High-Tech market, Q1 2024: are we back to growth?

The year 2023 was a challenging period for the global High-Tech market. Following the extraordinary post-pandemic influx of investments in 2021-2022, the industry faced a rapid downturn that began in mid-2022 and persisted until the close of 2023. The total VC investments dropped by two-thirds, from a peak of $191 billion in Q4 2021 to just $66 billion in Q4 2023.

This downturn triggered widespread repercussions throughout the sector, leading to substantial layoffs. Data from Layoffs.fyi indicates that over 200,000 tech employees were let go in 2023, a figure that stands out, particularly after the significant workforce shortages experienced during the post-COVID expansion phase. 

Consequently, the focus shifted to the performance metrics for the first quarter of 2024, prompting the question: are we on the path to recovery, or is the market bracing itself for further contraction?

To address this, let’s take a look at the volume of VC investments funneled into High-Tech firms. 

According to Dealroom's Global Tech Update for Q1 2024, following nine consecutive quarters of either decline or stagnation, global VC funding has finally shown significant growth. The market bottomed out at $66 billion in Q4 2023 but surged to $82 billion in the following quarter. This figure not only exceeds the totals of the previous three quarters but also comes close to the $86 billion recorded in Q1 2023.

It's important to note, however, that the spike in Q1 2023 was largely due to two mega-deals—$10 billion in funding for OpenAI and $6.5 billion in funding for Stripe. The 2024 figures do not include such high-impact investments.

Significantly, the total funding amount has surpassed any level previously observed in the aftermath of the post-COVID growth frenzy. 

Industry-wise, the primary sources of growth are Enterprise Software and Health, with significant contributions from the Fintech, Energy, and Transportation sectors:

• Enterprise Software consistently attracts investment during economic downturns due to its role in driving operational efficiency and cost savings through widespread automation. This trend is currently amplified by the emergence of Generative AI, which is unlocking new levels of automation possibilities. 

• The Health sector greatly benefits from various AI applications, especially in pioneering automated diagnostics and drug development processes.

• The Transportation and Energy sectors are experiencing intertwined growth. The former is rapidly transitioning to electric mobility, while the latter enhances this shift through the expanded adoption of clean energy generation, along with more efficient energy storage and distribution systems. 

• In Fintech, the majority of substantial investment rounds are focused on Crypto and Decentralized Finance (DeFi) startups. 

AI stands out as the predominant focus for venture capitalists in 2024, capturing the lion’s share of investments. Other areas drawing significant attention include Semiconductors, Cybersecurity, Immersive Technology, and the Metaverse. 

It is too early to declare the crisis over, given the persisting geopolitical factors that initially triggered it. However, the robust growth observed in certain sectors is undeniably noteworthy. 

About the author

Victor Haydin is a Vice President of Growth Enablement at Intellias. With 17 years of experience in the industry, Viktor is involved in multiple business development initiatives, including the development of services for the High-Tech industry.

Discover how to transform today's complex challenges into tomorrow's groundbreaking opportunities with High-Tech services at Intellias: https://intellias.com/high-tech/