on to start their own ventures.

Israel has also become a hotbed of entrepreneurial activity. It has produced household names like Waze (which was acquired by Google) and, in 2018, 61 companies exited at an average deal size of $81 million.

Within the US, cities like Chicago, Seattle, Denver, Portland, Atlanta, and Washington, D.C., have also seen massive increases in both investment and startups.

Fintech was another sector this decade that saw major disruption and a flurry of new companies achieving massive valuations. Startups took advantage of the rise of smartphones, digital banking, and machine learning to bring more consumers into the financial system and upend how people spend, make, borrow, and exchange money.

"When you look underneath, there is true technological innovation," Treyger said. "It's really exciting to see that the dollars went into companies that have truly transformed the financial service sector."

As just a few examples, Stripe and Square helped change the way businesses get paid, Lending Club and SoFi took on incumbents in the personal loan space, and Robinhood reinvented how everyday consumers invest.