In January, I made five predictions about the startup/tech space in 2023 (with an Australian perspective). As the year comes to an end, it’s time to review those predictions.
1. Fundraising will be hard – correct
2. “Eco Growth” mode will be normalised – correct
3. Generational defining companies will be started – partially correct
4. Crypto will make a comeback with innovation – partially correct
5. Tech M&A / consolidation will increase – partially correct
1. Fundraising will be hard
As I noted in January, this wasn’t a particularly bold prediction. The full year data is not available yet, but as at the end of the Q3 (from our friends at Cut Through Ventures), $2.3bn had been raised in 2023, down 42% compared to the same period in 2022. The report noted a somewhat positive tone had returned to the market in Q4 but it is likely we will see a significantly lower amount (by number and dollars) of capital raised in the coming quarters vs. their 2021 and 2022 equivalents.
2. “Eco Growth” mode will be normalised
While the term hasn’t been normalised as I had predicted (I guess I need to push harder on social media), the “action” of conserving capital aiming to reach profitability certainly has been. This is unsurprising given point 1 above as less capital is being invested.
A point that resonated with me during the year from an investor in the space “In 2021, 50% of companies trying to raise were successful because of the abundance of the capital available. We’ve now returned to more a historically normal level of companies raising with 10-15% of companies being able to raise. Hence 35-40% of companies that had raised capital can’t…they are seeking to become profitable”.
3. Generational defining companies will be started
Partially correct because technically OpenAi wasn’t started in 2023. However, it certainly made an impact on the market in 2023 and started a wave of AI-focussed R&D, investment and enthusiasm. In the coming years we will see which companies (e.g. Mistral AI) will make a substantial and lasting impact on the tech space and beyond.
4. Crypto will make a comeback with innovation
Partially correct because crypto has made a comeback but I don’t believe this has been driven by any sort of innovation.
Bitcoin would have been a great investment at the start of this year.
5. Tech M&A / consolidation will increase
We don’t have data for the full year yet but the globally technology M&A was down 55% in first nine months of 2023 compared to the same period in 2022. However, deal volume was up over 1% - a two year high for the number of deals. In short, more smaller deals. Likely this is as smaller companies are seeking an exit as they can’t raise capital on favourable terms. The regulatory environment must be noted here as there is more scrutiny on large scale tech M&A (e.g. Adobe / Figma).