Global turns local
In recent years and now more than ever, the rush for sovereignty has become increasingly evident, with globalization shifting to the background. This change began in the hardware realm, notably with manufacturing chips, and is now extending its grip onto software. Three distinctive markets are solidifying their strength - US, Europe and China -, in part driven by regulatory measures aimed at safeguarding local and regional players.
These regulations are meant to guard domestic entities against the dominance of global companies, while simultaneously ensuring individual markets become increasingly independent. As such, the era of ever-present global software companies and apps seems to slowly dissipate and paves the way for a re-emergence of local solutions.
We see a growing demand for cybersecurity solutions amid ongoing geopolitical conflicts. Attacks on infrastructure, private companies and government IT systems will continue, and will increase, as a consequence of escalating conflicts. Many of these private and public entities are not prepared to withstand such situations. We anticipate interruptions of business operations and, with it, an uptick in data theft.
The AI Bubble
Meanwhile, AI will evolve into a new type of platform, with robust ecosystems and app-store-like dynamics. 2023 has been a late cycle bubble for AI, which indicates that 2024 will bring with itself a normalization in this space. We believe there will be enough room for AI application companies with very limited defensibility (e.g. building simple wrappers for LLMs) that reach a seven digit ARR thanks to significant market curiosity and demand. However, those are not the businesses that will be VC backed. In the AI space, companies focused on foundation models and hyperscalers will be taking a major market share, potentially leading to large M&As with entities with unique tech and/or data sets.
Consolidation of the startup sector
2024 will bring clarity on who is here to stay. Everybody has been working hard in the last 24 months to own their destiny. In the next 12 months we will have a clear picture of who has been able to thrive, who has embarked on a profitability journey and who has managed to join forces with somebody else. The rest will have closed down - most notably those that did not find a product market fit.
We also expect more consolidation on the funding side. While OpenView and Stride have been among the first ones to announce that they discontinue the operations, we believe others will follow suit aiding the consolidation and adjustment of the supply and demand in the market.
In-person collaboration on rise
Interestingly, while in 2023 we have seen primarily corporates demanding return to the office, we expect new ventures to start with an on-site mindset (once again). Nevertheless, entrepreneurs have learned that talent has no borders and specific hires will be done remotely, especially in regions like Central Europe, where the commercial talent is still limited.
With uncertainty looming all around us, our predictions for 2024 are rather a realistic account of expected outcomes. And to conclude, we’ll recount a fitting statement from last year : “It’s time to buckle up, hold on to the steering wheel, and have a game plan ready.”
Curious if our predictions will hold true?
Check out our 2023 predictions and see how we did there!