Key Points
- The rise of generative AI (GenAI) is on everyone’s mind as we believe private tech companies must develop and continue to refine their approach to this new technology if they want to stay ahead of competition.
- Along with GenAI, another key theme from the conference was the importance of data. The focus becomes leveraging data and AI; which is a topic we think continues to evolve over time.
- Another key conference conversation centered around the growth of cybersecurity, as it was evident that the cybersecurity industry is expected to continue to thrive, but could see consolidation.
- Cloud migration will continue, but cloud cost optimization becomes part of an ongoing IT strategy.
- Overall, companies remain cautious about the macros as many executives are looking for stabilizing trends.
RBC Capital Markets’ Private Technology Company Conference hosted nearly 40 leading software, FinTech, internet and AdTech companies to discuss the future of the technology space. What were some of the event’s key takeaways?
GenAI is here to stay
GenAI is taking center stage in the private tech company space – and beyond. Fine tuning a long and near-term approach to GenAI will prove vital to the future success of companies in the sector, which can’t afford to move slowly when it comes to integrating this advancing technology into their products, developments, and operations.
“Nearly every management team we spoke with predicted GenAI will disrupt various aspects of their business or industry, as well as how customers leverage software,” says Matt Hedberg. “And, so, having an approach on GenAI is super important.”
When considering the future of GenAI, companies are predicting the technology will function as a tool to boost sales, enhance customer experience, and reduce IT, sales and marketing costs. But, as GenAI continues to rapidly advance, many acknowledge the unknown potential.
“We heard from a lot of management teams that this is being viewed as an evolving topic. They're listening to how customers want to consume or leverage GenAI. Ultimately, these management teams are thinking about how they can introduce it to their own product stack to perhaps leapfrog competition,” says Hedberg.
“We think that as the future evolves, investors want to see tangible evidence of generative AI.”
Data and GenAI
Along with GenAI, another key theme from the conference was the importance of data. For tech companies, successfully utilizing data has become vital to delivering a quality customer experience, next-gen products, and overall company success – something which has become even more true alongside the rise of GenAI. The focus becomes leveraging data and AI; which is a topic we think continues to evolve over time.
“We think data is absolutely fundamental to nearly everything today – and in this case, as it relates to generative AI, we think it's super important. Having unique datasets will allow large language models – or LLMs – to be trained, and offer companies really unique insights into merging both public and private data,” says Hedberg.
“Having unique datasets allows these companies to become more strategic and disruptive, and I think that could have ripple effects to public companies – when it comes to disruptors or to potential M&A opportunities. The unique data set offers a critical moat that we think offers a real differentiation today.”
Cybersecurity and GenAI
Another key conference conversation centered around the growth of cybersecurity, as it was evident that the cybersecurity industry is expected to continue to thrive.
“It remains as robust as ever. Hackers are leveraging code generation tools to rapidly create more effective malware by leveraging GenAI. So that leaves the cybersecurity industry in high demand.”
As the threat landscape continues to evolve, another topic we heard is that the big cybersecurity vendors are likely to become bigger through consolidation; a trend we expect to continue in the future.
Clouds optimization is part of an ongoing IT strategy
In today’s post-pandemic world, cloud migration accelerated by COVID-19 is expected to continue. That said, cloud-cost optimization has become a priority for many private tech companies. Executives and their customers are focusing on reducing cloud spending, aiming towards an improved ROI through optimization and more efficient integration.
“Being smart about cloud spending is the new normal,” says Hedberg. “A number of private companies are offering tools to help customers optimize cloud spend, alongside offerings from the hyperscalers.
“Overtime, we will continue to see a migration towards a public cloud. But it could come at a bit more of a measured pace. Ultimately, this positions customers to feel better about the long-term trajectory of leveraging both public and private cloud spend. We think this optimization trend will become part of the fabric that IT executives consider when rolling out new applications.
“While institutional investors are concerned about the rate of cloud cost optimization, my main takeaway is that this will be part of the healthy progress to additional cloud spend.”
Zooming out to the macros
Overall, companies remain cautious about the macros as many executives are looking for stabilizing trends. Despite this, there are some areas of high growth – particularly in relation to cybersecurity, GenAI, and vertical software offerings.
“We’ve talked about software eating the world for the last decade. And it is alive and well. I think that is especially prevalent within vertical software companies. Demand signals remain somewhat mixed in private software company sectors, which mirrors the public software peers. But there are certainly pockets of strength in vertical software, which is encouraging,” says Hedberg.
“Nonetheless, areas of caution and uncertainty remain as the year progresses. But the key theme is a focus where software can unlock value and underserved categories - that is where we’re seeing very healthy growth.”
