According to venture capitalists (VCs) interviewed by Business Insider, 2024 may be a banner investing year, with particular attention given to AI startups with tangible use cases, startups focusing on defense-tech and cleantech, and gaming companies. However, this investment optimism comes with an expected wave of startup shutdowns due to decreased funding and irrational valuations. Additional trends predicted for 2024 include increased startup fundraising difficulties, increased competition at pre-seed and seed stages, and the potential for a founder mental health crisis due to high stress levels in the startup landscape.
Key 2024 Predictions
2024 may be an excellent year for investing, with investors predicting a focus on AI startups, defense-tech startups, and gaming companies. However, this year might also see a large number of startup failures due to decreased funding and irrational valuations.
Attention to AI Startups
Industry professionals predict that support will increase for AI startups with “tangible use cases” and “real revenue.” Increased attention will be given to companies truly innovating with AI, separating themselves from the masses of startups that sprouted up in this space.
Startup Shutdowns
Many investors expect numerous startups to run out of money and fail in 2024. Misguided business models and irrational valuations are driving this trend. Under the past market conditions, startups could raise while “largely ignoring the underlying economics of their businesses.” These companies are now under pressure to improve their unit economics, though for many, it will be too late for significant change.
Fundraising Challenges
Despite projected improvements from 2023, fundraising in 2024 is likely to remain challenging. Founders are expected to have three to four times as many conversations with investors than in previous markets. The fundraising process may stretch longer, and there must be a clear path to profits much sooner.
Mental Health Concerns for Founders
Many expect an increase in mental health issues among founders due to the pressures of running a startup amidst an economic downturn and a frosty funding climate. As capital markets likely fail to improve in 2024, these pressures may multiply, leading to higher stress levels among founders.
Investing in Defense-Tech
Many predict a new competitor to generative AI in 2024: defense tech. In recent years there has been a significant investment in tech defense startups due to the changing nature of global conflicts and the evolution of the modern battlefield. 2024 will bring more investments in this area, with a focus on companies that have a deep understanding of the technology and the customer.
Cleantech Investments
Cleantech has gained significant attention from investors over the past three years, a trend expected to continue in 2024. With rapid advancements in this field, much hope is placed on the potential impact on emissions reductions.
Gaming Startups
Investors expect gaming’s funding slump to end in 2024, driven by the artificial intelligence boom and its potential to enable unique gameplay experiences. Additionally, changed behaviour patterns due to the Covid-19 pandemic may cause more people to spend leisure time at home, increasing demand for gaming and sports betting.
