Isadora Teich

09/27/2022
Philadelphia, PA
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Here’s How Venture Capitalists Say Tech Startups Can Take On the Downturn

Economic conditions are tightening and fears of recession can be felt across industries. However, enterprise tech startups are continuing to move forward.

This is being pushed by companies who fear that underinvesting in tech could potentially hurt their market share. In this hard environment, venture capitalists offered advice to tech startups in the Wall Street Journal.

Let’s take a look.

Tech Startups Don’t Want To Fall Behind

In uncertain times, it is not uncommon for businesses to cut back. This is strategicc and often necessary. However, when it comes to tech, experts warn that this is the last thing that companies should do.

By halting tech innovation, businesses can fall behind in a real way. According to Shane Wall, venture partner and president of the CXO Network at Fusion Fund:

“Markets are won or lost based upon what you do in a downturn.”

According to Wall, tech chiefs have a critical role to play in making sure that companies do not fall behind in these challenging times.

Emphasis on the Cloud

Talk of cloud technology has been everywhere lately, and for good reason. We are at the beginning of the cloud era. There is still a lot of profit to be made in this space.

Despite all of the hype, cloud technology does not take up as much spend as you might think. According to Alex Kayyal, senior vice president and managing partner at Salesforce Ventures, only 22% of spend is on cloud technology at this time.

This is a part of why so much growth is possible.

A Closer Look at the Cloud

There is a lot more in the world of cloud technology than most people think. There are actually three main types of cloud computing:

  • Infrastructure as a Service (IaaS)
  • Software as a Service (SaaS)
  • Platform as a Service (PaaS)

Currently, the cloud computing market is on a major upswing. In 2020, this market was valued at about $370 billion. It is estimated that by 2025, it will rise to more than $800 billion in value.

94 percent of all enterprises are using cloud services in some form or another. So, it’s safe to say that cloud computing is here to stay and will only get even bigger in the future.

There are Big Opportunities in Cyber Security for Tech Startups

Kayyal also cited cybersecurity as a major area of opportunity for tech companies and startups. Let’s take a look.

It’s no secret that cybercrime has skyrocketed over the course of the pandemic. Due to the pandemic, more people were struggling to make ends meet. The prices of basic necessities skyrocketed too. This lead to more crime.

In addition, globally, people turned to virtual work and play like never before, leaving more and more people and organizations vulnerable to attacks.

Here are some sobering statistics shared by Dataprot:

-33 billion accounts will be breached in 2023.
-59% of Americans report they have experienced cyber crime or in some way fallen into the hands of a computer hacker.
-70% of small businesses are completely unprepared for a cyber attack.
-88% of professional hackers can infiltrate an organization within 12 hours.

In fact, it’s estimated that cybercrime earns criminals over $1 trillion every year. As such, it makes sense that stopping them has also become an incredibly lucrative market full of opportunities for enterprising startups.

The State of the Cyber Security Market

This is a rapidly growing market in response to real global threats. According to Fortune Business Insights:

The global cyber security market is projected to grow from USD 155.83 billion in 2022 to USD 376.32 billion by 2029, exhibiting a CAGR of 13.4%.

The cyber security market is largely driven by the explosion of e-commerce platforms and the advancement of technologies like the internet of things, AI, and cloud computing.

This is a hotspot of investment globally and demand is only growing. Many industries globally are adopting enterprise security solutions. This includes banking, manufacturing, and healthcare.

Innovation in Automation

On top of cloud technology and cyber security, automation is also an incredibly important area of investment, profit, and innovation. According to Kayyal:

“Obviously, we’re in an uncertain economy, but we see the innovation.”

It is projected that companies will continue to embrace automation in new ways over the coming years. One example is that 64% of business professionals at enterprise organizations plan to upgrade the employee experience with automation.

Even in this one area, these automations can vary. They could streamline onboarding, offboarding, and even numerous daily tasks. There are so many potential applications for automation in almost every organization and industry.

Final Thoughts on How Tech Startups Can Approach The Downturn

Even in tough economic times, there are still opportunities. Startups have to be smart in their approach and make calculated decisions to grow and thrive in hard times.

If you are looking for more inspiration and guidance when it comes to operating a startup in the face of adversity, check out our blog post on how to create a startup in a niche that is brand new to you!

What do you think? Comment below.

Since 2009, we have helped create 400+ next-generation apps for startups, Fortune 500s, growing businesses, and non-profits from around the globe. Think Partner, Not Agency.

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