Greenberg Traurig | Emerging Technology Views

Emerging Technology Views provides entrepreneurs and early stage companies a forum to keep abreast of technology news, trends and strategies to help their business succeed. We cover a variety of topics from business formation to seeking investment, IP protection to labor and employment issues, hot spots of innovation to event highlights and anything in between.

5 Trends to Watch: 2024 Emerging Technology

1. Increased Adoption of Generative AI and Push to Minimize Algorithmic Biases – Generative AI took center stage in 2023 and popularity of this technology will continue to grow. The importance behind the art of crafting nuanced and effective prompts will heighten, and there will be greater adoption across a wider variety of industries. There should be advancements in algorithms, increasing accessibility through more user-friendly platforms. These can lead to increased focus on minimizing algorithmic biases and the establishment of guardrails governing AI policies. Of course, a keen awareness of the ethical considerations and policy frameworks will help guide generative AI’s responsible use.
2. Convergence of AR/VR and AI May Result in “AR/VR on steroids” The fusion of Augmented Reality (AR) and Virtual Reality (VR) technologies with AI unlocks a new era of customization and promises enhanced immersive experiences, blurring the lines between the digital and physical worlds. We expect to see further refining and personalizing of AR/VR to redefine gaming, education, and healthcare, along with various industrial applications.
3. EV/Battery Companies Charge into Greener Future. With new technologies and chemistries, advancements in battery efficiency, energy density, and sustainability can move the adoption of electric vehicles (EVs) to new heights. Decreasing prices for battery metals can help make EVs more competitive with traditional vehicles. AI may providenew opportunities in optimizing EV performance and help solve challenges in battery development, reliability, and safety.
4. “Rosie the Robot” is Closer than You Think. With advancements in machine learning algorithms, sensor technologies, and integration of AI, the intelligence and adaptability of robotics should continue to grow. Large language models (LLMs) will likely encourage effective human-robot collaboration, and even non-technical users will find it easy to employ robotics to accomplish a task. Robotics is developing into a field where machines can learn, make decisions, and work in unison with people. It is no longer limited to monotonous activities and repetitive tasks.
5. Unified Defense in Battle Against Cyber-Attacks. Digital threats are expected to only increase in 2024, including more sophisticated AI-powered attacks. As the international battle against hackers wages on, threat detection, response, and mitigation will play a crucial role in staying ahead of rapidly evolving cyber-attacks. As risks to national security and economic growth, there should be increased collaboration between industries and governments to establish standardized cybersecurity frameworks to protect data and privacy.

