2024 Enterprise Technology Outlook

PitchBook Data, Inc.
EMERGING TECH RESEARCH

John Gabbert Founder, CEO
Nizar Tarhuni Vice President, Institutional

Research and Editorial
2024 Enterprise
Paul Condra Head of Emerging
Technology Research Technology Outlook
Our analysts’ outlook on the enterprise
Institutional Research Group technology market in 2024
Analysis
PitchBook is a Morningstar company providing the most comprehensive, most

Derek Hernandez
Senior Analyst, Emerging accurate, and hard-to-find data for professionals doing business in the private markets.
Technology
derek.hernandez@pitchbook.com
Brendan Burke
Senior Analyst, Emerging
Technology
brendan.burke@pitchbook.com
2024 outlooks
Rudy Yang p. 2 AI & ML: Open-source generative AI orchestration projects will create
Technology
multiple unicorn startups in early-stage deals.
rudy.yang@pitchbook.com
p. 5 Enterprise fintech: Rise in partnerships and demand for growth will drive an
Robert Le
acceleration in M&A.
Technology
robert.le@pitchbook.com p. 9 Infosec: Infosec leaders will make multiple IAM acquisitions.
Eric Bellomo p. 12 Infrastructure SaaS: Infrastructure investment will be driven higher by data
Analyst, Emerging Technology software & systems, as enterprises seek to capture and monetize their data
eric.bellomo@pitchbook.com
like never before.
pbinstitutionalresearch@pitchbook.com
p. 14 Enterprise SaaS: Enterprise vendors will employ recent AI & ML
breakthroughs to develop more mature and impactful solutions beyond the
Publishing initial rush of early solutions.
Designed by Drew Sanders
p. 16 Crypto: The crypto market will see a significant shift toward centralized
Published on December 21, 2023 financial structures, influenced by greater institutional adoption. This
movement marks a pivotal deviation from crypto’s traditional emphasis on
We are adding PitchBook Exit Predictor decentralization.
probabilities to our Emerging Technology Research
reports. PitchBook’s proprietary VC Exit Predictor p. 18 Insurtech: Insurtech investments across VC and M&A will increase, driven
estimates the probability that a startup, or VC-
backed company, will successfully IPO, be acquired,
by incumbent capital deployment.
or merge. The tool is available exclusively to
PitchBook clients. Additionally, we have launched p. 20 E-commerce: Composable commerce startup activity will rebound in 2024,
a pre-seed report methodology to more accurately
and comprehensively capture deals from the
spurred by a renewed focus on discrete points of friction in the shopping
earliest phase of venture. Going forward we will experience and B2B digital commerce growth.
sunset “angel” as a specified stage of venture in all
of PitchBook’s venture-focused reports.
1
2024 Enterprise Technology Outlook
Brendan Burke
Senior Analyst, Emerging Technology
AI & ML
Outlook: Open-source generative AI orchestration

projects will create multiple unicorn startups in early-
stage deals.
Rationale
Open-source AI projects became some of the fastest growing in open-source

history in 2023. Model developers have become the primary beneficiaries of large
funding rounds, yet startups can benefit from model-agnostic approaches given the
increasing commoditization of open-source models. We believe that developers
want to use tools that connect multiple types of models to unique data sources
and application logic. AI agent projects can take orchestration to the next level
by integrating application logic with large language models (LLMs) and making
extensible frameworks that can carry out complex, multi-functional projects in high-
value areas. This architecture may become more valuable than the underlying LLMs
because of the time savings for developers and conversion of pilot projects into
production applications.
Open-source commercialization has produced some of the largest companies in

AI, and more specifically, generative AI. At the high end, Databricks has expanded
from commercializing open-source project Apache Spark to offer a comprehensive
AI training platform. In 2023, open-source success yielded the largest acquisition
we saw in AI, with MosaicML being acquired by Databricks, in part due to the high
download counts of the company’s open-source AI models. Some highly funded
companies are choosing to go to market via open-source, including Adept and
Stability AI, yet others are emerging from open-source projects to raise funding.
Some of these projects are maturing quickly into high-growth startups.
Potential unicorns in the open-source community include both model developers

and tooling providers, which provide script-based frameworks for model usage. The
$1.0 billion mark has been set not only by MosaicML, but the rapid ascent of 01.AI
to unicorn status after being founded by AI luminary Kai-fu Lee after Stability AI
and its collaborator Runway set the precedent. Open-source model developers like
Mistral AI, which has recently become a unicorn at the model layer, and together.ai
may be on a rapid pathway toward similar status. Beyond these model developers,
orchestration projects have yielded significant early-stage rounds from leading VC
firms, including LangChain and LlamaIndex. These orchestration projects have not
yet become unicorns but are becoming essential utilities for connecting models to
enterprise data sources and applications.
2
Agent projects are beginning to grow quickly and can yield new unicorns. Agents
refer to software applications with AI models that make decisions on what steps
to take. In Q2 2023, open-source agent frameworks gained momentum to bring
automated actions to the newly launched GPT-4. AutoGPT became one of the most
quickly adopted open-source projects in GitHub history. These simple automations
failed to scale in commercial applications, though the company has raised $12.0
million in a seed round from Redpoint Ventures. Recent research finds that agents
can be used to coordinate complex actions among different experts instead
of relying on a single expert model. Recent multi-model orchestrators include
Microsoft’s AutoGen, which became the top-trending repository on GitHub in
October 2023. These orchestrator agents promise to simulate entire organizations
by combining models trained on specific domains and using them to cross-check
each other’s work.
GitHub star count for selected open-source AI agent repositories*

