2023 was an action-packed year for technology and ventures, marked by the rapid rise of AI and the often dramatic downfall of startups large and small.
In many ways, 2024 is expected to be the year when things calm down a bit. The buzz around AI will likely wane, but hopefully so will the layoffs. We expect the IPO market to make a gradual comeback, with venture investment flattening out after nearly two years of declining funding.
Here are five trends that Crunchbase News editors and reporters are watching for in the new year.
The topic of AI will disappear
Perhaps the most interesting thing to watch in 2024 is what will happen to AI, and more specifically AI investments.
Rounds of $100 million or more have been common this year, but with valuations continuing to soar and many wondering how many winners there are in the generative AI market, many investors are at least We’re talking about the possibility of a market pullback.
Certainly, OpenAI and Anthropics will likely continue to be able to get almost any valuation they want, but FOMO seems to be fading for investors in this space, and other changes in the industry are causing investors to Many believe that it can have psychological effects.
As 2023 approached, many investors seemed increasingly uninterested in marketing and sales platforms that simply incorporated AI into their platforms.
Some venture capitalists believe the flood of AI funding for startups seen in 2023 will slow due to legal and regulatory dilemmas that AI companies may face both in the U.S. and abroad. Expect.
Some point to the fact that when the mobile revolution took place more than a decade ago, it was the established technology companies that ended up being the biggest winners when it came to the underlying infrastructure layer. Sure, there were startup winners like Twilio, but it was many big tech companies that benefited most from the last wave.
Of course, these big tech companies are already playing a big role in the AI space, investing billions of dollars in various AI startups. Nvidia, Salesforce 1, Microsoft, Google, and others are very active and will likely continue to push AI funding well 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 stand still and VCs pull their funding, 2024 could be cold for many hot AI startups.
— Chris Metinko
Venture fund slump
Many predict that due to changes in the funding environment, more startups will go bankrupt (see Convoy), but what about the VC firms themselves?
OpenView’s news seemed to shake up the venture world a bit when it was announced in December, and its uncertain future likely has many eyes on it.
But those in the venture capital world expect to see similar headlines in 2024.
The Salad Era of 2020 and 2021 saw the birth of many new companies, many of which were forced to reduce their valuations, reducing the value of their investments on their books. These companies will be unable to raise new capital, and some will be forced to close shop and even sell their current company shares early.
Even some established, large companies are changing their fundraising plans to adapt to this year’s market evolution, as San Francisco-based Founders Fund and New York-based Tiger Global both announced cuts to new funds. was forced to.
Please expect more. Venture capital seems like a fun business when money is cheap, but its risks become apparent when a realignment occurs.
— Chris Metinko
Tech layoffs have slowed, but are not over yet
At least 300,000 tech workers have lost their jobs in the U.S. alone since we started tracking tech layoffs in early 2022, and we’d expect the layoffs to end in 2024. However, as startups continue to close, large companies are also cutting staff in preparation for the holiday season in the second half of 2023, but it appears that the layoffs are not over yet.
Yes, fortunately, headcounts on the scale we saw in November 2022 and January 2023, when major technology companies like Amazon, Alphabet, Microsoft, Meta, and Salesforce cut tens of thousands of jobs. Although we haven’t seen any reductions, let’s take a quick look at The Crunchbase. Looking at the Tech Layoffs Tracker (and LinkedIn feed), it’s clear that there is still a lot of pain in the tech workforce. Some layoffs are strategic layoffs, while others are deep layoffs across the board.
In addition, the outlook for the IPO market in 2024 remains lackluster, startups will have difficulty raising capital, and layoffs are expected to continue, at least for the time being.
— Marlies van Romberg
The end of the story where “everything goes wrong”
As we have explained, 2023 was a year of negative returns. Startup investment across almost all sectors, stages, and regions declined significantly from 2022, falling further below its 2021 peak.
But in 2024, it will be much easier to craft a positive story in terms of year-over-year funding. For example, sectors such as e-commerce for consumer goods have seen investment decline in recent quarters, but it won’t be long before they declare a sharp recovery.
We also expect overall startup investment to increase in 2024. Tech stocks have rallied in recent weeks on expectations for Fed interest rate cuts, which could eventually bring back some IPOs.
— Joanna Glasner
However, we cannot expect an IPO boom.
While some IPOs may return next year, we don’t expect the new listing market to pick up steam again.
This is the latest we’ve heard from those closely watching the market, especially given the poor performance of the only two major venture-backed IPOs since late 2021, 2023-listed Klaviyo and Instacart. It’s an outlook.
In the current environment, public market investors are becoming more selective about which companies they want to IPO, insiders said. That is, they value profitability over growth at all costs, and often seek out larger, more established companies that can maintain solid market capitalizations.
That means companies that can postpone their IPOs may do so until 2025 or later.
Again, The Crunchbase Unicorn Board currently has nearly 1,500 privately held companies valued at $1 billion or more, all of which need to go public or exit.
— Gene Teare
Illustration: Dom Guzman
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