The next big tech trend you’ve probably never heard of.
Big tech is facing a moment of reckoning. Sky high valuations that seemed limitless have normalised and the premium that public tech stocks once held over the rest of the market have been largely erased. We’ve seen the market spooked and fuel talk of a tech stock unwinding, but the reality is that many of the companies most impacted were likely overvalued. The recent corrections will shake out the companies that have relied on hype, rather than strong fundamentals and robust business models.
We can (and should) still get excited about technology companies, and in the midst of falling tech valuations, there are still pockets of huge opportunity. There will always be a need for companies tackling real-world problems and creating lasting value.
Almost five billion people - 63% of the world’s population - have access to the internet, with 192 million additional users joining them each year. On average, these internet users spend almost 7 hours each day online. Behind the scenes, the data they consume is growing exponentially. A lot of work still needs to be done to serve these needs and to ensure that users get the best experience possible.
A pocket of opportunity lies in the next generation of technology businesses that are tackling these trends are using to build the future of digital applications. It is the companies in these ‘sticky’ tech sub-sectors, not the ones you see in the headlines, which are the most resilient to market shocks in the short term and that have the potential to see strong growth and value creation over the longer term.
Here’s an example you may not have heard of: ‘serverless’ technology. Whether you’re watching the tennis on your iPhone, updating a CRM, or digging into your emails, the likelihood is that the data is being served to you through cloud infrastructure - and providers will soon leverage this new technology too.
Serverless is a rapidly growing solution for companies building applications. Don’t be deceived by the term: a company’s code still runs on servers. Where cloud infrastructure allows companies to outsource the management of hardware, serverless technology enables a company to outsource both infrastructure and its code execution to a cloud provider, such as Amazon, IBM, or Microsoft. This saves time, resources, and means that developers can focus on building exciting products and services that people want and need. For fast-growing companies, it means much faster innovation and lower start-up costs. Upgrading the infrastructure of the internet may not sound glamorous but it supercharges the underlying system that powers every business, process, and online action.
The serverless technology market is big. It is currently worth $7.29bn and is expected to reach $36.84bn by 2028, growing at a CAGR or 21.71% from 2021 to 2028. There is also an entire tech ecosystem being built around it, with innovative companies such as Baselime, our most recent investment, helping developers to resolve incidents and performance bottlenecks quickly.
The sheer volume of data that is moving through the internet every second means that there is a huge opportunity for any business helping data to move faster, more efficiently or more securely. Whatever your sector, all companies need scalable, reliable, and cost-efficient tech infrastructure that sets them free to focus on their business.
Despite the challenges of the current market, many of the tech companies tackling these opportunities continue to thrive. Within our own portfolio, we’ve seen the likes of Ably - who are building real-time notification infrastructure for the internet - deliver billions of messages to more than fifty million people every day for companies including HubSpot, Verizon and Bloomberg. It’s an opportunity wider than just technical tools for developers too. APEXX Global, for instance, has benefited from the changes in consumer behaviour brought on by the global pandemic. As more shoppers turn to eCommerce, APEXX’s payment systems aggregation has provided online merchants – including Asos and Ryanair - faster and easier ways to transact. This year they have reached over 120 integrated partners and operate across more than 70 countries.
To build the future, you need brave, innovative and fast-moving companies to challenge the status quo and take advantage of new trends. These companies hold potential for high payoffs. But naturally, resource and development costs for these businesses can be high and there can be more risk. This is where Venture Capital (VC) has a significant role to play. Early-stage VC in particular presents more opportunities to identify entrepreneurs that are developing new technologies or taking advantage of market shocks.
The cyclical nature of markets means that there will always be times of buoyancy and times when growth slows. But the one sure-thing is the ever increasing pace of technological change. By understanding and focusing on the trends that drive it, businesses can present solutions that underpin progress, whether that is serverless technology, a payments gateway or simplifying digital experiences.
The most exciting technology is not always the loudest, in fact it rarely is. The startups quietly and patiently building strong businesses are often the most transformative. That is often where the real opportunity lies.
You can read the article over on City A.M’s website.
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