6 Themes I’m Excited About in 2023

I’m excited about 2023 and the innovation that will come from this moment in time.  On the one hand, many companies unfortunately are coming off a second round of layoffs as uncertainty persists about whether the coming year looks bleaker than the last. But while some are treading water as they “wait and see” how things transpire, others are looking around at their relative opportunity set and thinking about starting a company in a way they may not have considered in the boom of 2021. It’s a unique and powerful combination of necessity and opportunity. As many have written about in recent weeks, times like these have historically yielded many category defining companies and I believe this time will be no different.

There are 6 themes that I’m particularly interested in exploring this year and where I believe, as an industry, we’ll see exciting innovation. They span the gamut from extremely broad to more specific and from consensus to much less so.

In no particular order:

1. B2B payments

2. Fintech infrastructure

3. B2B data

4. ERPs

5. CFO tech stack

6. Vertical SaaS

B2B Payments

I’ve written about my excitement around B2B payments before. There are definitely successful upstarts in this category but I still can’t name a single company that is completely happy with their setup (payments + workflows). It’s a huge market ($125T in volume) and no one is satisfied. This signals opportunity. It’s definitely a hard nut to crack but there’s a big prize for whoever does.

Today there’s generally a lot of manual work and many humans in the loop across the end to end process. This means there must be potential to streamline several components of the flow. For example, I'd love for someone to build a next generation Bill.com focused on the needs of the midmarket business. Bill.com is a great product, but it really stops working for companies as they have more complex needs and as they scale. We've talked to dozens of CFOs about their workflows and they consistently talk about the pain points they have around approvals, foreign exchange and more. Six themes keep coming up, which we've documented in a previous post.

Fintech Infrastructure

Fintech infrastructure is a pretty broad category in many ways as I illustrated in a previous market map. At the same time, the theme is quite specific - enabling speed to market and reduced costs for the next generation of fintechs. Some categories within infrastructure have been addressed, such as Banking as a Service (BaaS) but others still have a lot of greenfield like payment ops or data aggregation and normalization. Categories that drive efficiency and margin will be increasingly important this year given the renewed focus on economics and cash flow. 

In these areas there’s opportunity to reduce the amount of de novo build that every fintech needs to do as well as to reduce some of the “automagical” processes (things that look automated to the user but are actually very manual done behind the scenes). From what I’ve seen the build vs. buy decision today comes down to what the relative tradeoffs between flexibility, cost, and speed are. As this category continues to evolve, my hope is that these are no longer trade offs but that leveraging partners is a clear win across all 3.

B2B Data

There’s still a lot of opportunity to aggregate and normalize “alternative” business data similar to what has been done in consumer. The most obvious use case is underwriting but I continue to believe that if there was an easily accessible repository of broad data on businesses, the types of use cases that would emerge would be broad and novel. The amount of data a business leverages is directly linked to whether the benefit outweighs the friction and cost associated with obtaining it. If it were easy and cheap to get the data, why wouldn’t more companies use it? What I am less sure about is what the most interesting, feasible data types are and what segment is the optimal starting point. I’m excited to develop a stronger POV on these questions.

ERPs

I’m obsessed with the opportunity to innovate in the ERP market and have shared my POV on the topic previously as well. It’s a hard and hairy problem because ERPs are so core and far reaching in a company, but it’s a ~$50 billion market where we haven't seen any substantial new players in decades. I believe successful disruptors will unseat the large incumbents like NetSuite with a verticalized approach targeting the needs of a specific type of business. That allows them to be hyper targeted in their product development and GTM vs. spend years reaching broad feature parity. We've seen a handful of vertical SaaS companies do this, and I think it's just the beginning.

CFO tech stack

At Redpoint we have been looking at the CFO tech stack for a few years now. We’ve made investments in a handful of categories including spend management (Ramp), FP&A (Onplan) and others but there’s still more room to innovate in a finance team’s workflows. I’m interested in treasury in particular because it universally feels like an opportunity to pick off low hanging fruit to drive efficiency, if done right. The opportunities in treasury include:

1. Low risk, low lift ways to increase yield

2. Better FX management

3. All the data wrangling and workflows required to make these critical decisions

In today’s market treasury management innovation has meaningful tailwinds - (1) cash and runway being paramount, (2) volatility and (3) the ability to access meaningful yield in a relatively risk free way.

Vertical SaaS

This is a broad one by definition but a business model and thesis where I’d like to see continued  innovation across many categories that I can’t proactively envision today. I’ve seen companies building for marine services, forestry, security services and more. More to come from us on this but at a high level I’m excited about categories with high fragmentation and low technological penetration. There’s an opportunity to build software, an “OS” of sorts, to power the core workflows of an industry. In addition, I get most excited about workflows where there’s a clear opportunity to quickly layer in financial services to drive LTV on top of the SaaS product, usually through payments, lending, and insurance.

Overall, I’m optimistic about 2023 and what it will bring - I expect that we’ll see fewer fintechs being started but those that do will be focused on big, meaty problems. Given that, these products and platforms will take meaningful time to build but the successful ones will really inflect the cost and efficiency curve for their customers. In a market environment like this one those are the value props that will resonate. I expect that due to the public market performance of many beloved fintech names as well as the OCC and broader regulatory scrutiny, we’ll continue to see an exodus of fintech enthusiasts but those that remain will be the true believers committed to the category and opportunities.