)(general partnership)and the societ in accomandita sem-plice(s.a.s. FrameMaker 2019.0.4. Aqu estn los recursos de soporte y reparacin para su computadora mvil. (Searches for wide leg trousers are 50%,oversized blouse are 26%,oversized knit sweater are 22%)02DopamineDressing03ProportionPlayWomen are learning the art of proportionsadding cropped outerwear to their wish lists. (Searches for gingham romper are 412%,gingham top are 27%,and girls floral top are 17%)42CottagecoreKids43Prim andProperKids are hopping on the cottagecore wagon with prairie dresses and smocked shirts. To achieve the best fast charging results use only Zebra charging accessories and batteries. Install a micro secure digital (SD) card (optional). (Searches for smocking top are 43%,bib collar are 42%,and prairie dress are 21%)Kids are putting their best foot forward in 2022 with frilly attire perfect for dance recitals,school shows,and concerts. Pngase en contacto con el soporte inmediato hoy mismo. Meet your goals for associates, inventory and customer experiences with The Modern Store framework. (Searches for bloat supplement are 193%,ingestibles are 58%,and omega-3 supplement are 18%)Naturopathy69Anti-InflammationStaying hydrated is an important,if often forgotten,practice.Hydration multipliers and IV drips are here to help. )The 2016 Stability Law established a tax credit for the acquisition of capital goods intended for production sites located in the Southern regions of Italy(Campania,Puglia,Basilicata,Calabria,Sicily,Molise,Sardinia and Abruzzo).Investments are eligible for con-cessions which are made in machinery,pant and various equipment(also through finance leasing)relating to:the creation of a new factory;the extension of an existing factorys capacity;diversification of the production of a factory to obtain products not previously manufactured;a fundamental change in the overall production process of an existing factory.Art.4 of Decree Law 91/201710,for the purpose of promoting the creation of favourable conditions for development,in certain areas of the country,of enterprises already op-erating,as well as the establishment of new enterprises,provided for the possibility of 9 That is,by 30.06.2023,provided that by 31.12.2022 the seller has acquired the relative order and that down payments have been made for at least 20%of the purchase cost.10 Decree Law 20 June 2017,no.91,Disposizioni urgenti per la crescita economica del Mezzogiorno(Urgent provisions for economic growth the South of Italy).44Italy Singapore VietnamItaly-5.Forms of incentives and support to investors and enterprisessetting up so-called ZES(Special Economic Zones),inside of which it is possible to benefit from tax concessions and the simplification of administrative procedures.Specifically,a tax credit has been established corresponding to the overall cost of the capital goods within the maximum limit,for each investment project,of 100 million euros.The ZES tax credit has been recently extended,including also the purchase of land and the acquisi-tion,development or extension of real estate instrumental to the investments.The Southern Italy tax credit is proportionate to the overall cost of the assets11,within the maximum limit,for each investment project,of:3 million euros for small enterprises;10 million euros for medium enterprises;15 million euros for large enterprises.The determination of the maximum thresholds currently in force has superseded the previous legislation,according to which,the limits in question referred to the cost of the assets net of depreciation provisions made in the tax period,with relation to the same categories of asset belonging to the production site in which the new investment is made.The tax credit for areas in Southern Italy,on the basis of the region of reference and the dimension of the enterprise,is calculated according to the rates shown in the table below:RegionsSmallMediumLargeBasilicata,Calabria,Campania,Molise,Puglia,Sardinia,Sicily455%ruzzo30 %The above rates are applied also to the tax credit relating to Special Economic Zones.11 For investments made through finance leasing contracts,the cost incurred by the lessor for the acquisition of the assets is referred to;this cost does not include maintenance costs.45Italy Singapore VietnamItaly-5.Forms of incentives and support to investors and enterprises5.4.Aid for Economic Growth(so-calledACE)(Art.1,Decree Law 201/2011 art.19,Decree Law 73/2021)Aid for economic growth,better known in Italy with theACEacronym,is a conces-sion intended to foster the capitalisation of enterprises and is directed towards limited companies,partnerships and individual entrepreneurs in the ordinary accounting regime and other entities resident in Italy,as well as the same non-residential individuals and entities with respect to permanent establishments in Italy.The concession consists in a deduction from overall income of a percentage return on capital introduced or increased in the Italian enterprise,equal to 1.3%,permitting a reduction of IRES and of IRPEF,besides of the relative surcharges.The concession has no impact on IRAP.The increase in equity for ACE purposes,on which to calculate the aforementioned return percentage,is determined,generally,considering as increases cash contributions and provisions of available profits and reserves and as decreases reductions in share-holders equity attributable to shareholders(or to the entrepreneur)for any reason.5.5.Tax credit for research and development(Law 190/2014)The 2015 Stability Law introduced a tax credit in favour of all enterprises,regardless of their legal form,of the economic sector and of the tax regime adopted.The tax credit is quantified on the amount of costs incurred