Inside the Trends Driver Top Cloud Startups In 2023

Last year, the US Federal Reserve took the cue ball 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 triggered an economic downturn and potential recession. What does that mean for the hottest startups in cloud infrastructure?

The latest crop of startups pursuing cloud infrastructure and communications will need to focus on return on investment (ROI) as well as key trends in the cloud infrastructure market. Our ongoing research indicates that the top opportunity areas 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 that follow these trends.

As these startups tackle these technology challenges, they won’t have the luxury of unlimited funding. They need 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, then follow that up with deep dives into each category with a list of companies to watch.

First, some background on the market.

The IPO market needs to regain its Mojo

It is now a different world for startups. The business environment faced challenges in 2022, including rising interest rates, war in Ukraine and supply chain issues following the covid pandemic and factory closures in China. And after years of easy money, startups and private growth companies are adapting to new realities: more rational valuations, smaller investment rounds and a longer wait to go public.

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

  • In 2022, IPO activity fell 45% and 61% by number of deals and revenue, respectively, year-over-year (YOY), according to Ernst and Young (EY).
  • A total of 1,333 IPOs raised $179.5 billion, according to EY.
  • Not a single IPO 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 increased volatility from rising geopolitical tensions, inflation and aggressive interest rate hikes. Weakening equity markets, valuations and post-IPO performance have further deterred IPO investors,” Paul Go, EY Global IPO Leader, wrote in a research note. “As the pipeline continues to build, many companies are waiting for the right time to revive their IPO plans.”

In other words, there is a need for an adjustment.

Despite these challenges, The Futuriom 50 has raised more than $15 billion, and three companies — Celona Networks, DriveNets, and Versa Networks — have raised $440 million by 2022. So most of them have plenty of money to find out its ROI history.

Cloud ROI will be key

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

The 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 the key to running a more efficient business. They will continue to invest. The data below shows, for example, that a survey of 102 senior-level technology leaders in autumn 2022 believes they will continue to invest in multicloud and hybrid network technology. Of those surveyed, 46% expect to invest modestly and 41% expect to invest significantly – with a total of 87% expected to invest.

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

• Trend #1: Hybrid and Multi-Cloud Management — Organizations are moving to diversify their infrastructure to mix public and private cloud resources. This is a trend that took hold in 2022 and is likely 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 when using cloud.

• Trend #3: Data Management and Pipelines — As data proliferates across hybrid and multicloud environments, the solutions and platforms required to support efficient 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 resources.

• Trend #5: Unified cloud security — With cybersecurity tools multiplying like rabbits, technology leaders want to combine and integrate new security features as much as possible — securing data, networks and cloud computing together in a holistic way.

The new list of Futuriom 50 companies riding on 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 many nuances. Over the next few weeks, I will begin to dive into 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 an independent list voted on by a panel of Futuriom analysts and consultants. Companies do not have the ability to purchase in. The research is supported by organizations that license rights to the report after it is published.)

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