Trends

Like the internet, cloud computing, and mobile, the newest wave of AI is a platform shift that opens up expansive frontiers and wholesale opportunities for disruption. While AI isn’t a novelty, recent model enhancements combined with advanced processing capabilities are unlocking a range of groundbreaking applications, from incremental to revolutionary.

These are still early innings. Developers and researchers continue to push boundaries in areas such as computer vision, natural language processing, and robotics. Many of the advances we anticipate will support productivity. In combination with other technologies, work automation could add 0.5 to 3.4 percentage points annually to productivity growth, adding trillions of dollars in value to the global economy.

As with previous platform shifts, we see the majority of the capturable value higher up the stack towards the application layer. We have seen firsthand through our recent AI exits (Luminar, Casetext, FigureEight, among others) how go-to-market is as important as ever with companies leveraging this technology. We have witnessed the profound impact that comes with a unique dataset, a strong customer base, and an effective market strategy when it comes to a company’s ability to scale their revenue and to achieve their mission.

A new macro environment—led by non-zero interest rates along with step function developments in AI—is opening up a wave of opportunities in fintech. Amid the bull market, fintech innovation had slowed in previous years; new companies have largely been incrementally-valuable derivatives of existing products.

Going forward, we anticipate three trends: 1) a renewed thoughtfulness on customer needs; 2) vertical and horizontal opportunities leading to net productivity gains through AI; 3) a focus on companies building platforms rather than single-point solutions.

McKinsey estimates that banking is expected to have one of the largest opportunities: an annual potential of $200 billion to $340 billion (equivalent to 9-15% of operating profits). Large financial institutions are generating increasingly robust data sets that are siloed across product groups and P&Ls. We can imagine seeing new horizontal data tools to help teams more efficiently query the large amounts of data and draw insights. Fintech start-ups can look to financial institutions as customers and partners, by either building their own platforms as efficient alternatives or offering customers equal access to products and insights at lower costs.

While the last wave of fintech saw a trend toward infrastructure tools opening up the pipes to more quickly and cheaply create new products, the next set of winners will be companies that spend the time understanding the implications of building platforms for customers with greater price sensitivities. With this in mind, we expect to see more direct competition between startups and large financial institutions.

Artificial intelligence and machine learning have taken center stage in revolutionizing healthcare. Innovation cannot come fast enough. US healthcare spend is ballooning; 17.3% of GDP in 2022 went to healthcare, and that number simply grows, year over year. We believe that applying AI to one of the largest domestic industries can and should increase accessibility and quality of care.

We continue to seek out software that helps deliver fundamentally improved patient experiences by unlocking more proactive and customized care, while augmenting providers’ abilities. Predictive analytics is already opening new doors in preventative medicine and personalized treatment plans. These technologies are now pivotal in analyzing complex datasets, enabling early disease detection and tailoring patient care to individual needs. Simultaneously, we're observing a decisive move towards decentralization. The rise of home-based care and mobile diagnostics is particularly relevant for underserved communities and those that experience higher rates of chronic illness—remote communities lacking reliable services and care.

Drawing from our experience building big businesses that work across this singular ecosystem (inclusive of payers, providers, and patients), our conviction only grows stronger that winning healthcare plays must work in concert with the existing system to normalize processes, enhance outcomes, and unlock efficiencies in spend that make quality care more accessible to all.