in each subsidised tax period,exceeding the average of the same investments made in the three previous tax periods.The level of aid,the maximum amounts and the concessions provided for vary on the basis of the activities in question:1.Fundamental research,industrial research and experimental development in a scientific or technological field12.12 The criteria for the correct application of said definition are set out in detail by art.2 of Ministry of Economic Deveopment(MISE)Decree 26 May 2020 which distinguishes them taking account of the general principles and criteria contained in the Frascati Manual 2015-Guidelines for collecting and reporting data on research and expe-rimental development(https:/www.oecd.org/sti/inno/frascati-manual.htm).46Italy Singapore VietnamItaly-5.Forms of incentives and support to investors and enterprises2.Technological innovation aimed at the development of new or substantially impro-ved product or production processes.3.4.0 and green technological innovation,aimed at the development of new or sub-stantially improved products or production processes for the achievement of an ecological transition or 4.0 digital innovation objective13.4.Design and aesthetic conception activities aimed at significantly innovating the products of The different rates subdivided on the basis of the type of activity,are summarised in the table below.202220232024-20252026-2031Research and development Rate20%Amount limit4 million5 million5 million5 millionTechnological innovationRate10%5%-Amount limit2 million2 million2 million-4,0/green inno-vationRate15%5%-Amount limit2 million2 million4 million-DesignRate10%5%-Amount limit2 million2 million2 million-13 The criteria for the correct application of said definitions are indicated in arts.3 and 5 of the aforementio-ned Ministerial Decree,taking account of the general principles contained in the Oslo Manual 2018-Guidelines for Collecting,Reporting and Using Data on Innovation,4th Edition. Table 4 Charging/Notification LED Charging Indicators. Insert the battery, bottom first, into the battery compartment in the back of the device.Figure 9 Insert Bottom of Battery into Battery Compartment. (Searches for dairy free ice cream are 51%and food sensitivity test are 9%)Anti-Allergy74Social Feed FoodNew years resolution or not,healthy habits are always on trend.Immune boosters can be added to smoothies and other meals for additional benefits. (Searches for psychobiotics are 162%,mushroom supplement are 105%,and cannabinol are 38%)Coping with work from home,burn out,and daily distractions,were looking for ways to more efficiently manage our time. (Searches for vaginal serum are 34%and feminine wipes are 28%)IntimateHealth65Pain ReliefA range of products and treatments are available for those looking to relieve pain in the new year. (Searches for 2000s fashion are 122%,low rise skirt are 144%,and low rise flare jeans are 81%)10God Is A WomanReaching back to the 70s and 80s for style inspiration,women will be infatuated with retro silhouettes and classic styles this year. ),in the presence of non-independent agents that have the power to close contracts in the name and on behalf of the foreign company or act for their closure without substantial modifications made by the foreign enterprise(so-called commission agent)6.From a civil law point of view,also the permanent establishment is not a legally auton-omous entity with respect to the parent company.It is essentially a mere means through which the business activity is carried on.As a result,although it is typically provided with an endowment fund,it does not need to formally establish share capital or have inde-pendent corporate bodies.4 The new paragraph 5 of art.162 of the Income Tax Consolidated Act provides for the so-called anti-fragmen-tation rule,aimed at preventing the non-resident enterprise from artificially subdividing a single activity into a number of operations,considered preparatory and auxiliary,only for the purpose of meeting one of the conditions excluding the permanent establishment definition provided for by the so-called negative list.5 The characteristics necessary for being defined as a M.P.E.include principally the fixed nature in time and space of the fixed place of business and the requirement that the activity of the foreign parent company is carried out in said place.6 With regards to the P.P.E.,it should be noted that the power assigned to a person must be effectively exercised,not in an occasional manner,and must relate to the foreign parent companys business activity.Conversely,the status of permanent establishment is not met when the person that operates on behalf of a non-resident enter-prise only carries on merely auxiliary and preparatory activities.When a person operates exclusively or almost exclusively on behalf of one or more enterprises with which they have close ties,they cannot be considered as an independent agent.28Italy Singapore VietnamItaly-2.Starting a business activity in ItalyWith reference to aspects relating to taxation,the permanent establishment is a signif-icant entity both with regards to value added tax(VAT),and is an autonomous centre for the allocation of revenues and costs,and is taxed in the territory of the Italian State for the income generated there by the P.E.The permanent establishment is considered as an entity resident in the Italian state for tax purposes and as such is subject to the same tax regulations provided for individ-uals and entities carrying out business activities in Italy.In accounting terms,the operations carried out by the permanent establishment are recorded in separate accounts from that of the parent company and merge into the fi-nancial statement of the foreign