5. 2023 was the breakout for AI
2023 can arguably be labelled as “the year of AI”. This is evident in the significant investments made in AI companies like OpenAI, Anthropic, Hugging Face and Mistral, the merger and acquisition activities exemplified by Databricks acquisition of Mosaic ML (we are proud to have supported the former in the last funding round) and a pronounced surge in enterprise demand and early adoption of AI (with a notable shift of budgets from other areas to AI). Additional drivers were sustained advancements in research, the formation of fresh collaborations, significant activity across the Big Tech and hyperscalers and an ongoing surge in the creation of new AI companies and applications. AI’s disruptive potential is forcing tech companies, especially existing software providers, to integrate AI or risk obsolescence. This subject warrants its own dedicated blog post, so keep an eye out for more insights in later posts.
As the challenging macro conditions remain, we expect the headwinds facing software companies will continue well into the next year and beyond,. However, we remain cautiously optimistic and see promising glimmers of hope coming from ongoing technological innovations and the enduring resilience of the founders and ecosystems we are privileged to collaborate with. We think that some natural attrition and acquisition appetite will make the market stronger, which will create exciting opportunities for companies and investors. Software businesses will need to continue to adapt and navigate the challenging fundraising and IPO climate, while continuing to grow in a more efficient and agile way. Those that manage to do this well will not only survive, but thrive, emerging as stronger and more resilient businesses.
 By “on-prem” we are referring to both private clouds, i.e. third party cloud infrastructure dedicated to a single organisation, as well as owning and managing one’s own infrastructure.
Zaya Kadyrova is a Director at Teachers' Venture Growth (TVG), Ontario Teachers’ venture capital and growth equity arm. Based in London, she helps lead TVG's strategy for direct investments in high-growth European technology companies.