Inside the Trends Driving Top Cloud Startups In 2023 ( – Stack Technology

Last year, U.S. Federal Reserve took the punch bowl away from the financial markets, putting an end to the easy money and stratospheric valuations in the venture capital (VC) and startup markets. This also precipitated an economic slowdown and potential recession. What’s that mean for the hottest startups in cloud infrastructure?

The latest crop of startups pursuing cloud infrastructure and communications will have to focus on return on investment (ROI) as well as key trends in the cloud infrastructure market. Our ongoing research indicates that the best areas of opportunity for 2023 include hybrid/multicloud management, cloud cost management, data management, cloud security, and edge/cloud convergence. This week we identified the Futuriom 50, the top 50 private companies pursuing these trends.

As these startups tackle these technology challenges, they won’t have the luxury of unlimited funding. They’ll have to prove they can help global organizations move to more efficient cloud infrastructure. In this multi-part series, we’ll look at the top trends in the cloud infrastructure market, and then follow that up with deep dives in each category with a list of companies to watch.

First, some background on the market.

IPO Market Needs to Regain its Mojo

It’s now a different world for startups. The business environment had challenges in 2022, including rising interest rates, war in the Ukraine, and supply-chain issues lingering from the COVID pandemic and closures of factories in China. And after years of easy money, startups and private growth companies are adjusting to new realities: More rational valuations, smaller investments rounds, and a longer wait to go public.

In 2022, the market for IPOs all but shut down – following 2021, which was a record year for technology IPOs and represented the top of the last cycle. For reference, here is some data on the IPO market:

  • In 2022, IPO activity dipped 45% and 61% by number of deals and proceeds, respectively, year-over-year (YOY), according to Ernst and Young (EY).
  • A total of 1,333 IPOs raised US$179.5 billion, according to EY.
  • There was not one single IPO that raised more than $1 billion, after 15 IPOs raised at least that much in 2021, according to FactSet.

“A record year for IPOs in 2021 gave way to increasing volatility from rising geopolitical tensions, inflation and aggressive interest rate hikes. Weakened stock markets, valuations and post-IPO performance have further deterred IPO investor sentiment,” wrote Paul Go, EY Global IPO Leader, wrote in a research note. “As pipeline continues to build, many companies are waiting for the right time to revive their IPO plans.”

In other words, an adjustment is needed.

Despite these challenges, The Futuriom 50 have raised more than $15 billion and three companies — Celona Networks, DriveNets, and Versa Networks — raised $440 million in 2022. So most of them have plenty of cash to figure out their ROI story.

Cloud ROI Will be Key

Private companies now need to gear up for potential profitability and more rational growth. Many of the Futuriom 50 have something working in their favor: Cloud technology can present tremendous ROI and will remain in demand even in a recession, as companies invest in their long-term digitalization and cloudification strategies. Technologies such as AI, machine learning (ML), data analytics, and cloud computing infrastructure will fuel new applications as well as efficiencies.

Demand for these advanced technologies is not going away – organizations will simply take a more cautious approach to their technology investments.

In our discussions with cloud technology leaders, they see digital transformation efforts as key to operating a more efficient business. They will continue to invest. The data below, for example, shows that a survey of 102 senior level technology leaders in in the fall of 2022 believe they will continue to invest in multicloud and hybrid networking technology. Of those surveyed, 46% expect to invest modestly and 41% expect to invest substantially — with a total of 87% expected to invest.

For our trends identified in 2023, we used data from all of our recent six months of data, surveys, and discussions with technology leaders. Here are the key trends we expect in cloud and communications infrastructure in 2023:

• Trend #1: Hybrid and multicloud management — Organizations are moving to diversify their infrastructure to blend public cloud and private cloud resources. This is a trend that was taking hold in 2022 and is poised to accelerate in 2023.

• Trend #2: Cloud and cost management — With a more conservative business environment and potential recession in 2023, business leaders are looking to technology to help optimize existing resources and reduce costs, especially with the use of cloud.

• Trend #3: Data management and pipelines — As data proliferates across hybrid and multicloud environments, solutions and platforms required to support effective data systems are emerging, many powered by AI and machine learning (ML).

• Trend #4: Edge/cloud convergence — The technology leaders and organizations we track are increasingly looking at new ways to connect, manage, and use data at the edge in conjunction with public and cloud cloud resources.

• Trend #5: Unified cloud security — With cybersecurity tools multiplying like rabbits, technology leaders would like to combine and integrate new security functions as much as possible – securing data, networking, and cloud compute together in a holistic way.

The new list of Futuriom 50 companies riding these trends includes the following: Anjuna, Arrcus, Aryaka Networks, Aviatrix, Aviz Networks, Betacom, CAST AI, Cato Networks, Celona Networks, Chronosphere, ClearBlade, Cloudbrink, Cockroach Labs, Databricks, Devo, Dragos, DriveNets, Elisity, EngFlow, Exabeam, Fivetran, Fortanix, Graphiant, Hazelcast, Hedgehog, Itential, Kentik, Kong, Lacework, Macrometa, Materialize, NetBrain, NetFoundry, Netris, Netskope, PacketFabric, Prosimo, Orca Security, Rubrik, Selector, SonarSource, StackPath, Stackwatch, Stellar Cyber, Striim, Tecton, Teleport, Tigera, TrueFort, Versa Networks, Wib.

It’s a big list, with a lot of nuance. In the next few weeks, I’ll start diving into these each of these trends and companies in more detail.

(Disclosure: Raynovich is the founder and principal analyst of Futuriom, which sells technology market research to some of the companies mentioned in this column. The Futuriom 50 is a independent list voted on by a panel of Futuriom analysts and consultants. Companies do not have the opportunity to buy their way in. The research is supported by organizations licensing rights to the report after it is published.)