enterprise,consolidating with the accounting records of the parent company.The permanent establishment keeps accounts only for tax purposes in order to quanti-fy the income attributable to it according to the arms length principle.Said income is de-finitively taxed in the foreign State,and is consolidated in the parent companys overall income.The taxes paid in Italy are deducted from the parent companys income through the tax credit system provided for by the OCSE Model and by art.165 of the Income Tax Consolidated Act(in that case for foreign branches).One advantage of the use of a permanent establishment with respect to the setting up of a company arises in the event of making substantial losses.With a company,in fact,it would be necessary to resort to recapitalisation,while in the case of a branch,it is not necessary to restore the initial endowment fund or,in all events,intervene with regards to capital.In addition,distributions of the endowment fund from the branch to the parent com-pany are not subject to withholding tax in the Italian State.The OCSE Guidelines on the attribution of profits to a permanent establishment permit,under certain conditions,the allocation of funds between the parent company and the permanent establishment.Said passive interests,together with interest payable on loans taken out directly by the permanent establishment can be deducted according to the ordinary rules of the Italian State.2.3.Incorporating a companyThe incorporation of a company is the most complete way of establishing a presence in Italy on the part of a foreign investor.Italian law offers a wide range of company forms useable for carrying on a business activity,the choice of which depends on numerous factors relating to the entrepreneurs 29Italy Singapore VietnamItaly-2.Starting a business activity in Italyorganisational requirements,the business objects established in the memorandum of association by the members or shareholders,as well as with respect to liability and the taxation regime to which it is intended to be subject.The rules regarding types of companies are contained in the Italian Civil Code and in special laws bearing detailed provisions for companies operating in sectors subject to supervision,such as listed companies,banks and insurance companies.Limiting our analysis to companies that do not carry on their business activities in su-pervised sectors,a first classification to make,with regards to legal status,relates to the distinction between partnerships and companies.The first category including the societ semplice(s.s.)(simple partnership)the soci-et in nome collettivo(s.n.c. Carefully remove all protective material from the device and save the shipping container for later storage and shipping. (Searches for broga are 73%and yoga retreat are 28%)26Amangiri YogaBored Ape Yacht ClubGREEN-WASHINGNFTsBROGAOur pets are members of the family,and no one can tell us otherwise.Pet tech,prescription food,and DNA kits reveal the lengths pet owners are willing to go for their best friend.Four Legged Family86(Searches for CBD for dogs are 138%,pet tech are 76%,prescription dog food are 10%,and dog DNA kit are 6%)88Whats your sign?Astrology is like a religion for many and will continue to make a cultural impact in the coming year. (Searches for pain relief roll on are 56%and cryotherapy are 18%)62AlteredState63TimeManagementDerived from mushrooms or made from CBD,this years top products are geared toward altering your mental state. All other trademarks are the property of their respective owners. Issue 24 November 2022|From Dezan Shira&AssociatesOpportunities in Singapores Manufacturing Sector in the Era of Industry 4.0How Singapore is Poised to Take Advantage of Industry 4.0Implementing Industry 4.0 in Singapores Manufacturing Sector Incentives Available for Foreign Businesses for Innovation and Capacity DevelopmentPg 04Pg 11Pg 15 AseAn Briefing Issue 24 November 20222IntroductionCreditsPublisher-Asia Briefing Media Ltd.Lead Editor-Melissa CyrillEditor-Ayman Falak Medina Designers-Ha Ngoc Anh Thu,Aparajita Zwww.india-www.vietnam-www.china-www.russia-Singapores manufacturing sector is well-positioned to face the challenges and reap the benefits of Industry 4.0.As an established regional powerhouse for advanced manufacturing,the country has already embraced Industry 4.0 and is steadily moving its production base up the value chain.By making use of technologies that are part of Industry 4.0,Singapores world-class manufacturing system has become the fourth largest global exporter of high-tech goods,ranging from medical devices and pharmaceutical products to electronics.In this issue of ASEAN Briefing magazine,we provide an overview of the factors favoring Singapores ability to adopt Industry 4.0 and key advantages as a result.We then explore the countrys sub-sectors with high growth potential under Industry 4.0.Finally,we highlight the incentives available to foreign businesses for innovation,research,and capacity upgrades.With offices located across Southeast Asia and years of experience helping foreign enterprises set up operations in Asia,Dezan Shira&Associates is well positioned to assist your company in entering ASEAN markets.For more information,please email us at.With kind regards,Alberto VettorettiALBERTO VETTORETTIPartnerDezan Shira&A AseAn Briefing Issue 24 November 20223Asia Briefing Ltd.Unit 507,5/F,Chinachem Golden Plaza,77 Mody Road,Tsim Sha Tsui East Kowloon,Hong Kong.Annual SubscriptionASEAN Briefing Magazine is published four times a year.To subscribe,please visit please explore the clickable resources below.Opportunities in Singapores Manufacturing Sector in the Era of Industry 4.0ContentsHow Singapore is Poised to Take