50,000
40,000
30,000
20,000
10,000
0
March 15 May 4 June 23 August 12 October 1 November 20
e2b-dev (e2b) AgentGPT (Reworkd) BabyAGI AutoGen (Microsoft) GPT Engineer MetaGPT Generative_Agents
Source: GitHub Star History • Geography: Global • *As of November 10, 2023
Note: AutoGPT is excluded for scale.
New projects are beginning to gain momentum that can yield significant startup
growth. AutoGPT showed that even nascent projects can raise significant
investment interest and congeal into startups with enough guidance. Other
promising agent projects without corporate affiliation include GPT Engineer,
MetaGPT, and Generative_Agents. GPT Engineer has achieved the greatest
popularity of projects launched since June 2023, nearing 50,000 GitHub stars by
focusing on codebase generation. This total shows the population of developers that
may convert into paid customers and have been the driver of growth for AI unicorns
like Hugging Face, which took three years to reach similar scale. At a smaller scale,
MetaGPT is continuing to grow quickly and resembles AutoGen’s architecture by
simulating the entire process of a software company, exceeding the key threshold of
10,000 GitHub stars. Generative_Agents simulates human interactions, and though
it is presently a research demonstration, it has exciting commercial potential to
simulate business interactions like negotiations or management. We believe at least
one of these projects will become a highly funded startup in 2024.
3
More broadly, open-source momentum will likely take mindshare from closed-
source advances. Closed-source models are multiplying in volume, given the low
cost of fine-tuning base models like Meta’s Llama-2. Advanced models like Adept’s
Fuyu-8B and University of California at Berkeley’s Starling-7B model demonstrate
that open-source models can both achieve parity with GPT-4 and demonstrate new
features in efficient sizes with customizable features. For this reason, we expect to
see game-changing new products built on top of open-source models in 2024, while
closed-source developers continue iterating on their existing products.
Risks
Forming a company around an open-source project can be complex given the

contributions of multiple stakeholders. Open-source projects can also quickly
become obsolete if the contributors shift their focus or users identify fundamental
flaws. Additionally, orchestration may not capture sufficient value, considering
the limited interest of strategic investors in deployment software relative to the
compute-intensive models. Tech giants and leading research labs are actively
developing internal orchestration tools and models with task completion capabilities
that may render open-source projects obsolete as well.
Key recent open-source AI deals*
Post-money valuation
Company Close date (2023) Deal value ($M) Deal type Lead investor(s)
($M)
Databricks November 13 $684.6 $43,184.6 Series I Nvidia, T. Rowe Price
together.ai November 2 $102.5 N/A Series A Nvidia, Emergence, Kleiner Perkins
Mistral AI October 31 $475.5 $2,113.2 Early-stage VC Andreesen Horowitz, Nvidia, Salesforce
Perplexity October 25 $50.0 500 Early-stage VC IVP
Stability AI October 1 $86.0 N/A Early-stage VC Intel
Hugging Face August 24 $235.0 $4,500.0 Series D Salesforce Ventures
Runway June 29 $191.0 $1,500.0 Series C1 Nvidia, Alphabet, Felicis
Mistral AI June 13 $113.0 $260.0 Seed Lightspeed Venture Partners
together.ai May 15 $20.0 $100.0 Seed Lux Capital
LlamaIndex May 12 $8.5 $40.0 Seed Greylock Partners
LangChain April 4 $10.0 $45.0 Seed Benchmark, Miles Grimshaw
Source: PitchBook • Geography: Global • *As of December 4, 2023
4
Rudy Yang
ENTERPRISE FINTECH
rudy.yang@pitchbook.com
Outlook: Rise in partnerships and demand for growth

will drive an acceleration in M&A.
Rationale
Valuation multiples have expanded YTD but generally remain at significant discounts
to the highs of 2021. In addition, many companies are beginning to adapt from the
initial shock of rising interest rates. We believe these aspects create an environment
where potential acquirers are no longer waiting for valuations to bottom out and
are prepared to seek out acquisition targets. Further, the pursuit of revenue growth
following revenue decelerating from 2022 to 2024 and the increase in partnerships
are likely to lead to additional M&A, as we have seen play out in the past.
At the start of this year, significant valuation cuts and limited capital availability led
fintech investors and operators alike to forecast a wave of consolidation in 2023.
However, this expectation never materialized. In the first three quarters of 2023, the
enterprise fintech sector saw 77 acquisitions, compared with the 156 and 129 total
acquisitions seen in 2021 and 2022, respectively. However, we believe the industry
will see a significant increase in M&A activity in 2024, with acquisition levels
exceeding those individually seen in 2021, 2022, and 2023. Our prediction is shaped
by three primary factors: the continued discount in valuation multiples (largely a
factor of interest rates), the desire from mature players for additional growth, and
the increasing possibility of partnership-based acquisitions.
Valuations continue to be mixed; the enterprise value (EV)/NTM sales multiple for
many public enterprise fintech companies is now higher than their multiples from
January 2023; though, some public enterprise fintech companies trade at discounts
versus January. High-growth payment companies, high-growth fintech companies,
and medium-growth fintech companies trade at 4.3x, 5.1x, and 5.3x, representing
19.2%, 44.8%, and 0.9% premiums over their median EV/NTM sales multiples at the
beginning of 2023, respectively. Conversely, the median EV/NTM sales multiple for
medium-growth and legacy payments companies sits at 4.5x, down 7.2% from the
start of this year.
While many companies now trade at premiums compared with January 2023, we
believe the overall YTD rally sets the stage for M&A in 2024. Significant discounts
in multiples compared with levels in 2022 were already seen earlier this year but did
not bring on the wave of consolidation that was generally expected by the industry.
In our view, this was due to the challenge many investors and companies faced
in determining whether the market had bottomed out. Consolidation may have
also stalled, partly due to the initial shocks experienced by companies from rising
interest rates. However, companies have continued to adapt to the new operating
environment, enabling some to feel more confident about reinstating M&A at the
top of their capital allocation priorities.
5
As we head into 2024, we expect higher confidence that the market has reached
its bottom, which should spark acquisition activity. Furthermore, many valuation
multiples still sit at notable discounts. Most public companies continue to trade
significantly down from their multiples at the beginning of 2022, while nearly all
public fintech companies currently see their premiums against the S&P 500’s price-
to-sales multiple discounted compared with earlier this year. At the beginning of
2023, the median EV/trailing 12-month (TTM) Sales premium over the S&P 500’s EV/
TTM Sales was 259.1% for high-growth payments companies, 236.8% for medium-
growth and legacy payments companies, 224.7% for high-growth fintech companies,
and 225.9% for medium-growth and legacy fintech companies. However, these
premiums have retracted YTD by 30.1%, 40.2%, 13.2%, and 19.3%, respectively.
Median EV/TTM Sales multiples*
Median premium versus Median premium versus Change in median premium

