Startup CEOs Are Getting Optimistic Again

Tech startup CEOs are feeling increasingly upbeat about the year ahead. 

Softbank released its annual survey of the CEOs of its portfolio companies on Monday and found that 49 percent of CEOs are feeling more optimistic about the economy compared with a year ago. Then again, 25 percent said they were less optimistic. Still, it’s is quite the reversal from this time last year. At the time, a downturn seemed all but imminent. Megan Greene, senior fellow at Brown University’s Watson Institute for International and Public Affairs, went so far as to call it “the most anticipated recession in U.S. history.” So with that prevailing mood, it’s no wonder that when asked the same question in 2022, only six percent of CEOs said they were more optimistic, and 80 percent responded they were less optimistic.

That enthusiasm is not restricted to the broader economy. Tech CEOs are also feeling more confident about their businesses, with 70 percent saying they are more optimistic about their company’s prospects than they were a year ago. The survey found that some of the key factors include: calming inflation, the outlook for interest rate cuts, and the rapid advance of artificial intelligence. More than half of the CEOs said they expected rates to drop this year. Nearly three-quarters of them expect inflation to recede further, and just a quarter fear that increasing prices will impact their company, down from 45 percent in 2023.

As for AI, nearly three-quarters of the CEOs increased their investment in the technology last year, with 18 percent more than doubling it. Most CEOs do not plan to slow down. Some 60 percent said they will increase investment in AI again this year, with three-quarters of startup leaders noting that the technology has created opportunities to cooperate more efficiently and improve products.

“Over the last couple of years, founders and CEOs in our portfolio have shown incredible resilience,” said Alex Clavel, co-CEO of SoftBank Investment Advisers, in a statement. “As economic indicators begin to move in the right direction, and as the AI revolution continues to accelerate, they are well positioned to seize the opportunity in front of them.”

Softbank, the Japanese multinational investment holding company, has loomed over Silicon Valley in recent years. With backing from the sovereign wealth funds of Saudi Arabia and Abu Dhabi, it raised the largest venture capital fund ever with its $93 billion Vision Fund in 2017, before turning around and raising Vision Fund 2 just two years later. As of 2021,Vision Fund 2 had amassed $56 billion in commitments–making it the second-largest fund ever, dwarfed only by its elder sibling.

Softbank has used those deep pockets to invest in high-growth technology companies that have become household names and public companies like Uber, DoorDash, and Nvidia. Not all of their bets have had a Midas touch effect. Notably, the Japanese investor lost more than $14 billion on WeWork, which filed for bankruptcy last November. 

Softbank also found that despite the increasingly stiff competition for capital, more of its portfolio companies plan to fundraise this year. Among the CEOs surveyed, 25 percent plan to raise equity, compared with the 15 percent that did so in 2023. The share of startup leaders that plan to fundraise through a combination of equity and debt also increased, with 19 percent citing plans to do so in 2024, up from 8 percent in 2023.

While the CEOs surveyed are betting that 2024 will be a growth year, they still have some cause for concern. When asked about their stress levels, 57 percent said it had increased. There is not just one problem keeping them up at night; there are plenty to choose from. Nearly half of CEOs have found it harder to raise funds. When asked what issues will have a major impact on their companies in the year ahead, 51 percent said rising interest rates, the top concern; 47 percent cited access to capital; 42 percent said market volatility; and 27 percent responded inflation.

And when asked to describe the next 12 months, more than half of the CEOs interviewed, 54 percent, said it would be a time to conserve cash and stabilize the business.