Advantage of Industry 4.0Pg 04Implementing Industry 4.0 in Singapores Manufacturing Sector Pg 11Incentives Available for Foreign Businesses for Innovation and Capacity DevelopmentPg 15ReferenceASEAN Briefing and related titles are produced by Asia Briefing Ltd.,a wholly owned subsidiary of Dezan Shira Group.Content is provided by Dezan Shira&Associates.No liability may be accepted for any of the contents of this publication.Readers are strongly advised to seek professional advice when actively looking to implement suggestions made within this publication.For queries regarding the content of this magazine,please contact:All materials and contents 2022 Asia Briefing Ltd.Like ASEAN Briefing on FacebookFollow ASEAN Briefing on TwitterConnect with Dezan Shira&Associates on LinkedinView Dezan Shira&Associates on Youtube Follow usScan the QR code to follow us on WeChat and gain access to the latest investor news and resourcesConnect with us for the latest news,events and insights across Asia.Legal,Tax,Accounting N and W S Advisory and C AseAn Briefing Issue 24 November 20224How Singapore is Poised to Take Advantage of Industry 4.0 The Fourth Industrial Revolution is already upon us and presents challenges and changes to businesses worldwide.With its robust manufacturing ecosystem,high-skilled talent base,and government support for businesses doing research and innovation,Singapore is well-positioned to take lead in the transition to Industry 4.0.The country is home to a vibrant start-up scene,which offers opportunities for co-innovation with large multinational companies(MNCs).By some estimates,Singapore is used as a regional headquarter by more than 37,000 international companies and 7,000 MNCs.More than ever,Singapores importance as a base for Industry 4.0 can help foreign businesses reduce investment risk,maximize profit,and harness business opportunities in the region.We explore in greater detail as to why Singapore is ready to take advantage of Industry 4.0.Singapores manufacturing sector is well-positioned to face the challenges and reap the benefits of Industry 4.0.As an established regional powerhouse for advanced manufacturing,the country has already embraced Industry 4.0 and is steadily moving its production base up the value chain.The Singapore Smart Industry Readiness IndexIn 2017,Singapore launched the Smart Industry Readiness Index(SIRI),the worlds first Industry 4.0 tool that helps manufacturers regardless of their size to start,scale,and sustain their manufacturing operations.SIRI was developed together by the Singapore Economic Development Board(EDB),leading technology companies,industry and academic experts,and consultancy firms.SIRI educates manufacturers on the concept of Industry 4.0 and how to develop in-depth understanding of a companys Industry 4.0 maturity level.Following this,SIRI can recommend the companys ideal business objectives and activities that can bring them the greatest benefits in the Industry 4.0 era.The SIRI index consists of three layers.The top layer is made up of three building blocks:process,technology,and organization.Under the building Chapter 1Ayman Falak Medina Author AseAn Briefing Issue 24 November 20225blocks are eight pillars of focus,which are then divided into 16 dimensions of assessment.Companies can use this to evaluate their readiness for Industry 4.0.A world-class manufacturing ecosystemManufacturing accounts for approximately 20 percent of Singapores GDP and is an important cornerstone for the economy as well as the countrys competitiveness in Industry 4.0.Over the past few decades,the country has achieved growth capacity in high-value manufacturing,engineering,and innovation.Singapore is now an industry leader in various sectors,such as semiconductor manufacturing,pharmaceutical products,medical products,and aerospace engineering and has attracted MNCs like Siemens,Schneider Electric,Accenture,HSBC,IBM,Shell,UOB,and GlaxoSmithKline to set up here.Supporting Singapores manufacturing ecosystem are investments in research and development(R&D)within the engineering and advanced manufacturing fields.For example,the National Robotics Program helps engineers and scientists translate their research into reality and is driving robotics adoption in Singapores manufacturing sector.Over the next five years,the country plans to spend over S$25 billion(US$17.6 billion)for R&D in a continuing effort to build a more resilient and sustainable Singapore.One-fifth of the funds is allocated for innovation platforms,developing entrepreneurial talent,and supporting business innovation capabilities.The remainder is set aside for new programs that support future needs and emerging opportunities as well as talent development.Further,built within the countrys universities and research centers are model factories that stimulate real-life production environments for the testing of new manufacturing techniques,technologies,and business models that can be exported from Singapore to the rest of the world.Smart Industry Readiness IndexProcessTechnologyOrganisationOperationsSupply ChainProduct LifecycleAutomationConnectivityIntelligenceTalent ReadinessStructure&managementVertical IntegrationHorizontal IntegrationIntegrated Product LifecylesShopfloorWorkforce Learning&developmentInter-and Intra-Company collaborationEnterpriseLeadership competencyStrategy&GovernanceFacititySource:EDB Singapore12345614161315111210987 AseAn Briefing Issue 24 November 20226opportunities to develop their fullest potential in life regardless of their starting point.The government provides the resources to help citizens attain a mastery of skills.SkillsFuture includes short training programs,online tutorials,and earn-and-learn industry internships.The