Cohort Median EV/TTM Sales
S&P 500 (current) S&P 500 (January 2023) versus S&P 500
High-growth payments 4.5x 1.8x 2.6x -31%
Medium-growth payments 4.3x 1.4x 2.4x -42%
High-growth fintech 4.9x 1.9x 2.2x -14%
Medium-growth and legacy fintech 4.5x 1.8x 2.3x -22%
Within private markets, the YTD median pre-money valuation as of Q3 2023 was
$22.8 million for enterprise fintech startups, which is flat to 2022’s median. This was
driven by the YTD median pre-money valuations rising at the pre-seed, seed, and
early stages and declining at the late and venture growth stages, making late-stage
and venture-growth-stage companies more attractive to acquirers.1
In addition, the ongoing demand for revenue growth is likely to be another catalyst
for M&A. 2023 and 2024 revenue growth has reset to normalized levels after
2020/2021 highs, though many analysts forecast the deceleration in revenue growth
to taper as corporates begin to cease belt tightening. While profitability has been
a dominant focus for many investors this year, topline growth continues to play a
critical role. In August, this point was illustrated by Adyen’s HQ 2023 results, which
led to a 37% drop in the company’s share price after delivering YoY revenue growth
of 21% (consensus was 40%).
Acquisitions to boost growth have been made historically, primarily within the
payments industry. From 2019 to 2020, we saw FIS buy Worldpay (now being spun
off, with GTCR buying a majority stake), Global Payments merge with TSYS, Fiserv
acquire First Data, and Worldline purchase Ingenico. During this era, some leading
payment companies such as FIS, Fiserv, Global Payments, and Jack Henry saw brief
periods when their multiples compressed in the wake of next generation players like
Adyen, Block, and Stripe beginning to take market share. These new market entrants
1: Additional data can be found in our Q3 2023 Enterprise Fintech Report.
6
generally saw their multiples trade at premiums versus those of legacy players,
despite seeing much lower transaction volumes. As a countermeasure to slowing
revenue growth and contracting multiples, industry-wide consolidation occurred.
Even prior to 2019, payment companies were seeking out acquisitions to boost
revenue growth. For example, prior to FIS’ acquisition, Worldpay was bought by
Vantiv, and together they were the product of over a dozen acquisitions.
Another critical element that we believe will drive M&A activity is the ever-growing
number of fintech partnerships. As the fintech sector has continued to mature,
partnerships with enterprise fintech companies have increased as more players
view them as mutually beneficial relationships rather than competitive threats. This
mindset evolution has led to the forging of many new partnerships, including those
of Adyen and Klarna, Alipay+ and Yapily, Finastra and Tonik, FIS and Jifiti, Visa and
TerraPay, and many more. In the past, we have seen some partnerships demonstrate
favorable outcomes for both parties and evolve into acquisitions. Some examples
are Visa’s acquisition of Currencycloud, Plaid’s acquisition of Cognito, and PayPal’s
acquisition of Paidy. As larger players begin to seek out acquisition targets, we
believe they will likely consider candidates that are meaningful partners or that they
already have an equity stake in.
Top strategic enterprise fintech acquirers since 2017*
Investor Deal count Investor type
Visma Group 14 PE-backed company
Fiserv 11 Corporation
ION Group 9 PE-backed company
Insightsoftware 8 PE-backed company
MasterCard 8 Corporation
Broadridge Financial Solutions 7 Corporation
Jack Henry & Associates 7 Corporation
Sage Group 6 Corporation
Realtime Electronic Payments 6 Corporation
Visa 6 Corporation
PayPal Holdings 6 Corporation
FNZ 6 PE-backed company
Shift4 Payments 6 Corporation
Payroc 5 PE-backed company
Stripe 5 VC-backed company
Source: PitchBook • Geography: Global • *As of September 30, 2023
7
Risks
Interest rates, inflationary pressures, and geopolitical circumstances remain

primary determinants of valuation multiples. If elevated interest rates continue to
strain capital availability, or if spending on other services continues to decelerate,
management teams are likely to take a conservative approach to M&A, leaving
fewer deals. Furthermore, while an investment in a startup from a corporate can
lead to an eventual acquisition, the corporate’s presence can also deter potential
acquirers if they are competitors.
8
Brendan Burke
INFOSEC
Outlook: Information security (infosec) leaders will

make multiple identity & access management (IAM)
acquisitions.
Rationale
Identity security continues to grow quickly in the middle of a tech recession and
can offer acquirers both technical advancements and revenue growth. Incumbents
have been relatively inactive in the space this year, with only one minor acquisition
from access management leader Okta. Identity security affects every other product
segment since lost credentials serve as a threat vector for enterprise systems
across network, endpoints, and applications. Multiple startups have succeeded in
identifying threat signals in identity-based behavioral data and managing non-human
identities, including software-as-a-service (SaaS) applications. These capabilities
can contribute to the product strategies of all incumbents across segments.
Our analysis in last year’s outlook of the need for multiple data security acquisitions
was borne out by Palo Alto Networks, IBM, and Rubrik acquiring data security
posture management startups in 2023. In the coming year, we believe that
incumbents will be pressured to respond to innovation in identity management and
threat detection from the startup community. We have found that incumbents are
nimble and acquisitive in their response to emerging trends and see the need for
improved identity data collection and convergence of remediation solutions.
Identity architectures are becoming more complex, limiting the ability of directory
vendors to provide comprehensive security. Identity-based attacks are the
predominant vector of data breaches yet have significant resources dedicated to
preventing them already via multifactor authentication and credentials management.
Microsoft’s Active Directory, in both its on-premise and cloud-based version, is the
crown jewel of security, yet the volume of identities is expanding via the cloud, SaaS
applications, and remote workstations. With the diffusion of new systems of record
of identity, enterprises face complexity that requires visibility outside of Microsoft’s
environment. In a recent IDC survey, three of the top five most penetrated security
solutions involved IAM product categories, including advanced authentication,
customer IAM, and identity governance. 2 Other large categories below these
are managed detection & response and security automation, which have been a
greater target of M&A. The scope of this problem area creates opportunities for
legacy vendors.
2: “Identity Security Is Key to Organizational Trust Investments,” IDC, Jay Bretzmann and Grace Trinidad, November 10, 2023.
9
Precedent deals demonstrate that network- and endpoint-focused vendors will want
enhanced identity security protection. Endpoint detection & response competitors
CrowdStrike and SentinelOne have made acquisitions in the space to enable identity
logs to integrate with their extended detection & response (XDR) platforms.
CrowdStrike acquired zero-trust-security startup Preempt Security and has since
launched a module called Identity Threat Protection. SentinelOne acquired Attivo
Networks, launching the Singularity Identity module as a result. Palo Alto Networks also
launched an identity threat detection & response (ITDR) module for its XDR platform
based on internal product development, yet may want to enhance its capabilities via
M&A. Cisco recently made an acquisition in this space of Oort Security—preceding its
acquisition of Splunk—demonstrating the additive nature of ITDR to security platforms.
Other incumbents that might face gaps in the space are Alphabet, Rapid7, and Zscaler.
Infosec market leader acquisitions by segment (2020 to 2023)*
Identity & access

