SMB IT Spending Forecast 2023: What It Means for Technology Startup Funding
Admittedly, technology startup valuations remain under pressure. Still, entrepreneurs should remain upbeat about their long-term business prospects — especially if your business focuses on the SMB technology market.
Indeed, global SMB IT spending for 2023 is expected to reach $1.45 trillion (yes, trillion) in 2023, up 6.3% from 2022, according to Analysys Mason. Even more impressive, SMB IT spending through MSPs is expected to grow 11% in 2023 vs. 2022, the research firm asserts.
Yes, inflation and economic uncertainty are impacting the SMB market — where IT spending growth originally was expected to be 7% for 2023, the research firm conceded. However, “SMB technology spending is gradually getting back to pre-pandemic levels,” said Bob Takacs, research director at Analysys Mason.
Caption: Bob Takacs of Analysys Mason
Another item to keep in mind: Many MSPs actually experienced accelerated SMB growth during the pandemic, Channel Angels believes. The reason: Thousands of customers raced to overhaul their networks and applications for remote work. MSPs, predictably, managed the bulk of that emergency work and gained monthly recurring revenue (MRR) to maintain those newly installed systems.
Funding for SMB Technology Startups: Channel Angels Remains Optimistic
So what does all this mean in terms of SMB- and channel-centric technology startups that are seeking funding?
The simple answer: Most angel investors and venture capital firms don’t quite understand channel partner programs and go-to-market strategies that engage MSPs. In fact, some venture capital firms try to dissuade startups from channel-led business models.
In stark contrast, Channel Angels prioritizes investments in channel-centric technology startups. That’s why we have funded such early stage companies as:
Brelyon, an immersive display and PC monitor company that’s engaging channel partners, distributors and content creators worldwide.
Evo Security, a security startup that promotes identity and access management (IAM) to MSPs.
Lumu Technologies, a provider of compromise detection capabilities to MSPs and MSSPs.
Rewst, a developer of RPA (robotic process automation) software for MSPs in the SMB sector.
Ternary, a Google cloud cost management platform for MSPs.
Zorus, an SMB security platform provider that engages MSPs.
See our entire portfolio of investments here.
Technology Startup Valuations: Reality Check
Admittedly, technology startup valuations remain under pressure — especially compared to valuations from 2021. Among the data points to note:
Venture capital investments and exits plummeted in 2022, according to Pitchbook and the National Venture Capital Association (NVCA).
North American startup funding fell 63% in Q4 of 2022 compared to Q4 of 2021, according to Crunchbase.
Pre-seed and seed-stage valuations fell 19.4% and 15.9%, respectively, in Q3 of 2022 vs. Q3 of 2021, according to AngelList Venture and Silicon Valley Bank.
Amid recent economic and venture funding pressures, a lot of “tourist” investors have left the angel market, venture capitalist Sim Blaustein of BDMI (Bertelsmann Digital Media Investments) told entrepreneurs during a monthly Entrepreneurs Roundtable Accelerator meeting on January 10, 2023 in New York.
Sim Blaustein, venture capitalist, BDMI
We agree with Blaustein’s assessment. And in many ways, that’s good news for technology startups and truly credible angel investors — who can now more easily find each other since market “pretenders” have headed for the exits.
How to Apply for Potential Funding
We expect to remain responsibly active in 2023. If you’d like to apply for potential funding from us, we’ll typically reply with some initial thoughts within two business days of your inquiry. But before you send us your inquiry, please check out this FAQ to see if we’re a potential funding fit for your business.
If we’re not a potential fit for your funding needs, then seek out local or specialized investors by visiting the Angel Capital Association for more leads and contacts.
Still got questions about valuations, funding and deal flow? Feel free to email me: Joe@ChannelAngels.com. Thanks in advance your your inquiries.