5 Trends to Watch: 2024 Venture Capital

1. Down-Rounds, Recaps and Difficult Decisions Continue – While many companies tried to avoid down-rounds and recapitalizations by cutting expenses and raising bridge convertible notes in hopes that the funding landscape would change back to more favorable company terms by the end of 2023, that shift does not appear to be coming anytime soon. In late 2023, venture debt lenders were less willing to refinance existing venture debt facilities without an influx of additional equity from existing or new investors. Investors could be making difficult decisions about which companies to fund and which companies to write-off and shut down or sell at a loss. Investors are likely to take a hard look at which companies have real viability versus companies that may just trudge along for a while and ultimately not gain significant traction. Even for companies deemed viable, down-rounds and recapitalizations with pay-to-play and pull-up mechanics, as well as warrant coverage, are in full swing and are likely to continue well into 2024.
2. Have Capital, Will Pivot – After some companies raised record capital in 2021 and 2022 but their initial business plans/models did not pan out, many are sitting on a stockpile of cash without clear direction. Their answer? Keep the cash and pivot. Investors, on the other hand, may not be so inclined to allow companies to fundamentally shift their business plan while spending capital that was intended for a specific product or market. This could lead to spinouts and creation of new companies allowing investors to choose their path – roll the dice with a known management team while they pivot to a new business or ask for the remaining capital returned so it can be deployed in other portfolio companies.
3. AI an Exception – Notwithstanding general headwinds impacting the venture community, start-ups touting advances in artificial intelligence and machine learning (AIML) experienced a banner year in 2023 after products like OpenAI’s ChatGPT and DALL-E, Google’s Gemini, and Midjourney’s eponymous image generator, among others, captured the public’s attention. According to data from PitchBook, AIML companies raised $21.4 billion in 324 transactions through the first three quarters of the year, up from $8.9 billion in 364 deals and $5.1 billion in 380 deals) in 2021 and 2022 respectively. However, the 2023 total includes massive rounds for OpenAI – $10 billion in Q1 – and Anthropic – $ 4 billion in Q3 – suggest a more modest uptick in the market overall. Several name-brand funds have launched AIML-specific funds, while other investors have specifically earmarked large percentages of their existing funds to investments in this space. Look for investments in AIML to continue to grow in 2024.
4. Governance in the Spotlight – Over the last few years, several high-profile VC-backed companies have suffered public scrutiny when they hit a rough patch and unconventional governance structures (such as full founder Board control and super-voting rights) are exposed. Portfolio company governance has even become a topic of discussion with LPs at fund investor meetings and the sudden ouster and reinstatement of OpenAI’s Chief Executive Officer, Sam Altman, has brought governance considerations back to the forefront. Expect corporate governance matters to remain top of mind as founders and investors weigh typical venture capital growth economic models against other considerations (including “public benefit” considerations).
5. IPO Momentum in 2024 – Late-stage, successful VC-backed companies are feeling significant pressure from early investors to achieve liquidity. Hopefully with a better economic outlook — interest rates easing since the Federal Reserve Bank is forecasting three rate cuts in 2024, continued job growth, and cooling inflation — there could be a number of high-profile IPOs for unicorns and others that weathered the storm and have been sitting on the sidelines for the past two years. An IPO exit would be more attractive for these companies, given concern about future M&A exit activity after Adobe’s $20 billion deal to buy Figma was called off, which would have represented the largest ever acquisition of a venture-backed company, according to PitchBook data, and Illumina announced plans to unwind their $7.1 billion acquisition of Grail. Both deals faced regulatory roadblocks.

5 Trends to Watch: 2024 Robotics

1. Specialized Offerings Thrive: Making robots is hard and costs a lot of money. With funding harder to come by, many companies who do one thing and do it right will benefit from proven revenue streams. Look for growth from companies making robots for the difficult, dirty, and dangerous jobs like energy and utilities inspection, as well as those tackling issues arising from climate change, such as irrigation monitoring and optimization.
2. Autonomous Vehicle (AV) Companies Face a Difficult Balancing Act: Last year’s high-profile safety incidents will continue to be a challenge for AV, leading to delays and more human-in-the-loop oversight. But these measures may increase costs and thereby make it more difficult to compete with today’s less expensive alternatives, particularly when it comes to rideshares. Both safety and profitability are critical to success in this industry and AV companies will be forced to walk a tightrope between the two as pressures mount to prove the viability of this tech and associated business models.
3. Drone Industry Consolidation Ramps Up: 2023 was a tough year in the drone world. The abrupt exits of several well-known players sent shockwaves through the industry while many had to resort to product line consolidations and layoffs to stay afloat. The headwinds will likely continue through 2024, but well-funded companies and those with profitable market niches will weather the storm and emerge stronger via low-cost acquisitions and less competition for investment dollars and talent. Regulatory progress – especially in Beyond Visual Line of Sight (BVLOS) and one-to-many operations – will continue to dictate scalability in many respects.
4. Robotic-Assistance Improves the Surgical Outcome: Robotic-assisted surgeries will continue to become more popular. While the robots are unlikely to fully replace human surgeons in the near future, surgical robotic systems provide surgeons with tools, such as assistance in pre-operative planning, enhanced navigation and visualization systems, and more precise tool handling, that will enable them to perform more complex surgical procedures and improve their outcome.
5. IP will Continue to Play a Critical Role: Many early stage companies found 2023 to be a difficult year to raise funds. As they wait for markets to open up, early stage companies should invest in building strong, strategic patent portfolios to protect their technologies. A strong IP position can help robotics companies differentiate themselves from competition and attract investors.

For more information please, contact:
> Chinh H. Pham, Partner – Co-Chair of the Emerging Technology Practice, GREENBERG TRAURIG

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