Infosec market leader Application security Data security Endpoint security Network security Security operations
management
Foreseeti ($6.3M),
Alphabet N/A N/A N/A N/A N/A Mandiant ($6.1B),
Siemplify ($500M)
SecureCircle Preempt Security

CrowdStrike Bionic N/A N/A Reposify ($18.9M)
($60.8M) ($91.2M)
OPAQ ($8.0M),
ThreatINSIGHT
Fortinet N/A N/A N/A N/A N/A
($31.0M),
ShieldX ($10.8M)
Agyla.Cloud,
Polar Security
IBM N/A ReaQta N/A Spanugo Octo (Reston),
($60.0M)
Randori
Auth0 ($5.7B),
Okta N/A N/A N/A N/A Bad Packets
Uno
Dig Security
Bridgecrew ($156.9M),
($350.0M), Talon Cyber Security
Palo Alto Networks Cider Security N/A N/A Expanse ($797.2M)
Gamma.AI ($625.0M)
($300.0M)
($20.4M)
Miburo Solutions,
Microsoft N/A N/A Refirm Labs CloudKnox N/A
RiskIQ ($500.0M)
Minerva Labs
Rapid7 Alcide ($50.5M) N/A N/A IntSights ($322.2M) N/A
($34.6M)
ERP Maestro ($28.0M),

SailPoint N/A N/A N/A N/A N/A
Intello ($43.0M)
Attivo Networks
SentinelOne N/A N/A N/A N/A Krebs Stamos Group
($616.5M)
Cloudneeti ($8.9M),
Zscaler Canonic Security N/A N/A N/A ShiftRight
Trustdome ($31.1M)
Source: PitchBook • Geography: North America & Europe • *As of November 30, 2023
10
In M&A, IGA vendors have focused on human identities via acquisitions for cloud
entitlement management rather than cloud asset identities themselves. As a result,
major vendors like Microsoft, Okta, SailPoint, and IBM find themselves relatively
behind innovators such as ForgeRock and Venafi. Promising startups in machine
identity management include Astrix, Corsha, QWERX, and Valence Security. Pure-
play identity threat detection & response startups include SpyCloud, SpecterOps, and
Rezonate. Some of those startups have become highly valued at an early stage and
may yield high acquisition offers in the range of $300 million to $600 million, which we
have seen in recent years.
Risks
Incumbents will face a range of M&A opportunities—not just in IAM—as startups

reach the end of their financial runway and public markets continue to reward
acquisitions in the space. Other areas of interest will involve XDR, LLM application
security, and security automation. Numerous attempts to consolidate the identity
security market have been launched by PE buyers and industry incumbents, which
may raise fears around entering the market.
11
Derek Hernandez
INFRASTRUCTURE SAAS
Outlook: Infrastructure investment will be driven

higher by data software & systems, as enterprises seek
to capture and monetize their data like never before.
Rationale
Infrastructure funding of data software & systems vendors will reaccelerate after
a strong deceleration in funding in 2022, as enterprises seek to capitalize on the
artificial intelligence and machine learning (AI & ML) opportunities developing in
conjunction with their own proprietary firm and customer data.
Data has long been the new gold, and in the last year, it has only become even
more valuable. Enterprises seeking to harness the rapid advancements in AI & ML
technologies are seeking to once again overhaul their data collection, management,
and storage to optimize for this new frontier of solutions. Still, current offerings are
in their nascent stages and will remain difficult to sell as the technology continues
to evolve rapidly. That said, one of the few certainties is that proprietary information
captured within each firm, as well as their own unique client interactions, will be
critical to developing insightful and impactful AI solutions in the coming years.
Importantly, we are seeing accelerated investment in our subsegments of data

management software and database management systems. Investment has focused
on big data platforms and data lakes, as well as corresponding data processing and
extract, transform, load (ETL) tools. Data integration and data quality services have
also seen greater investment, as has data governance and security. Ultimately, all of
these vendors must orchestrate their work together to serve the needs of disparate
enterprises. This includes enterprises seeking to deploy cutting-edge systems
through in-house development operations (DevOps) teams, all the way down to
firms seeking out-of-the-box functionality with little-to-no aspirations of developing
their own proprietary solutions. Nonetheless, data can be captured and monetized in
nearly every instance, once again reinvigorating the already massive market for data
software & systems.
Data software & systems investments have already begun to ramp up this year.
After these deal values reached a multi-year low of $482.1 million in Q1 2023, the
following two quarters rebounded strongly. Q2 grew 32% QoQ to $638.1 million, and
Q3 grew another 48% QoQ to $945.3 million—the highest level over our five-year
market outlook period outside of the highs of 2021 to 2022. We expect this trend
to continue in Q4 and for deal values to remain elevated over 2024. Assuming a
continued recovery in Q4, 2023 will strongly taper its decline YoY from 2022, and
fall just around 30% YoY in 2023, after a 45.9% decrease in 2022. Importantly, data
software & systems is the only subsegment in infrastructure SaaS that has had a
demonstrated bottoming recovery in deal value over the last few quarters. DevOps,
application infrastructure, and information technology operations have all been flat-
to-lower in 2023.
12
Data software & systems market size estimate ($B)*

$250
$200
Annual spending ($B)

