Inflation, new technologies, and the ongoing talent crisis are changing the playing field for tech startups. As these companies look to grow their businesses and protect their bottom lines, many are investing in new approaches and technologies. Here, Mike O’Malley, SVP of SenecaGlobal, talks about the latest trends and predicts what to expect in the startup community.
Changing regulations, new technologies, and a volatile economy are creating uncertainty and disruption for many startups. These companies must adapt and embrace technological advances to survive and thrive, or risk being overtaken by more innovative competitors.
McKinsey 84% of executives believe innovation is vital to their growth strategy. Innovation requires understanding what disrupts the current status quo and predicting future trends. Only then can startups learn what resources are needed to realize their big ideas and take advantage of changing market conditions.
Based on our company’s experience working with emerging startups in healthcare technology, security technology, and fintech, we’ve seen certain trends emerge. Here are my predictions for hot technology trends and how they will impact organizations in 2023.
1. IT talent shortage will accelerate
Even as the economy slows and certain industries experience layoffs, we see continued demand for certain high-demand technology skills. Among our clients, we see this talent gap primarily in health tech, security tech, and fintech startups.
For example, many companies are trying to stay ahead of a more complex regulatory environment. They may be looking for qualified cybersecurity professionals with expertise in data privacy and law. People with this combination of skills are so rare and highly paid that only the top 1% of companies can afford to hire them. Google recently highlighted the importance of this issue RSA Conference Panel Explores the legal framework, risks, and operational realities governing privacy in a complex digital environment.
The problem of labor instability is a big challenge for companies that want to take initiatives and extend the time to market of their products. According to the Economic Innovation Group, the number of new startups entering the market last year broke records. Competition for talent is even tougher. I predict this trend will continue until 2023.
2. Startups that focus on security at the start
With countless cyber threats on the Internet and an increasingly complex attack landscape, businesses that don’t prioritize security are putting themselves at risk. Creating secure code should be a priority for software development teams. In 2023, we expect emerging companies to implement this strategy by investing more in security from the very beginning of software design, a process we like to call PlanSecOps.
Compared to DevSecOps, which integrates security into the code, PlanSecOps incorporates security into the planning phase, early in the development cycle, before any code is written. PlanSecOps offers a more holistic, security design approach. For example, instead of fixing problems that arise, different subroutines can be patched together to work together. PlanSecOps can shorten development cycles by weeks and produce more reliable applications.
3. SMBs will leave QuickBooks for real-time financial information
With the economy slowing and talk of an impending recession, many small and medium-sized businesses (SMBs) are concerned about the lack of visibility into the data that drives their business operations. It is difficult to operate a business profitably in uncertain times, especially when predictions cannot be made based on actual financial data. According to Accenture, 76% of CFOs surveyed believes there must be “one version of the truth” to achieve business goals. However, too many small businesses run their companies on error-prone spreadsheets or QuickBooks tools that don’t match the financial analysis capabilities needed to make smart, strategic decisions.
By 2023, we will see a significant increase in the number of small businesses moving from spreadsheet-based models or QuickBooks to cloud-based Enterprise Resource Planning (ERP) systems. Cloud ERP streamlines all business systems (including accounting, finance, etc.) into a single platform, automating data tracking and other critical accounting processes. SMEs understand that having an ERP system that can handle these types of operations is key to survival regardless of economic conditions.
4. Health Tech, Security Tech and FinTech Set the Trends
In the third quarter of 2022, start-up funding down more than 50 percent due to high interest rates, record inflation, and recession. However, we predict that sectors such as health tech, security tech, and fintech will buck this trend in 2023 and remain strong or even grow faster.
We’re already seeing it start:
- Island, a cybersecurity startup that provides secure enterprise web browsers, recently raised a $60 million Series B round at a $1.3 billion valuation. This cash flow brings the company’s total raised to $270 million.
- Several in Q3 2022 digital health companies A lot of money was raised in the E+ series. Investors typically shy away from later-stage and larger rounds, but several healthcare innovators are bucking the trend. We Doctor, best known for launching China’s first Internet-based clinic, was one of the biggest recent donors during a $150 million Series G round earlier this year.
- Quona Capital, a DC Venture fund in fintech, has announced the closing of its latest $322 million VC fund for fintech companies, surpassing its initial target of $250 million, with support from new and existing investors.
All three industries offer innovations based on a few common characteristics. They are based on cloud applications, security is paramount, and they are designed to enable companies to use tools such as artificial intelligence and machine learning to gain new and competitive insights. As SMEs move to the cloud, we predict that investors will continue to fund visionary and innovative companies.
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