#035 Investment Trends for 2024

• The year 2023 in the VC world was the year of caution. With sluggish VC deals, fundraising, and IPO figures. The year saw half of the deal activity, in comparison to 2022, both in terms of deal value and number, and 30% in comparison to record highs of 2021

• While this new year doesn’t suggest a return to the record-breaking days of 2021, there are positive signs that venture capital activity is modestly picking up. Notable quarter-over-quarter improvements in fundraising, deal volume, and valuations appear to be ahead, indicating a shift in venture capital trends specially in India

Here are some of the top VC investment trends to keep an eye on in 2024, that will fetch investing dollars on the back of innovation with sustainable business models around them 

1. AI and GenAI use-cases become more real

• The venture capital world is buzzing with excitement as AI startups take center stage. We opened 2023 with an enormous OpenAI deal clocking in at $10bn

• This buzz shows no sign of stopping in 2024, and startups are establishing use cases to harness data, automation, and machine learning to solve complex problems. Infact, while we have seen GenAI use-cases for ChatGPT, year 2024 will see an emergence of use-cases particularly for enterprises, whether it’s healthcare, finance, autonomous vehicles, or customer service.

• Some of the enterprises pioneering in integrating GenAI based use-cases are the likes of –

a) Volkwagen integrating ChatGPT into its cars will be able to have actual back-and-forth dialogue conversations by the middle of the year

b) Meta – is launching GenAI tools to allow companies to automate the creation of multiple versions of adverts featuring different text and images aimed at different audiences. This may eventually feed into additional advertising revenues for Meta.

c) Since announcing a partnership with ChatGPT creator OpenAI earlier this year, Microsoft has been deploying the Copilot generative AI (GenAI) assistant across its suite of Microsoft 365 business productivity and collaboration apps

• McKinsey in their report on ‘The economic potential of generative AI’, few illustrative sectors and their use-cases along with their value accretion through GenAI deployment  

We expect India to innovate and bring more AI and GenAI use-cases that supercharge enterprises

2. Web 3.0 starts getting closer

• Our world today stands at the threshold of a technological revolution that is taking the ‘real world’ we inhabit far beyond the limitations of physics and time. By 2030, we could be spending more time in the metaverse than in the real world. As the wide horizontal reach of the metaverse reshapes almost every type of experience in our lives, businesses should be exploring their role in this new frontier.

• CES 2024 had new consumer tools including the cool Portalgraph the VR projector technology that doesn’t blocking the view, or the 3D AI powered holograph by Holoconnects.

• While the outlook for metaverse’s profound and fast-emerging, access remains a work in progress for now. Creating immersive content is difficult and current XR hardware and software can pose friction points for today’s early adopters and first-time users. But barriers to entry are expected to fade quickly.

We expect this year, we will see newer, more affordable and more immersive and engaging platforms for enterprises to connect with their customers.

3. Carbon Neutrality gets further mainstream  

• Given the ponderous action by governments world-wide, to cut carbon emissions – the world is still dwindling towards disastrous climate breakdown. With mandates emerging from Governments and Regulators, carbon monitoring and neutrality has been moving in the direction of voluntary to mandated. Greater efforts will be needed on ‘carbon management’ – which includes directly removing carbon as well as capturing emissions at their source from industrial facilities.

• The recent Cop28 summit in Dubai saw innovations ranging from Machines to magic carbon out of the air, indoor vertical farms to grow food for our escape to Mars, and even solar-powered ‘responsible’ yachts: with the promise of technological fixes for worsening global warming and ecological degradation.

Since there is no single solution to meet the goals of climate action, we expect multi-pronged innovation around (a) accelerating efforts to transition to clean energy and (b) biotechnological and new material innovation that converts carbon-rich waste emissions into new plastics, synthetic fibers, and fuels helping create a circular carbon economy

We are excited about these trends, as they align with our investment interests and thesis going forward.

~ Nanika

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