Our 2024 Predictions

2023 was a year of juxtapositions, as bleak macro signals contrasted with bounding optimism around tech breakthroughs. Exits slowed, generative AI skyrocketed, and startups navigated a knotty fundraising landscape.

Below, M13 partners share the industry trends, investment areas, and pendulum swings we’re paying close attention to in 2024. Highlights include:

Read on for more predictions and in-depth insights into the year ahead.

Artificial intelligence trends

The year of guardrails
Anna Barber, Partner

While 2023 was the year AI adoption and experimentation exploded, this year I’m watching what we call AI guardrails—platforms that help companies and consumers use AI in a safe way. Whether it’s protecting personal data, understanding how a model produced an answer, or ensuring compliance with laws and regulations, this will be a big area for investment in the next year.

AI transforms healthcare
Latif Peracha, Partner

AI will be the technology that finally gets us to the promised land of digital health and value-based care, improving outcomes and ripping inefficiencies out of the system. In 2024, we will see major breakthroughs in areas such as improved diagnosis, early detection, and personalized treatments. Notably, while a lot of people think the ultimate AI hub is San Francisco, we are seeing a nexus of great founders in New York building in AI.

Infrastructure & orchestration layers become interesting investment areas
Karl Alomar, Partner

AI has already begun changing the world but, as with web3 and other disruptive technologies, we are being cautious as to how we find strong foundational businesses that fuel this market. By segmenting the category, we are able to move down from the obvious application layer and focus on infrastructure and orchestration layers to identify where the tooling for this industry will live. We seek solutions that allow for the widespread use of AI across the developer ecosystem or within specific industries as the technology leap continues.

AI doesn’t mean job loss
Matt Hoffman, Partner & Head of People

I do not predict a significant loss of jobs due to AI in the near future. In fact, most similar technological trends are usually accompanied by a net gain of jobs.

Right now, the best use cases for AI still seem to be in the “copilot” role, rather than fully owning tasks. That means AI works best when it is guiding humans to do their work better, more efficiently, and more thoughtfully. As the technology gets smarter, it will free up time working on rote tasks and create more space for complex creative work. I expect peoples’ jobs to be safe for at least a little longer—and they are likely to be more engaging and satisfying to boot.

Two sides of AI-powered marketing
Brian Carroll, Partner & Head of Finance

As companies leverage generative AI for localized, multi-lingual, and demographic-specific images and ad copy, mass personalized ads will provide a major boost, especially to DTC brands.

At the same time, as AI-generated content and algorithmic feeds continue to flood social media, there will be a backlash in favor of authenticity and human curation. Generative AI tools made it easy to produce content, and speed and quantity of content are no longer meaningful differentiators. Consumers will increasingly value personality, realness, and the stories behind a piece of content. There’s a reason that Merriam-Webster's Word of the Year for 2023 was “authentic.”

AI markets self-regulate
‍Win Chevapravatdumrong, Partner & Head of Legal

AI development significantly outpaces governments’ ability to regulate, and that will be particularly true in an election year. Since we don’t expect regulation or court decisions to make any noticeable impact on AI markets or progress of innovation, we expect the markets to find ways to self-regulate. Examples include responsible AI development, continued innovation in AI privacy and security, and startups focused on IP monetization in AI environments.

The creative community will also begin to embrace AI through partnerships and innovation. Similar to how the relationship that the creative community had with UGC platforms evolved in the late 2000s and early 2010s, the creative community will begin to find ways to work with AI (establishing new norms around market pricing and structures along the way) and move on from the fear and lawsuits that we saw in 2023.

Proactive care meets AI
‍Courtney Reum, Partner & Co-founder

Last year we saw a big focus on the impacts of AI on productivity in the workplace. In 2024, we’ll see the impact of AI at a more personal level, as people leverage AI to proactively take care of their health and wellness.

AI assistants can help lighten the cognitive load of daily administrative tasks, while AI-powered tools like fitness trackers can continuously collect data (e.g., sleep tracking, heart rate) to help consumers make more tailored decisions about their health. For care providers, healthcare AI companies like Carenostics will use AI to prompt more effective interventions earlier.

Authenticity beyond GPT
‍John Tabis, Partner & Head of Launchpad

LLMs have become all the rage in 2023.  But text, image, and video creation will become table stakes for all businesses in 2024. Differentiation will come when companies and brands learn to harness the power of these tools in an authentic manner to deliver value beyond the GPTs of the world—that will be the real proving ground for AI in the medium term.  

Investment & exit trends

Focus on profitability over fundraising
‍Brent Murri, Partner

In 2024, the traditional venture path of Series A to B to C will look very different. Founders will abandon growth at all costs, stretch their dollars further, and consider the trade-offs between breakneck growth and reaching profitability.

We're already starting to see founders deciding between getting to profitability and raising a new round of capital, a luxury many startups have previously not had. Companies may grow more slowly, but raising less aggressively means being less beholden to investors—and more in control of their own destiny—when it comes time to exit.

