Union Square Ventures Partner: In 2024, focus will be on AI, Web3, and new energy, but the number of venture capital funds will not increase significantly
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Union Square Ventures Partner: In 2024, focus will be on AI, Web3, and new energy, but the number of venture capital funds will not increase significantly
2024 will be a brilliant year for the tech industry.
Navigating Web3 tides with focused insightsAuthor: Fred Wilson, Partner at USV
Translation: TechFlow
Fred Wilson, partner at U.S. venture capital firm USV (Union Square Ventures), has released his outlook for 2024, including views on the macroeconomy and expectations for AI, Web3, and new energy sectors. TechFlow has translated the full article.
As we enter 2024, capital markets have stabilized and are gradually rising. The Federal Reserve has raised interest rates to its desired level, and inflation has begun to decline. A "soft landing" for the economy now seems possible. This is good news for the innovation economy, as healthy capital markets serve as a necessary support system.
Yet while optimistic capital markets are essential for a thriving innovation economy, they are not sufficient. We also need innovation. The good news is that we have an abundance of it—and 2024 will bring even more. In my forty years in the tech industry, I’ve never seen such a concentrated wave of innovation. It’s extraordinary.
Let’s start with artificial intelligence (AI), the defining story of 2023. An AI “stack” has emerged: large language models and other critical models (for audio, image, video, etc.) now run in the cloud and offer well-documented, supported APIs for developers. More importantly, excellent open-source AI models are now available—many of which outperform proprietary models in key areas. With strong developer tools and infrastructure now in place, we’re entering the era of AI applications—just as browsers ushered in web apps and the iPhone launched the mobile app era. This is huge. In 2023, everyone focused on foundational models like OpenAI, Anthropic, Gemini, and Llama. In 2024, we’ll see new AI-native applications emerge, shifting attention and conversation to higher-level use cases. We’ll also see traditional applications integrate AI to improve their offerings and stay competitive with AI-first disruptors.
But like previous technologies such as web3 and the internet, this new technology will face lawsuits and regulatory scrutiny, raising—and eventually resolving—many important questions. Take litigation first. As the author of over 9,000 blog posts used to train these large language models, do I have a right to a share of their revenue? OpenAI generated over $1.5 billion in revenue in 2023. Should I get a cut? Do I need to join The New York Times and other publishers in suing to claim part of those profits? This is just one of many unresolved issues posed by AI models that must be addressed. I believe it will take years of legal battles and regulation before we understand the appropriate business models and norms for the AI economy. But fortunately, as with web3 and the early internet, the tech community won’t wait for these issues to be resolved. Trillions of dollars are being poured into AI, and that momentum will continue. Innovation never waits for regulations—but regulation will eventually catch up.
This leads naturally to web3, which has faced sweeping attacks from regulators and lawmakers in the U.S. and elsewhere. 2023 was the year web3 held its ground; 2024 will be the year regulators and legislators come to terms with it. We will finally begin to see regulatory clarity emerge in the United States, just as we’ve already seen in the European Union and other regions.
Yet while regulatory clarity is crucial for web3, it pales in significance compared to achieving a blockchain-based “ChatGPT moment.” AI took over forty years to reach its breakthrough moment. I believe web3 will achieve this in less than half that time. As early as 2008, Satoshi Nakamoto gave us the blueprint for building a decentralized internet. I’m confident that by 2028, we’ll be running numerous mainstream applications on this decentralized foundation. I expect to see the emergence of mainstream decentralized applications as early as 2024, thanks to cheaper, faster transactions and simpler user interfaces. Vitalik wrote an excellent piece on this recently—read it here.
Artificial intelligence and web3 are two sides of the same coin. AI will help make web3 accessible to mainstream users, while web3 will help us trust AI. Together, they will create a stronger, more flexible, trustworthy, and fairer internet.
Yet all of this will be meaningless if we don’t accelerate our focus on our warming planet. Earth is heating up faster than predicted, bringing increasing pain and suffering around the globe. Humans struggle to react to threats decades away—but respond much more readily to what’s happening right now. Thus, this growing pain and suffering will force an accelerated transition from carbon-based to clean energy.
The momentum behind this energy transition comes from innovation in energy generation (renewables, nuclear, etc.), energy storage (batteries, storage networks, etc.), and smarter energy distribution. In rebuilding the infrastructure and systems that power our planet, we’re also modernizing energy—making it decentralized, modular, and programmable. If you feel like you’ve seen this movie before, you have. The good news is that this time, if we move quickly over the next two decades, the ending could actually be happy.
Over the past decade, new energy has been advancing slowly and quietly. I believe 2024 will be the year new energy rises into prominence, and I’m excited to invest in this space and help make it happen.
If our capital markets are healthier than ever and innovation is flourishing at unprecedented levels, what about the venture capital ecosystem itself? That’s not a cheerful story. Limited partners—the investors who fund venture capital funds—have taken heavy losses in recent years and have become extremely cautious. Additionally, we’re seeing many large companies downsize or even shut down. Startups are struggling to raise capital. This is a natural correction for an industry that expanded rapidly over the past decade, and it will take time to find a new equilibrium. Given that venture funds typically have ten-year lifecycles—and often take even longer to fully wind down—the venture capital industry evolves more slowly than the companies it backs. I believe we are in a transitional phase that will take at least the first half of this decade to complete.
Therefore, while capital markets may thrive in 2024, I expect venture capital investment and the formation of new venture funds to grow far less than the broader tech industry surrounding them.
In summary, we are in a golden age of innovation. AI and web3 will deliver a new internet that is smarter, more resilient, and decentralized, while new energy will power our lives in sustainable ways without further heating the planet. To me, opportunities to support founders and founding teams building these technologies are everywhere. I believe 2024 will be a stellar year for technology.
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