After 11 years, four funds, and $500 million, we made our 300th Endeavor Catalyst investment in 2023. To celebrate, we shared our origin story, what makes our fund so unique, and how we support emerging and underserved markets and further Endeavor’s mission with every investment. And we’re just getting started!
To kick off 2024, we gathered the whole Endeavor Catalyst team and found our glowing crystal ball. Much like we did back in 2021, we’ve collected our best, expert predictions about investments in emerging markets this coming year. Like all forecasts, we’re bound to make a few mistakes, and in the spirit of the new year, here are 10 predictions for entrepreneurship around the globe.
AI Will Move Beyond the Hype and Focus on Utility
Companies are now facing the realities of successfully deploying generative AI (large language models), including complex data management, the high cost of computing resources, and new regulation—the AI Act was recently adopted by the European Union. The high costs and complexity of creating competitive foundational large language models will continue to favor the big incumbents in the space, including Microsoft, OpenAI, Google, and Meta, but this is nothing new for the tech space.
Startups have always had to fend off looming incumbents. For startups in any industry, anywhere in the world, success lies in building and distributing products that solve real world problems at scale. AI is at a critical inflection point and ripe for innovation and commercialization.
‘Emerging Europe’ Will Join the AI Race
AI companies in Central and Eastern Europe (CEE) collectively raised more than $4.2 billion from 2021-2023, drawing attention from preeminent global VCs. We expect this trend to continue. Top companies like Causaly, Alcatraz AI, Druid AI, and Resistant AI are focused on everything from healthcare to hardware. And in Spain’s fast growing ecosystem, startups like Clibrain and Luzia are optimizing generative AI technology for the Spanish-speaking market.
These are just a few of many examples of AI startups coming from the often overlooked and underestimated markets in Europe. Expect them to grab more headlines in 2024.
Down Rounds Will Continue to Rise (That’s OK!)
The estimated percentage of down rounds climbed to a 10-year high of 17% in Q3 2023, a number that has trended upward for several quarters—sitting at just 5% back in 2021. I wrote about this trend recently in There’s Nothing Wrong With a Down Round. While not aspirational, a down financing round shouldn’t be a death knell either.
When the market changed in the second half of 2022, startups were warned: preserve cash, extend runway, and become profitable. Many did. However, cash can only last so long. We think many companies will likely approach the market in 2024. With their previous valuations hovering at the 2021/2022 peak levels, many companies may likely face flat or down rounds next year.
Emerging Markets Will Begin to Make New Friends
There remains a funding gap (opportunity gap) in emerging markets. While many emerging markets have developed strong, locally-focused, early-stage investors, they have historically lacked local funders willing to write the extra large checks that companies need at later stages. This is changing! Regionally-focused funds are beginning to pop up. The launch of Bicycle Capital—a growth equity fund focused on Latin America, founded by former Softbank partners Shu Nyatta and Marcelo Claure—is a great example. We are closely tracking other funds with similar mandates for Southeast Asia and Sub-Saharan Africa.
These new capital providers are an exciting sign that these markets are maturing and have even greater future growth potential.
Latin America Will Be ‘Rediscovered’ By Global Investors, Again
Latin America is poised for a fresh influx of foreign investment this year. The region has been cast aside lately, but it is filled with high-quality growth-stage startups, has a major gap in growth-stage funding, and has a maturing entrepreneurial ecosystem. Foreign VCs have a long history of “rediscovering” Latin America on the upswing of every economic cycle, only to withdraw once the market cools down because of the region’s perceived riskiness, complex regulatory environment, and limited availability of liquidity and exits.
A message to VCs: The best strategy is to just stick around! As we’ve learned over 26 years, these markets reward patience and persistence.
Regional IPOs Will Increase in the Middle East and North Africa
Although initial public offerings (IPOs) fell worldwide this year in volume and value, countries in the Gulf have experienced a sharp rise in regional IPOs over the past few years—primarily Saudi Arabia and the United Arab Emirates (UAE). These countries have become attractive locations for new listings and foreign investment because they’ve passed comprehensive regulatory changes that align with international standards, their tax and economic policies have improved, and oil prices remain strong.
Right now, IPO numbers are down significantly in the Gulf due to macroeconomic conditions, but we know there is a strong pipeline of IPO-ready companies ready for 2024.
African Startups Will Keep Buying Each Other Up
Growth stage startups in Africa are taking advantage of these challenging economic times to deepen their presence by acquiring competitors at discounted prices, particularly in overcrowded sectors such as fintech, B2B ecommerce, and logistics. We’ve already seen some noteworthy examples of this trend, including Autochek’s (Endeavor Nigeria) acquisition of Egyptian startup Auto Tager and Fin’s (Endeavor South Africa) purchase of Thuthukan.
Mergers and acquisitions are often an important step toward strengthening entrepreneurial ecosystems and offering better, more scalable solutions. We see similar patterns globally, especially in Asia.
A Lot of New Public Companies May Go Private, Or Bust
The IPO and SPAC boom of 2021 created a new class of public companies, and many of them weren’t yet ready for the public eye. Nicknamed zombie companies, these unprofitable businesses stay afloat by taking on new debt, make up 11.5% of US listed stocks, and are underperforming market expectations.
With interest rates remaining high, we expect to see a wave of companies file for bankruptcy or Chapter 11 (bankruptcy filings are already up) and a greater number of take-private transactions that pull public companies back into the private market. While not ideal, these moves may give high-potential businesses a second chance to grow more sustainably.
Investment in Asian GreenTech Will Continue to Grow
Nine out of 10 Association of Southeast Asian Nation (ASEAN) members—which include Indonesia, Thailand, Vietnam, Malaysia, and Singapore—made a strong commitment to achieving net-zero emissions by 2050. This will begin to unlock significant potential for the regional greentech sector. Southeast Asia’s climate technology companies secured more than $1 billion in private funding in 2022, and in Q3 2023 saw their highest volume of greentech companies funded in 5 years. This past year, Endeavor’s eFishery also became the world’s first aquaculture unicorn and Southeast Asia’s first agritech unicorn.
Still, the greentech industry in Southeast Asia is fairly nascent, and will require strong participation from the VC community, improved policy-making, and collective interest to jumpstart more entrepreneurial activity in the space. We’ve loved seeing new funds join the category, including Radical Fund, SGX, and Clime Capital.
Crypto Will Get Regulated and Become More Mainstream
Digital assets and tokens will soon become safer and more mainstream thanks to greater regulatory clarity and Wall Street participation.
The U.S. Securities and Exchange Commission has approved the first ever Bitcoin spot exchange-traded funds for trade on a major U.S. exchange—a historic moment for cryptocurrencies that will better legitimize these kinds of assets. We are also seeing the tokenization of real-world assets, such as commodities, currencies and equities, which Bank of America anticipates being a “key driver of digital asset adoption.”
The volatile nature of tokens, coupled with regulatory uncertainties, fostered a very reasonable environment of caution around Web3, but conditions are noticeably improving.