As we reflect on 2022, we’re grateful for our community of founders, operators, and investors who we get to work with every day. As we look ahead to what’s on the horizon, here are six trends we’re watching in 2023:
In 2023, we predict that fintech companies will strive to become a financial operating system (OS) for the customers they serve. This will entail leveraging embedded fintech (or building in-house) to provide a variety of financial services including checking, lending, payments, business intelligence, financial software, and more all within the same platform. The result? Fintechs will then account for a greater share of the customer wallet, increase customer stickiness, and eventually expand gross margins to set the stage for a blockbuster IPO.
But according to GGV Managing Partner Hans Tung—along with GGV Venture Partner Huey Lin, investors Robin Li and Marcello Rossi, and GGV’s VP of Technology Rares Crisan—we’re still in the early innings of global financial service digitalization with many more large fintechs yet to be built.
With more than two decades of investing experience in infrastructure software (including developer tools, data infrastructure, and cybersecurity), GGV Managing Partner Glenn Solomon sees a silver lining in the multibillion-dollar opportunity of cloud adoption.
Even with Gartner predicting global spending on security and risk management to grow 11.3% in 2023, chief information security officers (CISOs) will undoubtedly face pressure to justify decisions and defend their budgets in the coming year. The result?
For some cybersecurity founders, seeking the mergers-and-acquisitions route can be a way to continue their entrepreneurial journeys: “Under the right leadership, startup founders can run a semi-independent product unit that will allow the smaller org to stay nimble and innovate while benefiting from the huge support of marketing and distribution of the incumbent,” writes GGV Partner Oren Yunger.
The data stack has exploded over the past 10 years, improving how data teams operate but also creating noise in the market. “If you ask two data leaders what their stacks look like, you’ll likely end up with very different answers,” writes GGV investor Dan Cahana. “Vendors, more than buyers, have owned the narrative around how you should construct your data stack, creating confusion around where to start.”
As we all learn to do more with less, this shift will force data leaders to separate the “must-have” data tools from the “nice-to-haves.”
For the SMBs that survived the pandemic and for the millions of new businesses launched in 2020 and 2021, the tools, technology, and financing options available have never been greater “for an entrepreneur to launch a website, e-commerce store, or digital experience to complement her/his Main Street storefront,” write GGV’s Jeff Richards, Tiffany Luck, and Chelcie Taylor.
These tech-savvy operators will have an advantage as they grapple with a “historic double whammy with labor and inflation.”
Macroeconomic uncertainties continue to loom over the financial markets. Central banks will have their hands full battling inflation in the U.S. and Europe. As China's “zero COVID” policy ends, we can expect to see a surge in COVID cases, making the road to economic recovery a bumpy one. Supply chain disruptions are also likely to persist.
It will be a tough year for VC exits as financial markets continue to be volatile. We may see fewer blockbuster IPOs as money managers struggle to reconcile the valuation gap between private and public markets. Profitability will regain its weight in investors’ decisions with valuation return to fundamentals. Tightening anti-trust laws may also make it harder for big companies to make large acquisitions.
As the economy slows down, there will be a greater focus on operational efficiency, driving digitalization across industries. Budgets in big corporations will shift from growth-driven categories to cost-saving ones, benefiting startups that build tech-enabled tools—this accounts for more than half of GGV’s portfolio companies.
Capital will remain expensive. Great startups with solid fundamentals, however, will emerge in a tight funding environment. Flat rounds or down rounds will be normal. Both make it easier and cheaper for VCs to invest.
For founders, this is a year to prioritize efficiency over growth. Benchmark yourself with your peers and your last year's self on key indicators of your industry.
Calculate your burn, and make sure you have more than 12 months of runway. If you need to do layoffs, do it in one go. By focusing on efficiency, we believe you can ride out the market turmoil with good fundamentals and succeed in the long run.