A recent example of this new profitable growth blueprint is Klaviyo. It debuted on the public market at a $9B market cap, after having burned only $15M net cash to get there. It took the company 11 years to IPO, but shareholders didn't experience the same dilution as other tech IPOs.

M&A activity recovers from recent lows
‍Win Chevapravatdumrong, Partner & Head of Legal

M&A activity slowed down considerably in recent months due to the high cost of capital, macroeconomic uncertainties, and, to a lesser extent, heightened regulatory scrutiny. As we start the new year, activity will pick up. This feels like the end of the rate hiking cycle, leading to less uncertainty in the debt market. PE investors and larger companies have dry powder waiting to be deployed, and smaller startups that have struggled to fundraise the past few years may see M&A as their only alternative.

AI acquihires on the rise
‍Rob Smith, Partner & Head of Product

M&A—and specifically AI acquihires—will pick up in 2024. As AI talent needs skyrocket and supply lags, acquihires for good AI teams will start to happen more frequently and competitively. This mirrors the acquihire booms that followed approximately 1–3 years after rises in machine learning and mobile apps during their ensuing talent shortages.

Venture trends toward “barbell investing”
‍Anna Barber, Partner

Right now, we are seeing our VC peers commonly employ two strategies: (1) investing earlier than they normally would, given public market multiples that make Series B or even A rounds challenging; and (2) paying a premium for a quality team in a big market. This results in a “barbell effect” in the early-stage funding market.

In 2024, we expect to see the seed market stay strong and healthy, with lots of competition, and we anticipate high prices for companies with large markets, strong teams, and true Series A traction.

Efficient growth > raw growth
‍Rob Smith, Partner & Head of Product

Growth has become secondary to unit economics and paths to profitability. In 2024, a new, revamped "efficient growth" metric will become the new holy grail for early-stage startups. A stat like 3X year-over-year efficient growth will be looked at more favorably than capital-intensive 5X growth in many sectors, including AI.

Workforce trends

GenX’s unique leadership style enters the C-Suite
‍Christine Choi, Partner & Head of Brand

GenXers (currently 43–58) are now aging into leadership roles. As the smallest and often overlooked generation, GenXers possess the resilience, responsibility, independence, and some of the baggage (rebellious, doesn’t like to let anyone down) of the middle child.

As self-aware architects of Web 1.0 and 2.0, GenXers are at once tech-forward leaders of the digital native workplace and cautious about unintended consequences, and will find ways to keep humans in the loop without slowing down innovation. GenX leaders will also adopt a pragmatic and unfussy integration of social responsibility, ESG, and sustainability, unceremoniously integrating diversity and inclusion initiatives to achieve measurable business outcomes.

As the original latchkey kids, GenX had to be adaptive, resourceful, and productive without supervision—and expects this from others as well. In turn, this generation balances listening (an essential skill for leaders) with pragmatism, which translates to an inclusive culture and flexibility as long as teams meet their high expectations. GenXers are used to highly dynamic times and paradoxical demands. There is no better time for GenX’s excellent adventure in the C-suite.

More hiring, more hybrid, less office space
‍Matt Hoffman, Partner & Head of Talent

We’ve seen the worst of the layoffs wave, and across our broader portfolio, we are seeing many more companies hiring than reducing headcount. My expectation is that most of the new hires for 2024 will be focused on building to start—engineering and product primarily—with sales and marketing to follow.

As companies navigate return to office, the clear winner is hybrid working. Most companies are actively encouraging their employees to work out of a central location 2–3 days a week. This allows workers to have the flexibility they need to manage the balance between personal and work responsibilities, avoid unnecessary long commutes, and still find ways to connect with colleagues and clients in person.

Similarly, I am noticing more companies significantly decrease their office footprint as leases come up for renewal. I expect this trend to continue, with the office environment continuing to move towards purpose-built use cases.

Industries to watch

Growing investment in carbon markets
‍Karl Alomar, M13 Partner

I have taken a keen interest recently in carbon economics and the carbon industry as a whole. It seems increasingly necessary for humanity to take stock of our impact on the planet, and governments and corporations alike seem to be moving more towards carbon-neutral solutions. Technology will likely fuel this current, and investment appetite here is growing. At M13, we have invested in and continue to look for businesses that will contribute to this carbon economy.

Crypto’s quiet comeback
‍Latif Peracha, Partner

We’re already seeing quiet recovery signals in the crypto market (regulatory changes, asset pricing) post the 2022 crypto apocalypse. In 2024, we will have our first breakthrough crypto app launch that will be used by tens of millions of users—except we won't recognize it as a crypto app, as it will rival the user experience of any current web2 application.

Cybersecurity rules
‍Win Chevapravatdumrong, Partner & Head of Legal

2024 will see continued focus on and innovation in privacy and cybersecurity. The combination of recent regulatory focus (e.g. FTC, SEC, new state legislation) on privacy and cybersecurity and a heightened need to maintain privacy and security standards in a rapidly changing AI landscape will continue to place additional demands on these functions. In turn, we’ll see more investment and hiring in privacy and cybersecurity, as well as continued innovation and an expanding vertical SaaS industry focused on these areas.