Behind the Scenes of TechCrunch Disrupt 2023: Top 5 Trends in Tech and Venture Capital

‍Every year, TechCrunch sets the stage for industry experts, business leaders, and founders to explore what the future of the tech industry holds during their much-anticipated annual Disrupt conference in San Francisco. Picture Coachella but with a techie twist. The conference boasts coverage on the most pivotal topics in tech: AI, Fintech, SaaS, Sustainability, Hardware, Security, Space, and Builders. 

This year’s lineup included panels on “Pervasive AI: We’re Going and How You Compete”, “How to Construct an Equitable Cap Table”, and “The Robotaxi Revolution”, with AI-generated scripts courtesy of conference sponsor Otter.ai. 

Conference attendees benefit from not only the panel events, but also a multitude of networking opportunities at deal flow cafes, roundtables, and after-hour events. This includes the conference’s crown jewel: TechCrunch’s “Startup Battlefield”, where 200 early-stage startups from all corners of the world pitch to a room full of investors and compete for equity-free prize money.

Congrats to this year’s Startup Battlefield winner BioticsAI, an AI-based platform that plugs into an ultrasound machine to prevent fetal malformation misdiagnosis. 

HearstLab’s Financial Analyst, Kriti Krishna, attended this year’s event. Here are her top five takeaways:

1. AI’s Future Hinges on Scalable Cybersecurity – As AI and cloud-based tools ascend to unprecedented heights, cybersecurity threats escalate in parallel. AI startups, in particular, walk a tightrope, pressured to both craft robust algorithms and scale rapidly. The dilemma lies in heightened exposure to risk with the complexity of models. To scale large language models effectively, startups need to account for cybersecurity vulnerabilities. Investors expect AI founders to proactively hypothesize threats, test models against them and ultimately, pace growth while protecting against catastrophic risks. This convergence of challenges has led to a landscape rife with nascent cybersecurity startups striving to address these risks, catering to both other startups and enterprise-level companies. Panelists across Disrupt’s stages agree that triumph under the “AI bubble” will be claimed by those standing alongside the most formidable cybersecurity counterparts.
2. Gen Z Wants the Internet to “BeReal”– The younger generation’s tolerance for photoshopped images, catfishing, and overly curated lifestyles is waning. Enter a new wave of social platforms that capitalize on this hunger for authenticity. At Disrupt, the following female-founded companies are reshaping the way we connect and present ourselves online: the RAW dating app resembles BeReal, requiring users to upload one, unfiltered photo every day in order to swipe. Communia, a social media platform for women, non-binary, and transgender people, provides a safe online community to practice self-care. While these early-stage startups have yet to reach critical mass, early adoption confirms the surging demand for safe and genuine virtual spaces.
3. The 2023 Market Demands New Series A Metrics – It’s no secret that the current raise environment is tough. Series A startups, historically focused on achieving hockey stick growth, face the brunt of the bear market with deployment down 60% over the last year and a half. As investors pull back capital and invest earlier and earlier, the bar for Series A investments is higher than ever. So how do Series A startups stand out in a challenging market? Investors want to see legitimate product market fit and ample traction ($1M-$2M of ARR). A few years ago, companies with $1M in ARR could successfully raise a Series A at lofty $50M-$60M pre-money valuations. However, present-day expectations lean towards more realistic valuations, closer to $10M-$20M, and down rounds signal a founder’s understanding of market dynamics beyond venture. Bootstrapping is no longer a dirty word as alternative sources of funding, like non-dilutive loans, offer a more flexible liquidity stream. Instead of chasing growth at all costs, investors value prudent cash management and a line of sight to profitability (HearstLab looks for a 1-2 year path to profitability for Series A investments). Given that investors are extending the due diligence process to 6+ months, it’s imperative for founders to shore up expenses, extend runway, and weather the downturn strategically.
4. TAM Analysis Goes Beyond the Market – The TAM (Total Addressable Market) analysis is no longer just about market size. It embodies a strategic roadmap for growth. Founders must clearly articulate their journey from Point A to Point B and why the requested capital/resources are vital for achieving projected growth. The TAM slide provides founders a chance to illustrate an understanding of the market dynamics and a feasible Go-To-Market strategy. Additionally, the TAM analysis allows investors to gauge a founder’s coachability and adaptability. As a founder, be prepared to answer the following questions: Is the TAM large enough if consumer behavior shifts (e.g. pandemic versus post-pandemic behavior)? Can the company expand to territories beyond the initial market? Is the founder raising sufficient capital to follow through on growth targets, considering the unit economics? For early-stage companies, the TAM analysis offers an avenue to unveil the “big vision” and the roadmap towards transforming it into a tangible reality.
5. Impact Investing Hits the Mainstream – The most attended panel at Disrupt featured Shaquille O’Neill (“Shaq”) who discussed “Slam-Dunking Education’s Future with AI & Edsoma”. The talk highlighted a notable shift in the investment landscape: it’s not just about making money; investors also want to leave a positive mark on the world. Earlier this month, Shaq led the Seed Round for EdTech startup Edsoma, an AI assistant that helps students develop their reading skills. Shaq’s investment portfolio also includes franchising Five Guys and Krispy Kreme restaurants as well as participation in Google’s Series A. He attributes much of his investment success to education, considering it a pivotal factor in his career trajectory - returning to school eight years into his NBA career to earn a B.A., and later pursuing an MBA and Master’s in Education. Like Shaq, a growing number of funds and angel investors, including HearstLab, are on the hunt for companies that promise substantial social impact alongside financial gains. As commitments to investing in diverse founders and thesis-driven funds become the norm, startups prioritizing social good finally have a seat at the table.

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