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Predictions for 2023

News, by AlbionVC

AI/ Data DeepTech FinTech HealthTech Life Sciences

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Predictions for 2023

“Predicting the future tech trends for 2023 is a piece of cake. After all, who needs to understand complex economic, social and technological factors when making predictions about the future of technology? It’s not like any of those things will have any bearing on how technology will evolve and be adopted. And even if you did try to take those things into account, it’s not like it would make any difference. So yeah, predicting technology trends is a total breeze. Just close your eyes, throw a dart at a dart board, and voila, you’re a tech trend prediction expert. Easy Peasy.”

This year we asked a sarcastically minded ChatGPT to tell us why predicting tech trends for 2023 was difficult and this was its answer. Whilst our bot friend’s moody response implies it is actually quite hard to predict the future, with results like this we can be pretty certain that the landscape for Natural Language Processing (NLP) is altering rapidly. What other sectors are changing rapidly?

Unlike the previous years (2021 trends, 2022 trends) where we looked at a wide spectrum of trends from therapeutics to the future of work to NLP, this year we are focusing on innovations across the three key themes that are aligned with our investment thesis- AI, healthcare and fintech.

Generative #AI for the enterprise

Generative AI needs no introduction. By now, we have all spent some time playing around with ChatGPT or creating avatars (image above is founder resilience as imagined by David Hockney). This technology has created one of the greatest buzzes we’ve ever seen in consumer tech. We believe this trend is far from being short lived and will rapidly transition to the enterprise.

The days of building bespoke models from the ground up may be over. Every company with NLP as part of their solution will now be considering if building on top of Large Language Models (LLM) will achieve better results. The astonishing progress of LLMs like GPT3 is going to allow companies to build NLP powered applications that unlock incredible, and incredibly valuable, use cases. But don’t take our word for it – try asking a bot instead.

After all, considering what generative AI enables, like the lowering of technical barriers for creation and personalisation, we can see how it could generate long term value, drive efficiencies, boost engagement and create sustainable long-term moat within organisations. Naturally, we can expect more widespread adoption of generative AI from companies in their tech stack.

In addition, we are also excited about the next generation of applications and tooling that this technology will power; writing code, product design, character development, lead generation, investing, drug discovery, to name a few and with that an even greater focus on Explainable AI to address the trust and safety considerations that will inevitably arise.

Blurring of the lines in #healthtech

At AlbionVC, we have previously bucketed our digital health thesis into digital care and digital pharma and, at a high level, described them as two siloed domains. Digital care was focused around the provision of care, and digital pharma was focused towards the generation of evidence informing care. In the process of building the annual State of European Healthcare Market Map 2022, of over 750 companies, we noticed that many companies could have existed in segments with many products starting on the care side but the collected datasets could be used to speed up evidence generation, thus leading to their presence on the digital pharma side.

In 2023 and beyond we expect the digital pharma and digital care spaces to continue to grow closer together. The distinction has previously been between evidence generation in pharma, and the use of that evidence in care, but the model is trending towards an integration of these functions as we usher in the digital revolution for health.

The investment landscape of healthcare in Europe is rapidly changing, and we expect this trend to continue for years to come. Many generalist investors have been actively deploying capital in the space, alongside to the traditionally healthtech focused investors (more in HealthTech Breakfast Club 2022 overview). This has been spurred on by the increased focus on impact investments from an ESG perspective and healthtech being an obvious opportunity for social impact. Moreover, there is clear correlation emerging that the greater the societal impact, the greater the returns for the company and thus the fund. We expect a lot more entrepreneurs to go after a dual mission of fixing the broken healthcare system and thus having a significant positive impact on patient outcomes thus society as a whole, while also delivering significant returns. Some of the early examples include Livongo in the US and Oviva in Europe.

The emergence of the #fintech orchestration layer

It’s no secret that we at AlbionVC are big believers in the API economy, Paul Lehair laid out why APIs are eating the world. Over 80% of the internet traffic goes through APIs today, it is estimated we have surpassed a trillion API end points, and API-first companies have raised in excess of $14bn. Perhaps the defining feature of APIs is their ability to plug and play, mix and match and provide the lego blocks for innovation.

Inevitability

As this ecosystem has exploded, the natural progression has seen the landscape segment. APIs have become best of breed, horizontally and vertically. Nowhere has this been truer than in Financial Services. Today, there are over 4,000 financial services APIs available globally, offering an increasing rich array of features and functionality. However, this choice has led to a financial services infrastructure jumble!

At the consumption end, we enjoy the financial outcomes that modular interoperable financial services provide: Chime provides fee-free mobile-first banking and accelerated access to direct deposits, Betterment provides diversified investing with ETFs, automated investing – just a few examples.

However, this increasing demand for personalised, feature rich financial products with seamless user journeys combined with the supply of a complex web of individual financial services and supporting components is creating a whirlwind of problems for the businesses looking to push the innovation envelope: total cost of ownership increases, data issues emerge, security and resilience management balloons, the list goes on.

What’s next

We believe the answer, and where we will see massive growth this year, is in the financial services specific orchestration layer. This refers to those businesses that enable the process of combining different technologies, such as APIs, cloud services, and software-as-a-service (SaaS) applications, to create a unified platform. This reduces the overhead of managing multiple services from different providers, providing customers with a more secure, efficient, and cost-effective experiences.

The lego board for the lego if you will.

Our investment in Toqio exemplifies this belief. Toqio provides a SaaS-based global financial orchestration platform that enables any business to launch financial solutions, without building and managing complex software. Without it a customer looking to launch a financial product would (in-house) need to integrate and productise a user interface, a customer operations layer, multiple product components (e.g. different payment solutions), a compliance and onboarding layer, and adhere to the appropriate regulatory licenses. While the underlying APIs are the fuel, this new layer will become the operating and delivery systems for them.

A few segments specific examples operating a similar model that are rapidly scaling in Europe: Payments (Primer), Banking (Toqio), Accounting (Codat), Lending (Sikoia), Insurance (Send), Digital Assets: (Metaco).

If you are building a category leading company in one of these areas get in touch with one of our team or submit your deck here.

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