four key focus areas under the initiative are:1.Helping individuals make well-informed choices in training,education,and careers.2.Developing an integrated and high-quality education and training system that responds to industry needs.3.Promoting employer recognition and career development based on skills.4.Fostering a culture that celebrates lifelong learning.Continuous government supportThe Singapore government provides various support measures to make it easier for companies to do business in the city-state.Apart from the fiscal and non-fiscal incentives(which we discuss in chapter 3),the country offers a stable socio-political environment,easy business setup,an attractive tax regime,and a plethora of free trade agreements to take advantage from.A highly skilled workforceSingapore has a highly skilled workforce,ranked second globally in the 2021 Global Talent Competitiveness Index.The countrys bilingual education policy means students are proficient in English(first in Asia for English proficiency)and one other language,such as Mandarin,Malay,or Tamil.Further,the school curriculum has a strong focus on science,technology,engineering,and math subjects.Singapores higher education institutions have established with leading MNCs to develop corporate labs that develop cutting edge solutions for real Industry 4.0 challenges,such as cybersecurity,computational engineering,blockchain,artificial intelligence,and smart industrial chemical production.The 2021 Global Talent Competitiveness Index also highlights that Singapore has one of the best pools for vocational and technical skills that matches labor market demands.More than 30 percent of the workforce holds a university degree with another 15 percent holding a diploma or professional qualification.Further,the government launched an initiative called SkillsFuture in 2015.The initiative is a national movement that aims to provide Singaporeans Singapores High-Value Manufacturing Capabilities at a GlanceBiomedical sciences60 percent of the worlds micro-arrays are produced in Singapore.One-third of the worlds mass spectrometers and thermal cyclers are also produced in the country.PharmaceuticalsFour out of the 10 drugs by global revenue are manufactured in Singapore.EnergySingapore is the fifth largest exporters of refined oil in the world.ChemicalsSingapore is ranked in the top 10 globally for chemical exports by volume.AseAn Briefing Issue 24 November 20227A streamlined business setup processSingapores efficient business environment is demonstrated by the ease with which foreign investors can incorporate a business in the country.Registering a company can take as little as one day provided all the files are in order.The private company limited by shares,commonly known as a private limited company,is the most preferred type of entity among foreign investors in Singapore.This entity is the most flexible,advanced,and scalable type of business form.Below are some key characteristics of a private limited company that makes them an attractive option for foreign investors:A separate legal entity the private limited company is a legal identity and separate from its shareholders and directors.Furthermore,this entity can also acquire assets,enter contracts,or enter debts in its own name.Foreign ownership this entity can be 100 percent foreign-owned.Limited liability the personal liability of the members that contribute towards the paid-up capital is limited to the amount that was contributed towards the paid-up capital.Tax benefits and incentives a Singapore private limited company is eligible for various tax incentives.For instance,the corporate tax rate of 17 percent is effective only for chargeable income above S$200,000(US$147,000)with a 50 percent exemption on the next S$190,000(US$139,000)of chargeable income.Furthermore,there is no capital gains tax.Ease in the transfer of ownership through the selling of all or part of the shares of the private limited company,the ownership of the company is transferred,thus not requiring any complex legal documents or processes.If the incorporation documents have been prepared,the company can be officially registered with the Accounting and Corporate Regulatory Authority ACRA.The process is done online and only takes one hour.Upon incorporation,the paid-up capital must be immediately paid and transferred into the companys bank account.The minimum paid-up capital is at least S$1(US$0.73).Taking advantage of Singapores double tax agreement networkSingapore has one of the worlds most extensive DTA networks,attracting international businesses from a multitude of conventional and nuanced industries.The country has signed over 90 DTAs,which comprise of three types:comprehensive,limited,and exchange of information arrangements(EOIAs).Comprehensive DTAs provides relief from double tax for all income types between the two signatories.Limited DTAs,however,only provides relief from income generated from air transport and shipping,and EOIAs are provisions for the exchange of tax information.The tax relief under each DTA treaty differs for each country.They normally cover several income types:Tax on royalties;Tax on dividends;Tax on capital gains;Tax on interests;Shipping and air transport;AseAn Briefing Issue 24 November 20228 Directors fees;Independent and dependent personal services;Researchers;Students;and Income from immovable property.Claiming relief under the DTATo obtain the benefits of the DTA,the company must first submit its Certificate of Residence(COR)to the IRAS as evidence it is a tax resident in Singapore.Only Singaporean tax residents and the tax residents of the treaty partner are recognized.To qualify as a Singaporean tax resident,an individual must be employed