Today: Jun 14, 2024

2024: Tech flight, defense-tech revival and AI victors, VCs forecast.

6 months ago
  • Top venture capitalists (VCs) predict 2024 to be a critical investing year, anticipating AI startups will face increased scrutiny, more startup shutdowns, a potential renaissance in defense technology, and the dominance of firms utilizing AI.
  • Funds investing in high-grade startups in 2024 are predicted to realize impressive returns years later, contributing to what could be one of the best “vintages” or investing years to date.
  • The defence-tech industry and gaming industry are expected to experience a surge and resurgence, respectively, whereas the Initial Public Offering (IPO) market is anticipated to remain slow until 2025.

According to venture capitalists from over 30 firms—including Accel, CapitalG, General Catalyst, Insight Partners, and Techstars—2024 has the potential to be a significant investing year. They predict an influx of startup closures due to inefficient business models and a decrease in venture funds. With AI startups becoming increasingly prevalent following the release of OpenAI’s ChatGPT to the public in 2023, investors will begin to analyze these companies’ tangible use cases and real revenue generation more closely.

Apart from AI, the VCs also foresee the emergence of a defense-tech hype cycle in 2024, which will become a notable competitor to the AI technology buzz. Over the past three years, VCs have invested about $100 billion in defense tech startups, forecasting its huge potential for disruption.

Despite the anticipated startup failures across sectors and stages, the investors maintain optimism as they expect larger companies to leverage their abundant resources and acquire startups struggling financially. Simultaneously, the ‘flight to quality’ is expected to continue, with rounds of investment concentrated into a subset of high-quality startups. Furthermore, investors predict a resurgence in the gaming industry in 2024, with technological advancements in AI enabling new gameplay experiences and attracting significant investments.

As the IPO market remained largely inactive for nearly two years, VCs suggest that the pipeline to the public markets may only reopen in 2025. Meanwhile, they also foresee the funding drought continuing into 2024 but expect the process to become more tempered, making it harder for startups to secure funding.

However, amid the shifts in the tech investing landscape, venture capitalists predict 2024 to be a standout investment year. These VCs believe that despite the slowing investment pace, the high-grade startups that do manage to secure funding will significantly boost returns for their investors in the years to come.