$150
$100
$50
$0
2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Note: Data for 2023 through 2027 is estimated.
Data software & systems VC deal activity by quarter

50
39 41 39
36 38 37
35
29 30
24 26 25
22
$1,039.2
22
$777.7
$811.0
$709.9
$678.6
$638.1
$577.9
$455.5
$482.1
$1,396.6
$2,388.1
$1,989.6
$2,135.4
$3,619.7
$945.3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2020 2021 2022 2023*
Deal value ($M) Deal count
Risks
Although we expect funding to increase over the year, this is among our most
highly competitive segments, and continued investment will require high enterprise
engagement despite firms’ high capital constraints.
13
Derek Hernandez
ENTERPRISE SAAS
Outlook: Enterprise vendors will employ recent AI & ML

breakthroughs to develop more mature and impactful
solutions beyond the initial rush of early solutions.
Rationale
With the development of ChatGPT and many other LLMs, AI & ML solutions
are poised to upend many industries already well along their digital
transformation journeys.
2023 has proven to be a banner year for AI & ML solutions. With the explosive
introduction of ChatGPT-3 and later models, traditional enterprise software solutions
have been upended with enormous promises of new horizons ahead. While these
may not all pan out, we expect that 2024 VC deals and exits will reflect a continued
push to fund these vendors in the hopes of establishing best-in-class solutions.
Despite high concentration and incumbency advantages, many startups have the
potential to become major disruptors in this new landscape.
LLMs have already made a meaningful splash in content generation, customer

support, personalized recommendations, programming and coding, and
cybersecurity. Within the highly structured environment of software development,
GitHub’s Copilot and Amazon’s CodeWhisperer have been revolutionary. This
single application has taken a largely manual task and enabled dramatically higher
productivity among a labor base that has been in short supply for many years.
Additionally, film and image content generation for marketing, as well as text
generation for copywriting has similarly enabled creative workers to expand their
capacities dramatically. Customers themselves are being positively impacted
through the personalization of historically automated recommendations, as well as
instantaneous and always-on customer service channels via text, voice, and soon
visual means.
Future iterations of these technologies are being applied across a wide array of
additional sectors, including low-hanging fruit such as data analysis and reporting,
financial analysis, and language translation. In addition, complex professional skills
are being supplemented by these advanced solutions in the fields of legal and
compliance, healthcare, human resources and recruitment, workforce education,
simulation and training, and knowledge base development. Legal research
assistance, compliance monitoring, and contract drafting are all generally within the
scope of current models.
Thus, the hype cycle is in full swing, with nearly every enterprise software vendor,
from nascent startups to massive public companies, seeking to implement AI
capabilities to new and existing enterprise software offerings. Although we do not
anticipate the majority of these to pan out, we believe AI & ML capacities will be the
new table stakes across all of our enterprise SaaS segments.
14
Enterprise SaaS market size estimate ($B)*

$600
OAS
$500 KMS
$400 AP
SCM
$300
ERP
$200 CRM
$100
$0
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Note: Data for 2023 through 2027 is estimated.
Risks
This technology remains deeply within the early stages of the traditional technology
hype cycle, with socially impressive results but only some immediate realizations of
the potential ascribed to it. There is a lot of work to be done to achieve these.
15
Robert Le
CRYPTO
robert.le@pitchbook.com
Outlook: The crypto market will see a significant shift

toward centralized financial structures, influenced by
greater institutional adoption. This movement marks a
pivotal deviation from crypto’s traditional emphasis on
decentralization.
Rationale
Institutional participation in the crypto markets has increased significantly over

the past year—as discussed in our recent crypto-focused analyst note—and the
expected launch of spot crypto ETPs in the US will not only attract significant
institutional capital but also foster a concentration of asset custody and staking
power in the hands of centralized entities.
As we move into 2024, we expect the crypto market to undergo a transformative

shift toward greater centralization. This transition, a stark contrast to the
decentralized ethos historically championed by the crypto community, will be driven
by the surge in institutional participation and new regulatory frameworks. We believe
one of the primary catalysts for this shift will be the approval and launch of spot
Bitcoin ETFs in the US, which will open the floodgates for institutional investment
in cryptocurrencies. This influx of capital is expected to have a transformative
impact on the industry by driving new application development, greater adoption,
and potentially propelling Bitcoin to new price heights. There are reasons to believe
there is high demand for Bitcoin and other crypto spot ETFs, according to a recent
survey that showed that over 79% of institutional investors are considering crypto
investments within the next year. 3 Another survey showed that 57% of institutional
investors believe prices will move higher during the next 12 months, compared
with just 8% who stated that view in October 2022.4 These institutions, seeking
secure and regulated pathways to invest in crypto, are turning to trusted centralized
These institutions, seeking secure and
custodial services provided by established players like Coinbase to custody assets for
regulated pathways to invest in crypto, are
crypto ETFs. This could lead to a concentration of Bitcoin and other crypto holdings
turning to trusted centralized custodial
under Coinbase’s management, representing a shift toward centralization in asset
services provided by established players like
custody. Coinbase currently holds over $150 billion in AUM, making it one of the
Coinbase to custody assets for crypto ETFs.
largest crypto custodians in the world. We expect Coinbase to become the primary
custodian for Ether should a spot Ether ETF come to market in the US.
3: “Exploring Institutional Interest in Blockchain Applications and Digital Asset Uses,” Fidelity Digital Assets, April 2023.
4: “2023 Institutional Investor Digital Assets Outlook Survey,” Coinbase Institutional, November 16, 2023.
16
This centralization, particularly in the management of significant portions of Bitcoin

and Ethereum holdings, illustrates a departure from the market’s decentralized roots.
Centralization is not just a matter of asset custody but extends to the influence
over network dynamics—especially in the Ethereum network—as it has shifted to a
proof-of-stake model. As Ethereum stakeholders delegate their tokens to validators
for network validation and rewards distribution, the concentration of staking power
under a single entity could potentially impact network security and governance
decisions. A crucial concern for centralization is the potential security risks, notably
the concerns around a 51% attack on Bitcoin and a 66% attack on Ethereum. Such
scenarios, where a single entity gains excessive control over a network, pose the
threat of dictating rules for the network or manipulating transactions for Ethereum.
This risk is heightened post its transition to a proof-of-stake model; if an entity
controls over 66% of the network’s staked ether, it could hinder others from
effectively writing transactions to Ethereum’s ledger.
Assessing the degree of decentralization within a blockchain network can be

