2024: Trends, opportunities and challenges for founders

What trends and technologies can we expect to see in 2024? And what are the opportunities and challenges that founders will face? Our Partners Dr. Angelika Vlachou, Dr. Markus Kückelhaus and Markus Kreßmann provide an outlook, focusing on our investment fields industrial tech, life sciences & chemistry, and digital tech.

Industrial Tech, Deep Tech and Climate Tech: An outlook by Dr. Markus Kückelhaus

In the traditional industrial tech cluster, which encompasses fields such as robotics, IoT and sensor technology, we saw investors growing more cautious last year. The market environment will remain tough in 2024 as a result of macroeconomic conditions. Non-disruptive technologies are generally not so appealing for investors, with component solutions in particular having difficulties. Customers prefer all-in-one solutions.

Looking at our deep tech and climate tech clusters, we see much brighter prospects. In certain areas, we see an up to 50% increase in investment volumes. Despite the economic situation, investors were very active in the fields of AI, new space and quantum technologies – and that will continue.

Dr. Markus Kückelhaus, Partner at HTGF

With respect to future topics such as quantum technologies, it’s no longer a question of whether a key technology will emerge, but rather which one will prevail. Regardless of which approach comes out on top, an extensive periphery is needed, such as connectivity and cabling.

Climate tech will remain a hot topic in 2024. We have investments in the standard renewable energy fields, as well as in areas of the future, such as nuclear fusion. Beyond power generation itself, grids and infrastructure will be highly relevant topics in the coming year, together with the associated business models. E-fuels are on the rise, with a great deal of potential seen in aviation and shipping in particular. The challenges lie not only in the technology itself, but also in selecting suitable locations, determining the required amounts of green power, and capturing CO2 for their production.

That’s why deep tech and climate tech remain highly attractive segments from a venture-capital perspective. However, in view of their capital intensity, supplementary financing models are required. Public funding is vital, serving as a non-dilutive form of financing alongside traditional venture capital.

Even before actually founding a company, entrepreneurs need to think about how to optimally leverage the funding options available before or after foundation to make sure their technology goes as far as it possibly can. It’s a marathon not a sprint, and the focus must not be on achieving a quick exit.

A great example of successful financing in this context is traceless materials, which secured a sizeable amount of funding in a Series A financing round to build a demonstration plant. The company’s founders worked hard to secure non-dilutive funding. Having reliable financing partners that can also contribute considerable sums in later rounds is vitally important.

What does 2024 hold in store for the life sciences? Predictions by Dr. Angelika Vlachou

Precision medicine, which comprises targeted and personalized diagnoses and therapies, will play an even bigger role in the healthcare industry in 2024. Artificial intelligence and big data are currently key topics for everyone. These tools (technologies) enable the processing and evaluation of large amounts of data and support doctors in making evidence-based decisions. AI and algorithms help patients to better understand their medical conditions. The focus here is on patient-centered and data-driven medicine, with privacy playing an increasingly important role alongside evidence and a positive cost-benefit ratio.

When it comes to targeted therapy, linking genes to the causes of diseases will continue to drive developments in the pharmaceutical industry. 2021 was the year in which the use of RNA technologies and therapies in humans took off. They will play a key role in the treatment of further indications. Cell and gene therapies also have the potential to save many lives in future, with long-awaited turning points in the treatment of cancer, immune-mediated diseases, anaemia, genetic diseases, autoimmune diseases such as MS and certain forms of diabetes. For example, CAR T cell therapies, which have already been used to successfully treat leukaemia, are all set to be used in the treatment of solid tumours.

Dr. Angelika Vlachou, Partner at HTGF

In the field of targeted cancer therapy, antibody–drug conjugates (ADCs) are still seen as having great potential. They are booming in the biotech industry, with an increasing number of investments and M&A deals being made. The takeover of our portfolio company Emergence Therapeutics by a global pharmaceutical company and a licensing agreement worth billions between our portfolio company Tubulis and Bristol Myers Squibb reflect the growing interest in these developments. A promising future can also be seen for targeted radiopharmaceuticals, which involves targeted molecules that specifically recognise and bind structures on tumour cell surfaces or the DNA of a tumour cell. The radiation coupled to these targeted molecules is delivered to the cancerous tissue via the bloodstream with high efficiency. Similar to ADCs, small tumours and metastases can be efficiently reached in this way.

The financing environment has become noticeably tougher both in terms of seed financing and follow-on financing. The macroeconomic conditions are providing founders with challenges, although fluctuations in the life sciences sector are less severe than in other economic fields, as there is always a focus on health. Despite a slight recovery in the last quarter of 2023, investors are being cautious and more reactive, focusing increasingly on their own portfolio. Company founders are therefore having to do more comprehensive preparatory work to convince them.

Excellent research alone is not enough; you need a business-savvy team who can successfully drive ahead with an innovation and come up with a market-ready product or application from the development stage.
Receiving coaching and adding new team members with a sophisticated entrepreneurial mindset are also important. Company founders must actively commercialize their innovations and be ready to work on their further development. Building a team with an understanding for the science and the ability to translate this into a business plan aimed at investors and strategic partners is vitally important.

The message to founders is clear: build teams that work well together, form networks, actively take part in exchanges and be willing to translate scientific data into a viable business model that ultimately leads to the commercialization of a product or application. These are all essential steps in founding successful life science companies.

Markus Kreßmann on trends and opportunities in digital tech

Further exciting developments can be expected in 2024, particularly in the field of artificial intelligence (AI). Discussions about the possibilities and limitations of AI will continue to be held at all levels. The use of AI in companies will play a particularly important role. Aleph Alpha’s recent €500 million financing round, which our fund investors SAP, Bosch and Schwarz Gruppe participated in, underlined the efforts being made to integrate AI into products and processes in order to offer tailored solutions to companies.

Similar to the last few years, another important trend can be found in the field of IT security. With the increasing digitalisation of society and business, there are greater requirements in terms of the protection of sensitive data. We have already achieved a number of important portfolio successes in this regard, as was highlighted with our exit from DRACOON in the field of secure data transfer. The company was bought by Kiteworks.

Markus Kreßmann, Partner at HTGF

The third key topic concerns the massive upheaval in the energy sector. High and strongly fluctuating energy prices are forcing companies to optimize their energy procurement and to look for potential savings in their production process. Software solutions play a crucial role in reducing energy costs and using energy more efficiently. Sustainability is also a key aspect, for example through the use of smart solutions for energy forecasts and energy distribution.

Cryptocurrency and blockchain technologies will be another important topic in 2024. The green light given by the SEC for the first-ever spot Bitcoin ETFs in the USA and the upcoming Bitcoin halving will generate considerably increased market interest. This will also accelerate further developments and smart solutions in the field of cryptocurrency and blockchain. Against this backdrop, traditional asset managers, insurance firms and banks will be particularly reliant on disruptive solutions from the cryptocurrency start-up scene, as external specialists are often further ahead with these technologies than in-house experts.

The current investment environment is quite distinctive compared to the crisis years after 2008 or 2001. In contrast to back then, when little or no money was on the market, investors are continuing to invest today, albeit more selectively. Although the investment climate has changed compared to the boom years of 2020 and 2021, start-ups can still operate successfully on the market. Investors are particularly focused on companies offering the right solutions for real problems who have a well-functioning business model with substantial growth and are led by a first-class team. The people factor is especially important. A team that works together well and with mutual trust in all areas – from technology and product to sales – has a chance of being very successful even during less dynamic growth phases.

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