in the country for 183 days or more during the year.For companies,they must be registered in Singapore.Tax residents of the treaty partner must also submit a COR certified by the tax authority of the treaty partner to the IRAS in order to obtain relief under the DTA.Singaporean tax residents can still avoid double taxation even if Singapore does not have a DTA with a particular country through the Universal Tax Credit(UTC)scheme.This applies to all foreign taxes paid by a Singaporean tax resident on the following income categories:Royalties derived from outside of Singapore;Foreign income from professional services or consultancy;Foreign-sourced dividends;and Foreign branch profits.The IRAS will grant the tax exemption if the following conditions are met:At least 15 percent in corporate taxes(headline tax)are paid on the income sourced from the foreign jurisdiction;The company has been subjected to tax in the foreign jurisdiction,which can be different from the headline tax;and The IRAS is satisfied that granting the tax exemption will benefit the tax resident in Singapore.Determining the treatment of profitsDefining a permanent establishment(PE)is an important feature within all DTA treaties in order to determine the treatment of business profits.The PE refers to the fixed place of business through which the taxpayer carries out their business operations.Under Singapores tax law,the tax residency of a company is determined where the business is controlled and managed.The company is considered a tax resident if the control or management of the business was exercised in Singapore in the preceding calendar year.Using Singapore as a Base for ASEAN ExpansionIn this issue of the ASEAN Briefing magazine,we provide an overview of the efficient incorporation process in Singapore and compare Hong Kong and Singapore as holding locations.We then explore how investors can benefit from Singapores tax policies and free trade agreements before finally focusing on Singapores potential as a hub for digital expansion in Asia.READ MORERELATED READING AseAn Briefing Issue 24 November 20229Taking advantage of Singapores free trade agreementsDespite regional players maintaining strong FTA networks,they are not as extensive as Singapores.Due to these factors,the country will continue to be the default location for businesses seeking to expand into Southeast Asia and neighboring regions.The countrys 14 bilateral and 13 regional FTAs include some of the largest combined trade agreements in the ASEAN-China,ASEAN-India,and ASEAN-Hong Kong trade blocs providing Singapore-based businesses with access to preferential markets,free or reduced import tariffs,as well as enhanced intellectual property regulations.There are two types of FTAs:bilateral(agreements between Singapore and a single trading partner)and regional(signed between Singapore and a group of trading partners).Bilateral FTAs China-Singapore FTA(CSFTA);India-Singapore Comprehensive Economic Cooperation Agreement(CECA);Japan-Singapore Economic Partnership Agreement(JSEPA);Republic of Korea-Singapore FTA(KSFTA);New Zealand-Singapore Comprehensive Economic Partnership Agreement(ANZSCEP);Panama-Singapore FTA(PSFTA);Peru-Singapore FTA(PeSFTA);Singapore-Australia FTA(SAFTA);Singapore-Costa Rica FTA(SCRFTA);Singapore-Jordan FTA(SJFTA);Sri Lanka-Singapore FTA(SLSFTA);Turkey-Singapore FTA(TRSFTA);United States-Singapore FTA(USSFTA);and UK-Singapore FTA(UKSFTA).Regional FTAs ASEAN-Australia-New Zealand Free Trade Area(AANZFTA);ASEAN-China Free Trade Area(ACFTA);ASEAN-Hong Kong,China Free Trade Area(AHKFTA);ASEAN-India Free Trade Area(AIFTA);ASEAN-Japan Comprehensive Economic Partnership(AJCEP);ASEAN-Republic of Korea Free Trade Area(AKFTA);ASEAN Free Trade Area(AFTA);Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP);EFTA-Singapore FTA(ESFTA);Singapore-Eurasian Economic union(EAEUSFTA);Regional Comprehensive Economic Partnership(RCEP)GCC-Singapore FTA(GSFTA);and Trans-Pacific Strategic Economic Partnership(TPSEP).How to apply for tariff concessions for exporting goods from SingaporeOnce a Singaporean company has identified their target market,they can start applying for tariff concessions through the Enterprise Singapore website.LOCATION ANALYSIS AND SITE SELECTIONDezan Shira&Associates can help your company overcome various market entry and expansion challenges.Through in-depth research and analysis,we provide clients with the ability to better understand their options in new markets and make informed decisions on where to invest.To arrange a consultation,please contact us at or visit our website at.EXPLORE MORE AseAn Briefing Issue 24 November 202210Determine the relevant FTAs for your target market Determine the Harmonised System(HS)code of your productCheck if your product benefits from lower tariffs Choose qualifying FTA(based on ROO)with highest tariff savingsSend PCO to customer for presentation to importing authoritiesReduction in tariffs by importing authoritiesCheck the FTAs Rules of Origin(ROO)Visit Enterprise Singapores website for a list of Sinagpores FTAsUse the Tariff Finder Tool to search for the HS code of your product(using relevant keywords-e.g.avocado)in the destination country.Key in the destination country and the correct HS code and compare the tariff rate for your Singapore-originationg product to the generic rate applicable to most countries(i.e MFN rate).Refer to the ROO section for your product to determine the business processes necessary to benefit from lower tariffs.Some examples are:Change in HS code during manufacture Minimum%for local value-added contentIf Preferential Certficate of Origin(PCO)is required by your chosen FTAFollow self-certification prcedures as per FTA requirementsIf