The Book of 2024: Consolidation, death and resurgence
The Book of 2024: Consolidation, death and resurgence
An homage to Ancient Egyptian mythology
It’s that time of the year again. Abundant with festivities and predictions about the year to come. 2023 was one of these hard yet good years - at least to me personally. As I peek into my Book of Thoth, I see a few patterns shaping up for startup-land in 2024. These are consolidation, death and resurgence.
Consolidation
The era of ZIRP has ushered in far too many startups. Some will die, some will thrive and some will be ripe for the picking.
One significant area expected to see consolidation is the cybersecurity market. This sector has already experienced a spate of acquisitions, as evidenced by major deals involving prominent companies like Rubrik, Tenable, CrowdStrike, Check Point, and Palo Alto Networks. These acquisitions have ranged in value from hundreds of millions to over a billion dollars. I expect this trend to continue and see it beneficial for both acquirer and acquired.
“The security market is forever consolidating” Unknown source.
Another category which I posit will be highly accretive is the data landscape. Just witness the chart below, which admittedly covers data, AI + ML, to appreciate the sheer number of companies in this category. It’s just simply unsustainable to have that many logos all chasing the same dollars.
Overall my crystal ball shows strong M&A activity in cybersecurity, data, AI and machine learning, and potentially other high-growth technology sectors. The focus will be on acquiring startups that offer innovative technologies, have a strong market presence, or can provide strategic advantages to larger, more established companies looking to enhance their product offerings and market competitiveness.
Death
The year 2023 marked a turbulent epoch in the startup-land, with a staggering 3,200 ventures shutting down. The latest data from Carta shows that this trend remains unabated through Q3 as well. It’s worth noting that some of the companies that shutdown were late stage companies that raised significant amounts of capital: Convoy alone raised ~$1B. I expect many more to fail next year, especially within the late stage startup segment.
One only needs to look at this (outdated) list of unicorns to wonder how many of these will exist in a few years’ time. Unless of course you believe that these ~1200 or so startups have really created $2T of value.
I predict more death, especially within the late stage startups. Companies that do not have a sustainable business model and raised at absurd valuations will have their day of reckoning.
Resurgence
2024 won’t be all doom and gloom. In fact I predict it will usher in a resurgence within the startup ecosystem. Consolidation and death in a sense are necessary to make way for stronger and healthier companies to emerge.
Since this is after all the Year of AI, I asked my friendly AI assistant to predict which of the top 100 companies from the previous list might IPO in 2024. There are a few bemusing choices in the list below. Further evidence that we’re still ways out from true AGI :)
Based on industry trends, market presence, and growth trajectories, here are 20 companies from the provided list that could be strong candidates for an IPO in 2024.
Stripe: A major player in digital payments, known for its robust payment processing platform.
Databricks: Specializing in big data analytics, it's well-positioned in a high-growth industry.
Epic Games: Renowned in the gaming industry, particularly for Fortnite and the Unreal Engine.
Chime: A leading fintech company in the digital banking space, experiencing rapid growth.
Miro: An online collaborative whiteboard platform that has gained traction in remote work environments.
Ripple: Plays a significant role in cryptocurrency and blockchain, especially in payment solutions.
Discord: Popular among communities for communication, especially in gaming.
Plaid:Provides important technology in financial services, connecting bank accounts to fintech apps.
OpenSea: As a leader in the NFT marketplace, it's at the forefront of the digital assets trend.
Grammarly: Its AI-driven writing assistant tool has a wide user base and application.
Airtable: A cloud collaboration service gaining popularity for its flexibility and user-friendliness.
Bolt: E-commerce checkout software that's been gaining significant attention.
reddit:** One of the most popular social media platforms with a vast and active user community.
Gusto: Provides cloud-based payroll and HR management solutions to businesses.
ServiceTitan: Offers a software platform for home service businesses, a sector with growing demand.
Chainalysis: Known for blockchain analysis, crucial in the evolving world of cryptocurrency.
Flexport: A freight forwarding and customs brokerage company that's revolutionizing logistics.
Automattic: The company behind WordPress.com, which powers a large portion of the internet.
Netskope: A leader in cloud security, a sector that's becoming increasingly crucial.
Snyk: Specializes in digital security, a field of growing importance and market demand.
Source: ChatGPT prompted by the author
Irrespective of the accuracy of my AI assistant, which in fairness even humans suck at making predictions, 2024 will see the thawing of the IPO window and the emergence of a batch of healthier and stronger startups. The harsh medicine of cost optimizations and focusing on building a long-term sustainable investment will pay dividends for the few that make it. For those who don’t Anubis awaits…