13 December 2023

Cervin 2024 Predictions

We are pleased to share our 2024 predictions focused on macro economic and enterprise tech trends.

This time every year, VCs and business leaders reflect on the past year and plan for the new year. Our team sat down and discussed our predictions for the next 12 months to inform our strategy and plan for 2024. Needless to say, 2023 was a tumultuous year and 2024 looks to be an exciting year that will require adaptability and flexibility.


Before we made our 2024 predictions, we revisited and graded ourselves on our 2023 predictions, see how we did on our predictions made in last year’s post. The Cervin team is pleased to share our 2024 predictions focused on macro economic and enterprise tech trends that impact us. 

Macroeconomic Conditions

While there are still various pockets of weakness in macroeconomic conditions, the technology industry has made a significant comeback. We expect market conditions to continue to improve in 2024 as the cycle of Fed tightening turns. The underlying assumption is that the Middle-East and the Russia-Ukraine conflicts are resolved or contained.  


The enterprise IT industry remains healthy and is expected to grow. Gartner expects the entire IT spending budget to increase by 4.7% to $5T (see chart below).




In terms of sectors, IT Services and Communication Services will likely be the biggest areas of spending (see chart below). The enterprise software sector, coincidentally, is expected to grow at exactly the same rate as the entire budget - 4.7%.


State of the VC Market

Despite the hand-wringing in 2023 about venture assets falling out of favor with LPs, we expect US VC funding will go back to pre pandemic levels (~$150B in the US) in 2024. Global trends will follow the US. The venture funding environment will remain strong at the seed stage, but companies raising Series A’s and later will continue to be scrutinized more closely, with continued weakness in Series C and Series D, primarily due to differences in valuation expectations between entrepreneurs and investors. Entrepreneurs will expect valuations much higher than public market multiples justify, while investors will look for guidance at public market multiples. Startups will struggle with balanced growth. Companies will begin to invest in longer-term initiatives such as brand, awareness, events and a high-quality, end-to-end customer experience. Many companies will learn that they cut too deep in certain areas, and 2024 will see heavy investments to rebalance go-to-market motion for B2B startups.


We expect the IPO market to open up in the second half of the year, which will allow traditional growth-stage investing to slowly come back. The chart below shows the Enterprise Tech companies in the IPO pipeline for 2024.  



The public market shifted from valuing absolute growth, to valuing profitability, to valuing efficient growth - all this happened in less than 12 months. While it seems, capital efficient growth and models such as the Rule of 40 would drive 2024 operating plans, we expect "operator’s dilemma" of balancing growth vs profitability. There will be a period of time when startups will be operating in the dark with demand and valuation metrics not being very clear. We will see targeted areas where investors will push for growth over profitability as the trend line for interest rates reverses and rates start to come down. Animal spirits may get unleashed but this time around, having been bitten recently, companies will be more careful with use of capital. They still have to grow into the high valuations of 2021-22. 


We predict that consolidation in the VC industry will continue. Many funds, whether those who specialized in frothy market segments, as well as ones who haven’t adjusted to a more challenging investment environment, will struggle with managing LPs expectations and with maintaining a steadfast partnership vision and path forward. The glamour of entrepreneurship and VC will wear off. The tourist VCs, the momentum VCs, and executives that left good jobs to start companies for the wrong reasons will start to depart the industry. In the light of a longer J-curve, fewer exits through IPOs or M&A, LP allocations to the VC industry will trend back to pre Covid levels. Many firms will be unable to raise their next funds or raise smaller funds. As the threshold for going public increases, entrepreneurs and VCs with patience and perseverance will succeed. The availability of talent and the scale that AI provides will drive a rise in  "foundry-model" and co-creation investments in venture capital. The seed-Bridge/Seed+ ecosystem will have fewer players as fewer companies will be  successful in graduating to Series A and B. Those rounds will have higher thresholds as exit options stay limited. Stronger boards, governance and terms will be back in vogue. 


On a geographic note, we expect that there will be increased investment activity in LatAm as the next generation has seen the likes of Rappi and Nubank pave the way.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Maecenas a fringilla tortor, et porttitor tort. Vestibulum non nisi interdum, blandit dolor in. laoreet magna. Suspendisse sit amet elit sit amet nisl. semper imperdiet. Suspendisse

Investment Areas of Interest


There will be continued strength in opportunities for new cyber-security companies as customers will look for best-of-breed solutions rather than only focusing on incumbents. Tailwinds will continue to carry forward segments such as cloud security and identity-centricity. Some overinvested segments will take time to get resolved, but vendors are already struggling to cling to differentiated motions and technology. We predict many vendors in the supply chain security space will reach the end of the cycle, all while a new hype cycle will make security for AI workloads, an intensely contested part of the market. 