self-certification is required by your chosen FTASubmit the relevant documents to Sinagpore CustomsGo to Singapore Customs Certificate of Origin website to check document requirementshttps:/www.customs.gov.sg/businesses/certificates-of-origin/overview123456a6b78Source:mti.gov.sgHow to Apply for Tariff Concessions for Exporting Goods from SingaporeOnce a Singaporean company has identified their target market,they can start applying for tariff concessions through the Enterprise Singapore website.AseAn Briefing Issue 24 November 202211Implementing Industry 4.0 in Singapores Manufacturing SectorIndustry 4.0 will impact operational processes and technologies used in Singapores manufacturing sector.Chapter 2Ayman Falak Medina AuthorIndustry 4.0 will impact operational processes and technologies used in Singapores manufacturing sector.This includes everything from automation and the application of the Internet of Things(IoT)to robotics and 3D printing.Manufacturers that can embrace Industry 4.0 stand to benefit from higher efficiency,cost savings,and a boost to bottom line growth.We explore key sub-sectors within Singapores manufacturing sector that can implement or have already implemented Industry 4.0 practices.Electronics and semiconductor manufacturingElectronics manufacturing is the bedrock of Singapores manufacturing sector,contributing to approximately eight percent of the GDP and 20 percent of total manufacturing jobs.From its modest beginning as the only TV assembly plant in Southeast Asia,Singapore has become a vital manufacturing hub for higher value-added electronic components.The global electronics industry is projected to grow to US$3.3 trillion in 2030 from the US$2.2 trillion recorded in 2020.This growth will be driven by artificial intelligence(AI),5G,automation,and the electrification of automotives,among others.These applications will increase demand for microchips and in-turn,semiconductors an industry with the potential to become a high-growth area for Singapore.The countrys semiconductor industry is,in fact,one of the most diverse in the region,attracting global players like United Microelectronics Corporation and Siltronic AG,and contributing to seven percent of GDP.This makes the sub-sector a fundamental contributor to Singapores electronics manufacturing output.Further,the city-state accounts for approximately 11 percent of the global semiconductor market AseAn Briefing Issue 24 November 202212share and manufactures one-fifth of the global semiconductor equipment.Through Industry 4.0,Singapores semiconductor producers can aim to transform their production lines into fully automated smart factories.Such factories can use machine vision algorithms to conduct automatic quality control and relieve constraints on the available workforce,as well as use analytical software to account the cost of raw materials and components,resulting in better business intelligence for product pricing.Additive manufacturingAdditive manufacturing plays an essential role in meeting some of the important requirements of Industry 4.0.Commonly known as 3D printing,additive manufacturing simplifies the production process,particularly for the assembly of products.As a result,3D printing offers efficient solutions to facilitate personalized manufacturing and intelligent production.In the Industry 4.0 era,the application of 3D printing reduces waste products and overall production costs since only the 3D data package of the product is required to produce a prototype.The inherent freedom of design allows engineers to create new geometric figures and manufacture parts with advanced features.Companies like Airbus are using this technology to design aircraft components that are lighter and more efficient,and Adidas and Nike are producing lightweight,high-performance shoes that would have not been possible using conventional methods.Further,doctors are using 3D models to help design diagnostic and surgical tools.Value Added by the Semiconductors Manufacturing Industry in Singapore from 2018 to 2021YearValue(US$)20166.8 billion201713.2 billion201823.4 billion201922.9 billion202019.3 billion202127.2 billionMarket Share of Additive Manufacturing in Southeast Asia40%5%AseAn Briefing Issue 24 November 202213Within ASEAN,Singapore has a 40 percent market share of the additive manufacturing market,followed by Malaysia and Thailand with the next 40 percent.This industry is a vital enabler for Singapore to strengthen its global,advanced manufacturing foothold.The Singapore government has established the National Additive Manufacturing Innovation Cluster(NAMIC),which aims to accelerate the adoption of additive manufacturing technologies in local industries,enabling them to operate in high value-added manufacturing fields.Additive manufacturing is expected to generate US$100 billion in economic value by 2025 in Southeast Asia.Medical devicesThe use of Industry 4.0 technology in the healthcare industry can deliver better care to patients.For example,AI can screen enormous amounts of data to recognize specific medical conditions that human diagnosis could easily miss.Moreover,AI tools can assist in running hospitals more efficiently,such as by identifying how staff and equipment can be better utilized.Singapores medical devices industry is expected to be worth US$1.3 billion by 2023 due to increasing government spending,an ageing local population,as well as demand from the region.More than 60 multinational medical technology(medtech)companies are leveraging the countrys strong engineering capabilities and high-quality assurance to manufacture high-value products,ranging from life science instruments to contact lenses.In addition,some 60 percent of the worlds microarrays