Between the rapid rise of AI and the often dramatic fall of startups large and small, 2023 was an action-packed year for technology and venture capital.
In many ways, we expect 2024 to be the year things stabilize a bit. The buzz around AI will likely die down, as will hopefully the layoffs. IPO markets may see a tepid comeback and we expect that after nearly two years of declining funding, venture capital investment will stabilize.
Here’s a look at five trends Crunchbase News editors and reporters are watching in the new year.
The AI buzz is fading
Perhaps the most interesting thing to watch in 2024 will be what happens to AI and specifically AI investments.
While Towers over $100 million were the norm this year, many investors are talking about at least a potential market pullback as valuations have continued to soar and many are wondering how many winners there will be in the generative AI market.
Of course, the OpenAIsand AnthropicIt’s likely that investors will continue to be able to get almost any valuation they want, but FOMO appears to be fading for investors in the sector and many believe further changes in the sector could affect investor sentiment.
Even as 2023 progressed, many investors seemed less and less interested in marketing or sales platforms that simply wrapped AI around their platform.
Some investors expect that legal and regulatory dilemmas that AI companies may face in the United States and abroad will lead to a slowdown in the flow of funding for AI startups seen in 2023.
Others point out that when the mobile revolution happened more than a decade ago, the biggest winners when it came to basic infrastructure ended up being well-established technology companies. Of course, there have been winning startups, like Twilio – but it’s many big tech companies that have benefited the most from the latest wave.
Of course, these big tech companies are already playing a big role in AI, investing billions of dollars in various AI startups. The tastes of Nvidia, Selling power 1, Microsoft And Google have been very active and this could continue to propel AI funding into the new year.
It’s important to remember that AI is expensive. Startups need data, computing power, talent and a variety of other resources – all of which big tech companies can provide.
If they stop and VCs withdraw their cash, 2024 could turn cold for many hot AI startups.
—Chris Metinko
Slowdown in venture funds
While many expect an increase in startup closures due to changes in the funding landscape (see Convoy), what about the venture capital firms themselves?
THE OpenView The news seemed to shake the venture capital world a bit when it broke in December, and its uncertain future will likely be watched by many.
However, those in the venture capital world expect similar types of headlines in 2024.
The boom years of 2020 and 2021 have given birth to many new companies, many of which are seeing their investments decline on paper after a good number of startups had to reduce their valuations. These companies will not be able to raise new funds, forcing some to close shop and perhaps even sell their current stakes in the companies early.
Even some large, established companies have had to change their fundraising plans to adapt to the changing market this year, as the two San Francisco-based companies show. Founders Fund and based in New York World Tiger announced cuts to their new funds.
Expect more of this. Venture capital seems like a fun business when money is cheap, but when a recalibration occurs, its risks become evident.
—Chris Metinko
Tech layoffs have slowed but are not over
With a at least 300,000 tech workers in the US alone have lost their jobs Since we started tracking tech layoffs in early 2022, we’d like to be able to say that we expect the job cuts to end in 2024. But with startups continuing to close their doors at the end of 2023 and large companies even making job cuts before the holidays, this is not the case. Looks like the layoffs aren’t over yet.
Yes, thankfully we haven’t seen the scale of layoffs we saw in November 2022 and January 2023 – when major tech companies including Amazon, Alphabet, Microsoft, Meta and Salesforce have cut jobs by the tens of thousands – but a quick look at Tracking tech layoffs Crunchbase (and our LinkedIn flow) clearly shows that there is still a lot of pain within the tech workforce. While some of the layoffs are strategic reductions, others are massive cuts across the board.
Add to this a still gloomy outlook for the IPO market in 2024 and difficult fundraising for startups, we expect layoffs to continue to pile up for at least the foreseeable future.
—Marlize van Romburgh
The end of the “everything is broken” story
As we’ve discussed, 2023 has been a year of negative comparisons. Seed investment in almost all sectors, stages and geographies was down significantly from 2022 and even further below the 2021 peak.
In 2024, however, it will be much easier to craft a positive narrative in favor of annual funding. In sectors such as, for example, consumer product e-commerce, where investment has shrunk in recent quarters, it doesn’t take much to announce a strong recovery.
We also expect overall investment in startups to increase in 2024. With tech stocks rising in recent weeks, supported by hopes of Fed rate cuts, we are also likely to finally see a return of some IPOs.
—Joanna Glasner
Don’t expect an IPO boom, though.
We may see a return of some IPOs next year, but don’t expect the new listings market to come roaring back.
That’s the updated outlook we’re hearing from those watching the markets closely, especially given lackluster listing performance in 2023. Klaviyo And Instacartthe only two major venture-backed IPOs since late 2021.
In the current environment, public market investors are more discerning about which companies they want to go public, insiders told us. This is because they are more interested in profitability than in growth at all costs, and they often look for larger, more established companies that can maintain a strong market capitalization.
This means that companies that can delay an IPO can do so until 2025 or later.
Then again, there are currently nearly 1,500 private companies valued at $1 billion or more. The Unicorn Crunchbase board – and they all have to be made public or released at some point.
— Gene Teare
Drawing: Dom Guzman
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