effectively achieved by examining the distribution of mining power (hashrates) or
validator nodes. This approach provides insights into the concentration of influence
among participants who are crucial in upholding the network’s consensus mechanism.
Looking at Ethereum, of nearly 898,000 validators, a significant portion is controlled
by centralized entities—as of December 5, 2023. Coinbase commands over 129,000
validators, which accounts for approximately 15% of the market share. On the other
hand, Lido, a prominent liquid staking provider, holds more than 288,000 validators,
representing a substantial 32% market share. This distribution highlights the growing
centralization of power in the hands of a few key players within the Ethereum network.
However, the trend toward centralization is not without significant challenges

and resistance. There are strong concerns over the erosion of the foundational
There are strong concerns over the erosion of decentralized ethos within the crypto community, a principle that has long been core
the foundational decentralized ethos within to crypto. In response to these centralizing forces, we anticipate decentralized finance
the crypto community, a principle that has (DeFi) founders to make the case against centralization and push for wallet-share
long been core to crypto. in 2024. These services will be pivotal in offering not only compelling alternatives to
the centralized models of asset custody and management, but also trading, lending,
borrowing, and payments. These initiatives represent not just a counterbalance but an
essential reaffirmation of the core values of the crypto ecosystem.
New technological developments are also challenging centralizing forces. For

example, several innovative startups like Obol, Blox, and Parastate are at the forefront
of developing technologies like distributed validator technology (DVT) aimed at
decentralizing staking services. Notably, Lido’s recent integration of Obol’s DVT
into its staking service marks a significant step toward more decentralized staking
solutions. These technological advancements are not merely technical improvements
but are pivotal in reinforcing the decentralized infrastructure, ensuring the integrity
and resilience of the crypto ecosystem in the face of centralizing trends.
Risks
The crypto market remains volatile and unpredictable, and the path toward
centralization can be altered based on new emerging technologies, regulatory
developments, and the evolving landscape of institutional adoption.
17
Robert Le
INSURTECH
robert.le@pitchbook.com
Outlook: Insurtech investments across VC and M&A

will increase, driven by incumbent capital deployment.
Rationale
While VC investment continued to decline in 2023, we began to see investments pick

back up in the last quarter of 2023. Investors believe that the insurtech market has
now bottomed and valuations are beginning to look attractive. This will lead to an
increase in capital deployment across both the public and private markets.
2023 saw a prolonged decline in VC investments in insurtech, culminating in a total

investment of under $5 billion, lower than any year since 2017. This aligned with
a prediction we made last year. 2023’s slowdown in VC investment can be partly
attributed to compressed valuations, a slower VC fundraising environment, and
the diminished number of successful venture exits, primarily due to a significant
reduction in IPOs. Additionally, only two insurtech unicorns were minted in 2023,
including home insurer Kin and agency management platform AgentSync. This
compares with six new unicorns in 2022. Kin’s journey is particularly illustrative;
after a canceled SPAC merger in 2021, Kin managed to raise a Series D at a $1.0
billion valuation, down from its initially projected SPAC valuation of over $1.3
billion. Such events reflect the shifting valuation landscape in the insurtech sector,
impacting investor sentiment and VC funding dynamics. Despite these challenges,
our anticipated rebound in VC investments in 2024 is underpinned by the market’s
adjustment to these new valuation realities.
The improvement in the macroeconomic landscape, including easing inflation and

a more favorable interest rate environment, is key to the rebound for insurtech
investments. These factors make investment in technology-driven insurance solutions
more appealing, considering their long-term growth potential and innovative edge
The emphasis will be on companies that have
over traditional insurance models. However, unlike 2020 to 2021, investors are likely
demonstrated resilience in the face of market
to prioritize insurtech firms with sustainable business models and clear pathways to
challenges of the past 18 months and have
profitability. The emphasis will be on companies that have demonstrated resilience in
scalable solutions that address deep friction
the face of market challenges of the past 18 months and have scalable solutions that
points across the insurance value chain.
address deep friction points across the insurance value chain. We believe strategic
investors, such as large carriers, reinsurers, and brokers, best understand the
industry’s unique challenges and will step up their VC investments in the latter half of
2023. Some of the most active venture arms of incumbent insurers during the second
half of 2023 include those from Munich Re, CSAA Insurance (Avanta Ventures),
American Family Insurance, and MS&AD Insurance Group.
18
M&A activity in the insurtech space has shown a strong recovery trajectory in
2023 with more than $7 billion in invested capital, already surpassing the previous
M&A activity in the insurtech space has shown
two years’ combined deal value. We expect this uptrend to continue into 2024,
a strong recovery trajectory in 2023 with more
driven by increased PE and incumbent acquisition activity. PE firms have played a
than $7 billion in invested capital, already
pivotal role in significant transactions in 2023. A prime example is the $2.6 billion
surpassing the previous two years’ combined
acquisition of Duck Creek, a legacy insurance core platform, by Vista Equity through
deal value.
a public-to-private LBO. This transaction is reminiscent of Thoma Bravo’s 2020
LBO of Majesco, another core system developer, valued at approximately $729
million. Similarly, core system provider Insurity acquired competitor CodeObjects
through an LBO in the same year. We anticipate further consolidation among major
core insurance platforms in 2024. We view Guidewire and OneShield as potential
targets. DXC Technology, which had previously engaged in acquisition discussions
that were subsequently called off earlier in 2023, also remains a likely target in this
consolidating market.
We anticipate a significant increase in M&A activity by incumbent insurers, a trend

