For those who are new to our annual predictions, welcome to our View from the Field. Each year, we share our top 10 predictions of what will drive technology trends, then we dive deeper into each prediction in subsequent months. You will also find a scorecard for last year, assessing how well our predictions fared.
Article – 01.31.2024
2023 Review and 2024 Outlook
The global backdrop remained complicated in 2023 as geopolitical headwinds dominated the headlines with the war in Ukraine, slowing China growth, and the Israel-Hamas conflict driving uncertainty. On top of this, inflationary pressures, and the Feds' desire to try and orchestrate a soft landing had investors scrambling to try and read through the tea leaves.
However, the US economy and the equity markets, in general, held up surprisingly well. The S&P 500 rose 26.4% (including dividends), marking its biggest rally since 2019. Large-growth stocks led the way with the so-called “Magnificent Seven” contributing to nearly half of the stock market’s gains. Bonds suffered through most of the year with the 10-year Treasury yield rising above the 5% level for the first time in 18 years on concerns of continued rate hikes. However, sentiment shifted in Q4 as investors started pricing in multiple rate cuts in 2024, driving bond yields lower and stocks to record highs.
VC deal activity was down considerably from levels we saw in 2021 and 2022, both by count and capital deployed. However, upon digging in a bit further, quarterly deal counts have stabilized over the past year, which is encouraging and shows innovation is not stopping. We are seeing particular interest not only in AI, but also in areas like healthcare, biotech, and defense. It’s not surprising to anyone that exit activity was pretty much non-existent. But with 51,000 VC-back companies now remaining private, all eyes are on the capital markets. Clearly, there is no shortage of backlog looking to exit. The fundraising environment remained challenged, but not closed completely. There remains a fair amount of dry powder remaining from the large fundraising years of 2022 and 2021.
Given the recent shift in sentiment as inflationary pressures ease and interest rates decline, we remain optimistic that activity will increase in the venture landscape and capital will continue to flow into the sector.
2023 Predictions Scorecard:
| 1 | Tech- based mental health companies expand beyond meditation and transactional applications and those offering clinical based solutions emerge. | NEUTRAL | Lots of new entrants, but not with clinical based solutions as a key driver. |
| 2 | Frontier markets attract a record amount of VC funding | NEUTRAL | Funding existed in these markets, but not exactly a banner year. |
| 3 | Technology advancements in the classroom allow for more personalized learning experiences | NEUTRAL | Major advancements but not to the extent that we would have anticipated. |
| 4 | Google loses dominance in search to Microsoft as ChatGPT-enabled Bing takes market share. | FAIL | Though we are all loving ChatGPT, google still reins supreme. |
| 5 | Robotaxis transition from conceptional to reality in at least 10 cities across the US | PASS | Testing in 8 states, carrying passengers in 4! |
| 6 | Climate Tech dominates the headlines, outpacing the venture industry in attracting dollars and talent | FAIL | Climate tech funding was down ~30% in 2023. |
| 7 | Net unicorn growth will turn negative for the first time | FAIL | Though we hit a 7-year low for new unicorns (71) we retained more unicorns than anticipated. |
| 8 | Venture investors go back to the basics and focus on operational efficiency over growth | PASS | The shift in focus to strong unit economics was all anyone could talk about! |
| 9 | Tech layoffs’ increase and the power struggle continues among employers and employees as popularity in unions rise | NEUTRAL | Tech layoffs continued, but the rise of unions were not at the forefront of headlines. |
| 10 | Infrastructure improvements and additional subsidies drive US electric vehicle sales to account for over 10% of new car sales in the country | NEUTRAL | Close! EVs accounted for 8% of new car sales. |
2024 Predictions:
| 1 | The next battle: AI to combat AI risks. |
| 2 | Launch of crypto ETFs will drive resurgence of interest in blockchain technology. |
| 3 | More companies will begin to do their R & D in space. Pharmaceuticals will lead the charge! |
| 4 | Enterprises will finally begin to extract exponential value from all of the data that they own by using gen AI. |
| 5 | Adoption and usage of AR/VR products finally goes mainstream with the launch of Apple Vision Pro. |
| 6 | SaaS companies will shift their archaic pricing models from per-seat to usage based. |
| 7 | Robo-advisors will make a comeback on steroids! Personal finance management solutions will cater to a more diverse audience and gain popularity again as FinTech solutions are armed with AI models. |
| 8 | Digital wallets will expand functionality beyond payments into an information repository for things such as identity and health insurance. |
| 9 | Robots become embedded into toys and become your child’s most loved, personalized companion. |
| 10 | Virtual reality will offer new approaches to treating mental health conditions at scale. |
Thank you again for your continued support. Wishing everyone a safe and healthy 2024.
Please don’t hesitate to reach out if you would like to discuss anything in further detail or if we can be helpful in any way.
All the best,
John N. Ailanjian, CFA
Managing Partner
Sign up for our weekly newsletter and track the most impactful micro and macroeconomic news stories of the week.