Last year will be marked by low cloud market growth as enterprises regroup and manage expenses to err on the side of caution, according to Thomvest Ventures Partner Umesh Padval. But if history repeats itself, "some great companies will be created or emerge during the downturn we are experiencing now," he told SDxCentral.

Cloud demand skyrocketed as employees began working from home during the pandemic, and enterprise cloud migrations continued accelerating as those hybrid and remote styles of working gained popularity, Padval explained.

But more recently, "the economy started slowing down as the Fed started increasing the interest rates, and inflation started going up along with global geopolitical issues. This spurred enterprises to start reducing their spending and that included cloud expenses," he said.

While the venture capital firm has seen cloud growth slow, "the move to the cloud is far from being over," he said, citing new cloud applications that will drive the adoption of cloud services going forward.

In terms of cloud funding and valuations in 2023, Padval noted cloud infrastructure is "a massive market." He predicts new cloud companies with exciting opportunities will emerge during this downturn and join those that originated during the past few years.

"We feel that there will be select opportunities to invest in really good companies with great founders at valuations which are much more reasonable than in the past," he said.

Amid this economic uncertainty, Padval expects larger cloud providers like Microsoft, Google Cloud, or Amazon Web Services (AWS) may get more aggressive and increase their market at the cost of smaller providers, and "some of the smaller providers may be acquired" by cloud hyperscalers.

But there will also be "innovative companies" built during this economic downturn that address novel cloud infrastructure pain points, just "as history has shown in past downturns in other market segments," he argued.