bolstered by their successful navigation of the inflation cycle. Throughout 2023,
established insurance companies have been able to manage inflationary pressures
by implementing some of the largest premium increases in decades across various
insurance lines. Remarkably, they achieved this without experiencing significant
customer churn. We believe this financial stability and customer retention will enable
incumbent insurers to pursue strategic acquisitions.
Risks
Any outsized unforeseen risk events like natural disasters, pandemics, or wars could
lead to major financial losses for the insurance industry, which will strain financial
resources and divert funds from investment and innovation activity. These losses
could also lead to a reassessment of risk models, potentially impacting the valuation
and attractiveness of insurtechs that specialize in predictive analytics and risk
assessment. Also, significant deterioration of macroeconomic conditions would lead
incumbents and investors to become more conservative.
19
Eric Bellomo
Emerging Technology Analyst,
E-COMMERCE
E-commerce & Gaming
eric.bellomo@pitchbook.com
Outlook: Composable commerce startup activity
will rebound in 2024, spurred by a renewed focus on
discrete points of friction in the shopping experience
and B2B digital commerce growth.
Rationale
Throughout the COVID-19 pandemic, businesses needed to establish and optimize

their digital footprint overnight. For many, this placed unprecedented demand on
archaic, monolithic systems. Digital transformation efforts ensued, unfolding at
breakneck speeds to support historic levels of online shopping. Now following the
peak of COVID-19, merchants are optimizing digital transformation projects and
shifting up return on investment (ROI) timelines amid margin compression due to
customer acquisition costs.
Throughout the COVID-19 pandemic, retailers accelerated digital transformation

efforts with great urgency as broad swaths of consumer behavior were forced
online overnight. Years of technology objectives were deployed in months to
support replatforming and surging online transactions. Fast forward to 2023 and the
pandemic has eased its grip on our daily lives, e-commerce growth is in line with
historic estimates, and stimulus-induced consumer demand is normalizing amid
inflation and dwindling savings. Consequently, we expect businesses to re-evaluate
their digital transformation progress in 2024 to prioritize specific projects and
discrete points of friction via composable technologies.
The composable commerce concept is not new to retailers. Put simply, retailers
can utilize specific, best-in-class application programming interfaces (APIs) and
services for specific commerce experiences, including search, payment, order
management, and more, without relying on a single, “monolithic” platform. In
the early days of e-commerce, retailers often built customized systems for each
shopping channel, but these monolithic back-ends became ossified and significantly
inhibited product iteration despite increasing consumer expectations for responsive,
omnichannel shopping. Fundamentally, brands must continually invest in their
digital experiences as e-commerce’s share of retail transactions climbs globally,
underscoring the need for scalability and stability.
The adoption of composable services decelerated in 2022 but maintained double-

digit expansion, and we anticipate growth tailwinds in the near term. 5 Despite general
familiarity, surveys indicate the portion of businesses that are “fully” or “highly”
composable are stuck in the low single-digit percents.6,7 We expect startups to focus
on this gap as retailers prioritize speed and ROI within 12 months. Our conversations
indicate C-level leadership has trimmed ROI timelines by a factor of three.
5: “Magic Quadrant for Digital Commerce,” Gartner, Mike Lowndes, et al., August 21, 2023.
6: “The Pulse of Retail 2023,” MACH, n.d., accessed December 8, 2023.
7: “Increase Organizational Composability by Reusing Composable Commerce Technologies,” Gartner, Sandy Shen, April 11, 2023.
20
A critical tailwind for composable growth is B2B e-commerce, which continues to

outpace B2C adoption.8 For instance, leading startups like commercetools have
targeted large retail brands but are increasingly incorporating nontraditional
verticals into their selling roadmap, like manufacturers. Other notable composable
commerce startups include Contentful for content management, Bloomreach for
marketing automation and personalization, and Akeneo for omnichannel product
data. Other startups like Pack or Vue Storefront are targeting Shopify merchants
as the crux of their go-to-market strategy. Generative AI is another tailwind.
Composable startups have been burdened by a perception of greater implementation
costs and complexity. Although implementation and architecture decisions are
required upfront, the adoption of generative AI, LLMs, and code completion services
by system integrators can materially de-risk technical complexity and flatten the
technical learning curve. MACH Alliance members within the system integrator
category are beginning to incorporate generative AI into their product offerings, like
Grid Dynamics’ product data starter kit and Dept’s DEPT/AI, for example.
Nevertheless, headwinds do exist. Retailers continue to face high inflation, softening

consumer spending, and a reprioritization of physical and omnichannel commerce
that can extend or complicate SaaS sales cycles. Further, brands who may have
previously been candidates for API-first services, like digital native direct-to-
consumer (DTC) brands, are adopting a “less is more” approach to commerce
technology. This trend is notable among digital native DTC brands that initially
differentiated their businesses with outsized technology investments but are finding
this overhead difficult to justify as margin pressure intensifies. This focus on greater
simplicity has pushed some high-visibility brands like Allbirds, Glossier, and others
to pivot to bundled subscriptions from Shopify.
8: “Magic Quadrant for Digital Commerce,” Gartner, Mike Lowndes, et al., August 21, 2023.
21
Select composable commerce startup highlights*
Total Last financing value

Company Last financing date Exit Predictor Year founded HQ location
raised ($M) ($M)
Stripe $9,104.9 April 30, 2023 N/A IPO: 97% 2009 South San Francisco, US
Contentful $338.7 July 28, 2021 $175.0 IPO: 95% 2013 Berlin, Germany
Algolia $334.3 May 1, 2023 N/A M&A: 70% 2012 San Francisco, US
Commercetools $305.0 June 1, 2023 N/A M&A: 69% 2006 Munich, Germany
Bloomreach $302.3 October 4, 2022 $30.0 M&A: 61% 2009 Mountain View, US
Akeneo $207.7 March 15, 2022 $135.0 M&A: 87% 2013 Nantes, France
Contentstack $178.6 November 15, 2022 $80.0 M&A: 83% 2018 San Francisco, US
Amplience $178.3 March 15, 2022 $100.0 M&A: 78% 2008 London, UK
SheerID $97.9 April 16, 2021 N/A M&A: 61% 2011 Portland, US
Nacelle $70.8 N/A N/A M&A: 78% 2019 Los Angeles, US

Note: Probability data is based on PitchBook VC Exit Predictor Methodology.
Risks
High customer acquisition costs and a spending slowdown from cost-conscious

shoppers coalesce and force merchants to further slow technology investments in
favor of shoring up existing technology investments.
22
2024 PitchBook industry & technology outlooks
AI & ML Open-source GenAI orchestration projects will create multiple unicorn startups in early-stage deals.
Enterprise fintech A rise in partnerships and demand for growth will drive an acceleration in M&A.
Infosec Infosec leaders will make multiple IAM acquisitions.

