2021 was a banner year for the enterprise application, infrastructure, and tools spaces. We're hopeful that 2022 will have even more exciting things in store.
State of the Market
As the Fed raises interest rates and tightens the money supply throughout the year, the markets will be even more volatile than in 2021. There will be 3 - 4 interest rates this year. However, given the relatively solid state of the economy and the increasing reliance of Enterprises on technology, our investment areas will continue to thrive.
Valuations in venture will begin to stabilize and start their slight descent towards normalcy, at least at the later stage. Public technology company's stock will revert to the mean, and high growth SaaS stocks will likely be 20%+ of their peaks. Two of the three - Tiger, Insight, or Softbank will stop being as aggressive as they were in 2020 and 2021. As a case in point, CBInsights reports that Tiger made 328 investments in 2021, and 107 in Q4’21 alone, so it is unlikely that they keep up this frenetic pace.
SaaS and cloud-born organizations paved the way for fast cycles to production and scaling solutions rapidly, as methodologies and solutions trickled down from those organizations to the Enterprise, a large discrepancy between solutions that fit those developers-savvy organizations and the ability to elegantly deploy and manage those solutions inside the broader Enterprise base, where the DevOps and SecOps skill-gaps are more evident. Automation is required at every level to help ease the work of developers and the supporting functions. Budgets will only be allocated to solutions that can reduce the ratio of developers to supporting functions, with an ever-increasing preference for open source delivery. No-code/low-code workflows are table-stakes, emulating intelligence/skilled work, and will be rewarded.
Aggressive "cloudifications" will happen as corporations of all sizes race to the cloud. COVID 19 accelerated this process, and we feel that this will continue in 2022. The Big 3 (AWS, Axure and GCP) will be the primary beneficiaries of this trend - as well as startups focused on hybrid clouds, data management, and security.
Crypto and Blockchain
These technologies will continue to come into the mainstream, with major growth following Web3, although many platforms may consolidate as things continue. It's possible that the Central Bank of a country with a large economy will issue digital currency, or a major e-commerce company will start accepting cryptocurrencies.
Cybersecurity will continue to be a major area of both innovation and investment. As Enterprises undergo digital transformation, more of their assets become targets for criminals. As a result, better technology will be needed to fight them.
As prevention solutions have proliferated, the focus of the market will likely move rapidly towards detection and remediation/resolution. CSO’s will ask for more automation as they seek to identify and resolve attacks.
The final point on this is that the world will awaken to potential Quantum technology encroaching upon the traditional 128-bit RSA Security paradigm that the industry is based on.
As Data moves closer to the application, more focus will be on finding ways to close and secure this increasingly important attack vector. With the growth in usage of data platforms (data lakes, data Warehouses, lake warehouses, and all the accompanying tooling involved), a new generation of Data security products is emerging, with an accompanying IT/Platform budget to help secure those. While Generation 1 (database security) and Generation 2 (protection of data-in-motion/transition-at-rest via enclaves/encryption) disappointed as far as it goes for standalone startups, Generation 3 will have a large cohort of standalone startups, of which a new security incumbent will emerge.
As the year progresses, with no end to the pandemic in sight, many more organizations will give up their plans to return to the office completely. In addition to those that have already done so, companies of all sizes will opt to invest in more robust enterprise tools to keep their remote teams working efficiently across multiple geographies and time zones. Most, however, will settle on the hybrid work model. Employees will be allowed to choose what work style fits them best and work either from home or from the office several times per week.
The industry will move towards solutions that are most effective for efficient collaboration which will likely be a combination of enterprise AR/VR tools with traditional collaboration tools (email/Zoom/Slack) and so on.
Much had been said about identity being the new perimeter. Protecting the organization is now about the users and services (SaaS, third-party, and cloud) an organization consumes.
That said, organizations still struggle with identity responsibility and vary in implementation. Sometimes contradicting decisions and approaches are selected at a departmental, developer, IT, and security level. The leading identity platforms, Okta and Microsoft AD, have yet to solve the inherent risk in using varying platforms and have a bias towards creating solutions that migrate towards their ecosystem. Identity would need the tools to enable access and permission grants to cater to stakeholders (developers, IT, Security), reducing risks and helping mitigate and respond to identity security events.
The Metaverse will start taking shape as new devices, new use cases, and new applications are created. Apple will enter the market, Meta (Facebook) will introduce new products, Google and Microsoft will race to catch up. Companies such as Roblox and Disney will start staking their claims as well as other platforms such as Zoom and Teams.
Service-Mesh and Application Networking
Service-Mesh will continue to be hard to implement and, in some cases, not the best implementation (as the centralized API gateway approach still exists). However, it's also becoming apparent that Istio will not be the winner-takes-all in a Service Mesh world (Consul on the rise) and that multi-mesh is becoming a requirement. Moreover, tools like sidecarless Cilium for ServiceMesh can help make the most out of Mesh.
The hardware and software infrastructure that allows Quantum Computing to solve real problems at scale does not exist yet. We believe the space will continue to progress in 2022, with top VCs starting to make bigger bets by the end of the year. We expect to hear some rumblings about potential use cases (cyber security mentioned above, protein synthesis, and super optimal speed for financial applications).
We're looking forward to all of the exciting developments and opportunities that 2022 has in store.