Will 2024 be a bounce-back year for startups?

In 2021 and early 2022, startups are experiencing a period of wild optimism. Capital is still plentiful and cheap, and business buyers are experimenting wildly, making it a great time to be a startup. But suddenly in 2022, the wind shifted, inflation reared its head, the Fed raised interest rates several times, and money became more expensive. Buyers are uncomfortable, buying cycles are suddenly lengthened, and startups are starting to feel the pinch.

There is a simple law of economic physics: Generally the economy rises, falls and eventually rises again. But as we approach the middle of the last quarter of 2023, and some of the economic signals have improved, is it reasonable to expect that we will see a recovery where startups can once again flourish?

It might not be that simple this time. While IT budgets are expected to grow in the new year, this does not mean that startups will be able to take advantage of that money. Do not forget that much major tech vendors raised prices this year, further complicating things for startups looking to get a piece of that action; companies may be forced to put more money into existing line items.

All these factors and more have led to a continuous shift from growth to efficiency, forcing many startups to tighten their belts to reduce costs. The popular way to do that is to lay off employees and generally try to be as lean as possible, but that, too, has its own set of problems. Startups, especially those at an early stage, already have a kind of all-hands approach, and cutting employees means having to do the same amount of work with fewer people.

As we approach 2024, what does it all mean for the startups that were able to ride this year? Can they expect things to improve in the coming year, or will it prove to be even more difficult than before?

Depends on who you ask.

Rough seas ahead

Scott Raney, managing director of Redpoint Ventures, has been in this for over 20 years, and he says the environment we’re seeing now is less about an economic downturn than a correction. in the market from unrealistic valuations in 2021. We just see a return to more reasonable levels.

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