2022 was not great, could 2023 bring some stability?

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The Ukraine war, energy prices and the emerging tension between the US and China also influenced businesses in 2022. What can we expect from 2023? Do we see recession or growth in the world economy? Is web3 coming back with actual results? What could be the catalyst that contributes to the development of future technology and businesses?

2022 has been a turning point for tech company valuations. This is especially true for some still unclear technology areas like web3, metaverse and crypto. Startup valuations have gone down; real businesses and revenue are now more respected.

How was it in 2022?

A year ago, I wrote my predictions for 2022. If I evaluate them now, predictions for sensorizing and B2B IT software were quite correct. Startups also now look for other than VC funding, also because less VC funding is available now. People are always looking for better privacy and user-centric data models; that area is developing more slowly, but it is inevitable. 

My crypto prediction was totally wrong. I have always been skeptical about cryptos, but 2022 proved much worse than I expected. It is disappointing that we haven’t seen any valuable web3 services; furthermore, the crypto business has suffered from more fraud, stupid investors, and empty promises than I could imagine.

Over the last three years, the COVID pandemic and the Ukraine war have become big business disruptors. Especially during 2022, starting with Russia’s attack on February 24 that impacted the global economy, then inflation and rising energy prices. It was a back-to-basics moment. For example, people started to understand the value of food and energy supply chains and their complexity. The military industry also filled its order books, and even VCs started to invest in it.

Five predictions for 2023

The world economy suffered another massive hit in 2022. However, in 2023 we will probably go deeper and see an actual recession in many leading economies based on its official definition. COVID (especially in China) and the Ukraine war will continue into 2023. Many economists see that a US recession would be short, maybe only two or three quarters, but it could last much longer in other developed economies. And geopolitics makes it now more complicated than usual to predict.

Let’s go then to my five predictions for 2023:

1. Geopolitics will significantly impact the economy and businesses

Last year also reminded me that there could be quick changes in geopolitics. The assumption is that the Ukraine war will continue for at least six months, and Russia is probably losing ground all the time. The big question is, what will happen in Russia if they lose Crimea too? That situation could create all kinds of instability. One of the biggest individual risks would be military conflicts in Taiwan. From the economic point of view, the US and China are the biggest players, and their relationship and behavior impact all tech companies and economies.

2. Risk management will play an important role for all companies

Companies must better understand their political, geopolitical and global connection risks and opportunities and invest in evaluating those. This is not only for global corporations, but almost all companies have some international contacts (e.g. material supply or customers), and it is crucial to understand them, evaluate risks and also diversify activities to manage risks.

3. The trends of sensorizing anything and utilizing personal data to create better experiences will continue to grow

Personal data, personal sensors and individuals’ capability to benefit directly from them will be one of the main themes for this decade. We are now seeing how many consumer products companies (clothing, fashion, footwear and sports equipment) are adding sensors to their products. However, it will take some time for the data and analytics market to turn from enterprise-centric solutions to consumer-centric services.

4. Decentralization

Cryptos, web3 and metaverses got a big hit in 2022, but they will not disappear. It is time to make services that are useful in real life and offer something tangible to people or businesses, not only building speculative value.

5. Startup valuations will be based more on actual business

Startups have difficulty with Series A onwards funding rounds, especially if they have had high valuations but cannot show real market traction. Many of these companies haven’t offered anything unique, but they have bought market share with VC money. At the same time, this can be an excellent opportunity to build healthy new businesses when those sketchy big-talk companies cannot collect money.

None of those predictions is really surprising or even unique. The surprises in 2023 will probably come from outside businesses, the economy, geopolitics and the security environment. We are perhaps in a situation where most companies or investors are not looking to introduce new ideas or technologies but more about systematic work to build things and business step by step.

Best to adapt to the environment

When we have this kind of uncertainty, high inflation and a potential recession, it is the time for serious systematic working people and businesses to turn such uncertainties into opportunities, especially to attract more customers, deliver value to customers and sustainable revenue to their investors. As we know from history, many significant new things are built during more challenging times.

In light of these considerations, investors will now respect businesses with stable management and founder teams. People ready to make the longer-term work, not just talk about unicorn dreams after VC rounds. The IPO market will be tough. Even being a unicorn on paper doesn’t guarantee anything.

After 2020, 2021, and 2022, many people and businesses hope 2023 will be a year without big surprises. It would be nice to see more stability in business and geopolitics. Hopefully, 2023 will be a year we can all again take longer-term targets and build new positive things. But we must be ready that things don’t go so smoothly.

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