We’ll also see the majority of vendors introduce chat-based interfaces integrated into solutions, as well as hyper automation as it relates to SOC workflows (Gen-AI based NG SOAR), AppSec workflows, Gen-AI centric pen-testing and red-teaming and asset discovery.  


Is this the year the edge finally lives up to the promise? Not fully, but as more companies lead by example of moving off the cloud and seek use-cases related to hyper-locality and data proximity to the source, we suspect that the move to the cloud edge will again be a topic of discussion.

Over the last few years, and well into the future, we see more data locality as well as global-scale distributed applications which require edge node presence. We’ll continue to see more infrastructure tooling and solutions/flavors servicing the edge. Case-in-point, co-lo data centers, distributed edge compute, CDNs and databases are all experiencing non-trivial growth in the last few years.

We will see various database companies struggle to raise capital, as they will be unable to rise above the value-chain/ecosystem created by the large platforms such as Databricks, Microsoft, and Snowflake. Casualties may include well-funded startups, which were considered industry darlings not so long ago.  

As Gen-AI use-cases continue to sprawl, we’ll see a mix of approaches by customers to the partition between modern data stack and ML/AI workloads (inclusive of all the respective tooling) versus newer Gen-AI/LLM workloads. Some companies will look to walk away from the overly complex, middleware heavy modern data stack. Many will learn that the blackbox approach of LLM based workloads, may not be for every enterprise, and that the fast growing toolchain being built for the LLM stack, still hasn’t caught up with the richness of more traditional ML. Companies will struggle to split budgets between those two siloed environments.       


The over-hyped investment environment for early-stage AI companies will taper off in the second half of 2024. There will be a wave of pessimism about AI as early investments fail to deliver. However, we feel strongly that AI will continue to dominate in the long-term. It is just that, as usual, investors got too excited too early in the cycle. While some money will be made in AI investments made in 2024 - but more will be lost as large incumbents continue to win with significant Capex and R&D budgets.

The first wave of Enterprise AI applications is going to come out in the first months of 2024. They will be underwhelming and uninspiring, as enterprises will struggle to deliver a magical experience and will primarily hone in on GPT interfaces, querying and simple task fulfillment.

Enterprise sales and marketing productivity from AI will slow as companies recognize they have competing data silos and too many point-solution AI tools in various business functions. New startups focused on the AI coordination layer or as an Enterprise OS will emerge to try and unlock the promise of AI across the organization.

Customers will continue to embrace GPU clouds, as they will continue to see challenges related to securing GPU resources in the cloud. Even though GPU cloud providers are a relatively new phenomenon, we  will see consolidation in the space as the current investing environment will challenge the equipment and capex intensive model for these cloud providers. Deep pocketed cloud service providers (mainly tier-2) may even aggressively move to tuck in some of the GPU cloud vendors to expand and service this space.

Large enterprises will invest heavily in the use of LLMs while ensuring their own data is kept proprietary. This will lead to significant investments in RAG (retrieval augmented generation) frameworks for retrieving facts from an external knowledge base to ground LLMs on the most accurate, up-to-date information and to give users insight into LLMs' generative process. AI will provide leverage to human capital, not a replacement. Companies that successfully use AI will identify how technology can supercharge their employees. 

We will likely see a big increase in consulting spend to help enterprises (medium to large) to leverage AI, not just as a competitive advantage but also to improve productivity and margin profile.

With its continued expansion, AI will come under increased regulation in 2024. 

Supply Chain Technology

Having learned their post-COVID lesson, we expect to see supply chain companies secure more sales contracts as interest rates decrease in 2024, the economy picks up, and there is more pressure on companies to ensure goods are delivered as efficiently as possible. This will also spur supply chain companies to dribble into fintech and start to capture a larger percentage of each dollar flowing through their systems.  

MarTech Solutions

Enterprise spending and usage of MarTech solutions will be a Tale of Two Cities:

1. Companies will tamper spending in the first half of the year due to the continued possibility of a recession or 
2. Companies who have not prepared for events such as the phase out of 3rd party cookies in the 2nd half of 2024 or Google/Yahoo’s crack down on bulk email, will invest heavily as they try to grow solutions. 

Either way, the proliferation of solutions in the last 10 years will result in the very largest or most innovative solutions grabbing the majority of revenue, and leaving multitudes of solutions with little revenue to try and get to break even - or make themselves attractive as acquisition targets.

We're looking forward to exciting developments and opportunities that 2024 has in store.