Last year was a turbulent one for the tech sector in British Columbia and around the world, with many leading tech companies announcing significant layoffs and with less capital flowing into the sector than has in previous years.
Experts in the industry say they expect to see slightly higher levels of investment and employment in 2024 as companies emerge from a reset and readjustment period in 2023 – but neither is expected to return to funding and job levels seen between 2020 and 2022.
“The end of near-zero interest rates, and tougher economic conditions, brought down valuations from their peak, so companies have had to figure out how to operate within this new landscape. That will continue and is an issue in tech globally,” said Jill Tipping, president and CEO of BC Tech.
Artificial intelligence (AI) is anticipated to lead the charge in growth and investments as companies seek AI solutions to increase productivity and drive profitability, according to those who spoke to BIV. AI will also be a priority area for government support.
“Tech has been built on the idea of grow at all costs and don’t worry so much about profit. Instead, grow, grow, grow. That’s really changed in the past year to year and a half.… Companies are being forced to figure out how to be profitable,” said Jeremy Shaki, CEO of Vancouver-based Lighthouse Labs.
Due to a “changing philosophy” that emphasizes profitability over growth, Shaki said he doesn’t expect tech companies to start hiring on a large scale in 2024, and does expect investors to be more eagle-eyed with their money.
“We’re entering that period for companies where they’ve normalized their smaller staffing structures… I think companies will start back towards their growth in 2024, but a lot will still be hunkering down. There’s a lot of companies that are just going to be trying to survive in 2024,” he added.
Ray Walia, CEO of Vancouver-based non-profit tech incubator Launch Academy, said the restrained investment environment has forced tech companies to shift to the “fundamentals” of a business, from focusing on raising capital, building their team and boosting their valuation.
“You have to have customers, you need to make money, you can’t just depend on government loans or venture capital dollars and things coming on,” said Walia.
“We were looking at how do we build sustainable businesses, reduce costs, reduce overheads. That played its way through in 2023, I think will still play its way in 2024.”
Generative AI as a gamechanger
After a significant year for AI developments – headlined at least initially by ChatGPT garnering mainstream, worldwide attention – experts say 2024 will be an even bigger year for the technology, which will lead growth and investment in the tech sector in B.C.
Despite less investment and fewer deals in B.C. in the first three quarters in 2023 compared to previous years, the tech sector still saw more deals that other sectors of B.C.’s economy, according to a report from the Canadian Venture Capital & Private Equity Association (CVCA). This was driven by investors’ interest in AI and its business potential.
“The gamechanger is generative AI … from tracking fish shipments around the globe to monitoring the dark web to managing assembly lines. We expect to see continued investment and customer demand for AI solutions in 2024,” said Tipping.
Shaki said tech companies’ emphasis on profitability is driving those firms to invest in AI adoption to understand how they can achieve their growth goals with less staff.
“There were two ways of having to use AI: There was having AI do people’s jobs … and then there was people who can use AI in their day-to-day job to be better at their job and more efficient and effective,” he said.
“I believe that AI is probably one of the biggest ones that pushes beyond the current more conservative climate … [and] opens a lot of doors there.”
Walia said that, in 2024 and beyond, he expects to see companies looking at not just how to have AI in their products, but how they can use AI in their back office to reduce expenses and create more efficiency.
“You’re probably going to see new startups coming up because … people are looking at problems or challenges that they’ve had in their businesses that can now be addressed using this new technology that’s far more accessible to people.”
AI will also be a priority area for government support in 2024, along with biotech and quantum, and tech businesses in remote areas, according to Brenda Bailey, B.C. minister of jobs, economic development and innovation.
Tech trends to watch in 2024
In addition to AI, several areas within the tech sector are expected to grow faster than others this year, according to industry experts.
“Definitely blockchain is coming back because crypto prices are coming back up, so a lot of interest is back on that,” said Walia.
“Fintech is the other one. The Canadian government’s been promising to open up banking for a while. Once that does come in, you’re going to see a lot more fintech opportunities start to come up because we as Canadians have the appetite for that.”
Tipping said she expects to see more technology adoption in traditional industries – such as energy, mining, transportation and agriculture – to fuel growth, create cost efficiencies, and support emissions-reduction and climate-related strategies.
“I expect that both the 2024 provincial election here in B.C. and the U.S. election could have a big impact. The sector will also be keenly watching for interest rates to come down, market conditions to improve and for more capital to start flowing from investors to help fuel growth,” Tipping said.
“Tougher market conditions always result in more pessimism than optimism, but … many of the most successful companies of all time were founded during economic downturns. Necessity is the mother of invention and innovation and 2024 will be a good year for B.C.’s tech sector.”
For Shaki, 2024 is likely to be a year of transition before a new dawn for B.C.’s tech sector.
“Because 2023 was so disorienting, I think 2024 is definitely going to be more normalizing.... And 2025 I think you’ll see a bigger year.”
