Between the rapid ascendance of AI and the often dramatic downfall of startups large and small, 2023 was an action-packed year for tech and venture.
In many ways, we expect 2024 to be the year when things settle down a bit. The buzz around AI will likely wane, but so, hopefully, will layoffs. The IPO markets may make a tepid comeback and we expect that after nearly two years of falling funding, venture investment will level off.
Here’s a look at five trends Crunchbase News’ editors and reporters are watching in the new year.
The AI buzz wears off
Perhaps the most interesting thing to watch in 2024 will be what happens to AI and more specifically, AI investment.
While $100 million-plus rounds were the norm this year, many investors are at least talking of a potential pullback in the market as valuations have continued to skyrocket and many question how many winners there will be in the generative AI market.
Sure, the OpenAIs and Anthropics likely will continue to be able to get nearly any valuations they want, but FOMO seems to be wearing off for investors in the space and many think other changes in the industry could affect investor sentiment.
Even as 2023 wore on, many investors seemed less and less interested in marketing or sales platforms that just wrapped AI around their platform.
Some VCs expect the legal and regulatory dilemmas AI companies could face in both the U.S. and overseas to lead to a slowdown in the flood of AI funding startups saw during 2023.
Others point to the fact that when the mobile revolution occurred more than a decade ago, the biggest winners when it came to the foundational infrastructure layer ended up being well-established tech companies. Sure, there were startup winners — like Twilio — but many Big Tech companies benefited the most from the last wave.
Of course, those Big Tech firms are already playing a large role in AI, investing billions of dollars in a variety of AI startups. The likes of Nvidia, Salesforce, Microsoft, and Google have been wildly active and that could continue to propel AI funding into the new year.
It is important to remember AI is expensive. Startups need data, computing power, talent and a variety of other resources — all things Big Tech companies can provide.
If they stop and VCs pull back on cash, 2024 could get cold for many hot AI startups.
— Chris Metinko
Venture fund slowdown
While many expect to see an uptick in startups shuttering due to changes in the funding landscape (see Convoy), what about VC firms themselves?
The OpenView news seemed to rock the venture world a little when it broke in December, and its uncertain future is likely to be watched by many.
However, folks in the VC world expect similar types of headlines in 2024.
The salad days of 2020 and 2021 birthed a lot of new firms, many of which are seeing their investments down on paper after a good number of startups have had to slash valuations. These firms will not be able to raise new funds, forcing some to close up shop and possibly even sell their current stakes in companies early.
Even some large, well-established firms had to change fundraising plans to adjust to the evolving market this year, as both San Francisco-based Founders Fund and New York-based Tiger Global announced cuts to their new funds.
Expect more of that. Venture capital seems like a fun business when money is cheap, but when a recalibration happens, its risks become apparent.
— Chris Metinko
Tech layoffs have slowed but aren’t over
With at least 300,000 tech workers in the U.S. alone who’ve lost their jobs since we started tracking tech layoffs in early 2022, we wish we could say we’re expecting the job cuts to end in 2024. But with startups continuing to shut down in late 2023 and large companies even making cuts leading into the holidays, it doesn’t look like layoffs are ending just yet.
Yes, we fortunately haven’t seen the scale of layoffs we saw in November 2022 and January 2023 — when large tech companies including Amazon, Alphabet, Microsoft, Meta and Salesforce cut jobs by the tens of thousands — but a quick look at The Crunchbase Tech Layoffs Tracker (and our LinkedIn feeds) makes it clear there’s still plenty of pain in the tech workforce. While some of the layoffs are strategic trims, others are massive cuts across the board.
Couple that with a still lackluster outlook for the 2024 IPO market and a difficult fundraising for startups, and we expect layoffs to continue to pile up at least for the foreseeable future.
— Marlize van Romburgh
The end of the ‘everything is down’ narrative
As we’ve discussed, 2023 was a year of negative comps. Startup investment across pretty much every sector, stage and geography was down considerably from 2022 and even further below the 2021 peak.
In 2024, however, it’ll be much easier to craft a positive narrative for year-over-year funding. In sectors like, say, consumer products e-commerce, where investment has shriveled in recent quarters, it won’t take much to proclaim a sharp upturn.
We’re also hopeful that overall startup investment will tick higher in 2024. With tech stocks up in recent weeks, buoyed by hopes of Fed rate cuts, we’re also likely to see a return, finally, of some IPOs.
— Joanna Glasner
Don’t expect an IPO boom, though
We may see a return for some IPOs next year, but don’t expect the market for new listings to come roaring back.
That’s the updated outlook we’re hearing from those who watch the markets closely, especially given the tepid performances of 2023 listings Klaviyo and Instacart, the only two major venture-backed IPOs since late 2021.
In the current environment, public-market investors are pickier about which companies they want to see IPO, insiders have told us. Namely, they’re more interested in profitability than growth at all costs, and they’re often looking for larger, more established companies that can sustain a robust market capitalization.
That means companies that can delay an IPO may do so until 2025 or later.
Then again, there are close to 1,500 private companies with valuations of $1 billion or more currently on The Crunchbase Unicorn Board — and they all have to go public or otherwise exit at some time.
— Gené Teare