At the close of 2022, forecasts for 2023 in the technology investing realm were marked by expectations of the Federal Reserve taming inflation, a thawing fundraising market, and the onset of a “new normal” era. Machine learning’s integration into daily workflow software for operators was also anticipated. As we now approach the end of 2024, having weathered the second year of the post-pandemic economy, the state of venture capital investing and technology faces a complex landscape with new challenges.
Various factors, including higher interest rates, a demanding market requiring superior product-market fit, and the rapidly evolving state of AI, contribute to the current scenario. The question arises: will the market in 2024 resemble the one we started in 2023? From the sluggish first half of 2023 to the explosive growth of AI in the second half, several predictions offer insights into what lies ahead.
Mergers and acquisitions (M&A) are expected to gain momentum throughout the year, driven by either the anticipation or reality of a rate change, accelerating due to the feared increase in valuations. With an average M&A total of about $49 billion over the last two years, a surge to above $60 billion is forecasted, primarily propelled by AI acquisitions. Private Equity is projected to become a significant buyer of companies experiencing 10-25% growth, similar to its role in 2023.
Following a Q4 2022 marked by a decline in M&A acquisition value comparable to the dot-com bust and Global Financial Crisis, a slight change in the market is anticipated. Increased M&A activity is expected as public technology markets regain strength and valuations rise. Notably, take-privates amounted to $50.2 billion in 2023, with Qualtrics and Coupa leading the list.
AI and data are set to continue dominating the funding landscape, evolving from being a category to becoming the core or a component of every product. Language models like LLMs have already transformed data in various ways, leading to increased demand and significant architectural changes inside companies. As the technology advances, predictions include a rise in new data products and teams.
The introduction of a bitcoin ETF is anticipated to rekindle interest in web3 financing. The aftermath of the crypto winter has driven companies to become revenue-generating, and the forecast suggests the emergence of broadly successful tokens with dividends, likely outside the U.S. ARR-based web3 businesses are also predicted to achieve scale.
Contrary to the expected hangover from the high activity of 2022 in web3, a resurgence is predicted in 2024. This resurgence is attributed to U.S. regulators moving forward with bitcoin ETFs, marking a significant shift for web3 and solidifying the digital assets space as part of traditional finance
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