Enterprise tech
Infrastructure SaaS Data software & systems will drive infrastructure investment higher, as enterprises seek to capture and monetize their data.
Enterprise SaaS Enterprise vendors will employ recent AI & ML breakthroughs to develop more mature and impactful solutions.
Crypto The crypto market will shift toward centralized financial structures, influenced by greater institutional adoption.
Insurtech Insurtech investments across VC and M&A will increase, driven by incumbent capital deployment.
E-commerce Composable commerce startup activity will rebound, spurred by a focus on discrete points of friction in the shopping experience and
B2B digital commerce growth.
Agtech Autonomous farming technology will see an increased pace of adoption.

Industrial tech
IoT Supporting the expansion of private 5G networks will create unicorn opportunities for startups.
Supply chain tech Federal approvals for drone delivery will expand, and commercialization will commence.
Carbon & emissions tech The carbon-credit trading market will see growth in removal-based credits.
Clean energy US support of the clean hydrogen space will lead to more acquisitions of VC-backed hydrogen startups.
Foodtech Advances in health consciousness, diabetes medication, and AI tools will drive record investment in personalized nutrition companies.
Consumer tech
Mobility tech Software efforts at automakers will get a reboot as automakers seek to enhance their share of the emerging mobility platform market.
Consumer electronics contract manufacturer Foxconn will begin producing vehicles, further pressuring traditional auto manufacturing.
Consumer fintech Undervalued consumer fintech companies will see positive reratings.
E-commerce AI-powered personal assistants will generate record funding.
Gaming VC penetration into emerging markets will progress as the industry looks to onboard the next 1 billion consumers.
Healthcare (overall) Healthcare will decrease as a share of both PE and VC global deal count.
Healthcare services PE healthcare services platform trades will not resume until the Fed begins cutting rates in earnest.
Digital health Although digital health IPOs will fall short of optimistic projections, at least three candidates will go public.
Biopharma Biopharma startups will require more robust clinical validation prior to pursuing IPOs.
Healthcare
Biopharma The interval between funding rounds for biopharma companies will lengthen from the baseline set in 2021 by several months, not
accounting for startups that cease operations or fail to secure additional funding.
Digital health GenAI will begin to disrupt care coordination as the technology accelerates efficiencies in care search and health benefits navigation.
Pharmatech Despite challenges in public markets and limited exit opportunities, AI-driven biotech startups will maintain robust growth and high
valuations in their early stages.
Medtech Surgical robotics will continue to be a leading VC category—surpassing 2023 funding levels.
Healthcare IT There will be at least two VBC enabler acquisitions.
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2024 Enterprise Technology Outlook

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PitchBook Data, Inc.

EMERGING TECH RESEARCH

Nizar Tarhuni Vice President, Institutional

PitchBook is a Morningstar company providing the most comprehensive, most

Outlook: Open-source generative AI orchestration

Open-source AI projects became some of the fastest growing in open-source

Open-source commercialization has produced some of the largest companies in

Potential unicorns in the open-source community include both model developers

GitHub star count for selected open-source AI agent repositories*

Forming a company around an open-source project can be complex given the

Key recent open-source AI deals*

Databricks November 13 $684.6 $43,184.6 Series I Nvidia, T. Rowe Price

together.ai November 2 $102.5 N/A Series A Nvidia, Emergence, Kleiner Perkins

Mistral AI October 31 $475.5 $2,113.2 Early-stage VC Andreesen Horowitz, Nvidia, Salesforce

Perplexity October 25 $50.0 500 Early-stage VC IVP

Stability AI October 1 $86.0 N/A Early-stage VC Intel

Hugging Face August 24 $235.0 $4,500.0 Series D Salesforce Ventures

Runway June 29 $191.0 $1,500.0 Series C1 Nvidia, Alphabet, Felicis

Mistral AI June 13 $113.0 $260.0 Seed Lightspeed Venture Partners

together.ai May 15 $20.0 $100.0 Seed Lux Capital

LlamaIndex May 12 $8.5 $40.0 Seed Greylock Partners

LangChain April 4 $10.0 $45.0 Seed Benchmark, Miles Grimshaw

Source: PitchBook • Geography: Global • *As of December 4, 2023

Outlook: Rise in partnerships and demand for growth

Median EV/TTM Sales multiples*

Median premium versus Median premium versus Change in median premium

High-growth payments 4.5x 1.8x 2.6x -31%

Medium-growth payments 4.3x 1.4x 2.4x -42%

High-growth fintech 4.9x 1.9x 2.2x -14%

Medium-growth and legacy fintech 4.5x 1.8x 2.3x -22%

Source: PitchBook • Geography: Global • *As of December 5, 2023

1: Additional data can be found in our Q3 2023 Enterprise Fintech Report.

Top strategic enterprise fintech acquirers since 2017*

Investor Deal count Investor type

Visma Group 14 PE-backed company

ION Group 9 PE-backed company

Insightsoftware 8 PE-backed company

Broadridge Financial Solutions 7 Corporation

Jack Henry & Associates 7 Corporation

Sage Group 6 Corporation

Realtime Electronic Payments 6 Corporation

PayPal Holdings 6 Corporation

FNZ 6 PE-backed company

Shift4 Payments 6 Corporation

Payroc 5 PE-backed company

Stripe 5 VC-backed company

Source: PitchBook • Geography: Global • *As of September 30, 2023

Interest rates, inflationary pressures, and geopolitical circumstances remain

Outlook: Information security (infosec) leaders will

Infosec market leader acquisitions by segment (2020 to 2023)*

Identity & access

SecureCircle Preempt Security

ERP Maestro ($28.0M),

Incumbents will face a range of M&A opportunities—not just in IAM—as startups

Outlook: Infrastructure investment will be driven

Importantly, we are seeing accelerated investment in our subsegments of data

Data software & systems market size estimate ($B)*

Annual spending ($B)

Data software & systems VC deal activity by quarter

Outlook: Enterprise vendors will employ recent AI & ML

LLMs have already made a meaningful splash in content generation, customer

Enterprise SaaS market size estimate ($B)*

Outlook: The crypto market will see a significant shift

Institutional participation in the crypto markets has increased significantly over