and one-third of the worlds mass spectrometers are manufactured in Singapore.Investors are attracted by Singapores strong base for research and innovation that help medtech firms in designing new business models in healthcare,such as the use of big data to provide better patient-centric care.This,in turn,provides medtech companies with the capabilities to export their products or services to go-to-markets in the Asia Pacific.An Introduction to Doing Business in Singapore 2022For corporate entities hoping to establish a holding company,branch office,or regional headquarters,Singapore of fers a power ful advantage in terms of business opportunities,government incentives,and trade relation benefits.This publication,designed to introduce the fundamentals of investing in Singapore,was compiled by Dezan Shira&Associates,a specialist foreign direct investment practice providing corporate establishment,audit,business advisory,tax advisory and compliance,accounting,payroll,due diligence,and financial review services to multinationals and small-and medium-sized enterprises investing in emerging Asia.READ MORERELATED READING AseAn Briefing Issue 24 November 202214Pharmaceutical and biomedical sectorsThe global pharmaceutical industry has already begun implementing Industry 4.0 practices with many pharmaceutical manufacturers switching from batch manufacturing to continuous manufacturing.Batch manufacturing is a lengthy process.After each step in the process,production is usually stopped to check for quality.During these hold times,the material is often stored in containers or even shipped to other facilities to complete the process.This increases the risk of defects and error as well as the lead time.However,under continuous manufacturing,the material is moved from end-to-end on a single,uninterrupted line,thus eliminating the hold times and shortens production times from months to days.Singapores pharmaceutical and biomedical sectors are fast-becoming leading drivers of economic growth,showcasing both improved healthcare and manufacturing capabilities.The countrys deep base of skilled talents,pro-business environment,advanced infrastructure,and thriving research and development landscape has attracted some of the largest pharma firms in the world.This has resulted in Singapore being one of the few countries able to export more pharmaceutical products(approx.US$369 billion in 2020)than it imports(US$8.92 billion in 2020).There are currently more than 50 manufacturing facilities in the country,with eight of the worlds 10 largest pharmaceutical firms owning plants in Singapore.Some of the major players include Abbott,GlaxoSmithKline,Novartis,and Pfizer,who account for more than 40 percent of Singapores regional market.German biotechnology company BioNTech,who developed the COVID-19 vaccine BNT162b2 with American pharmaceutical CROSS COUNTRY COMPETITIVENESS BENCHMARKINGDezan Shira&Associates can investigate the competitiveness of your preferred/shortlisted countries.Our experts evaluate the viability of the locations for manufacturing,examine the talent base available,and quality of existing infrastructure and logistics networks.Further,our reports cover the regulatory environment,operating costs,and available tax incentives in each destination for a comparative understanding.To arrange a consultation,please contact us at or visit our website at.EXPLORE MOREfirm Pfizer,has established its Asia-Pacific regional headquarters in Singapore,where it will also set up an mRNA manufacturing facility.The companys manufacturing plant is expected to be operational by 2023 and will produce several hundreds of millions of mRNA vaccines.More importantly,it will help build a rapid-response production capability to address the threat of future pandemic threats in the Asia-Pacific region and open the company to a dynamic marketplace with a population of 655 million.In the last 30 years,there have been no major observations by regulators like the US Food and Drug Administration(FDA)that regularly audit manufacturing facilities,which speaks to the quality of Singapores infrastructure and workforce.Ready-built facilities,such as the JTC Space Tuas Biomedical Park(TBP),provide laboratory space that can be out-fitted for single-use technology(SUT)manufacturing activities.SUTs allow pharma companies to set up their manufacturing facilities quickly at reduced costs and allows the company to produce multiple products in a single suite.AseAn Briefing Issue 24 November 202215Incentives Available for Foreign Businesses for Innovation and Capacity DevelopmentSingapore offers a variety of fiscal and non-fiscal incentives that have been tailored to assist the development of high-value Industry 4.0 activities.Chapter 3Ayman Falak Medina AuthorSingapore offers a variety of fiscal and non-fiscal incentives that have been tailored to assist the development of high-value economic activities,as well as encouraging businesses to upgrade their capabilities and expand their scope of operations.Applicants must fulfil rigorous requirements,which include committing to certain levels of investments,introducing leading-edge skills,technology,as well as contributing to the growth of research and development and innovation capabilities.However,most of these incentives have local ownership requirements.We highlight some of them here.Industry specific tax incentivesThere are four main government agencies that can administer business and tax incentives for Singaporean entities in specific domains.These are:Singapore Economic Development Board(EDB)which is responsible for developing and executing strategies that facilitate investment into the countrys industries;Inland Revenue Authority of Singapore(IRAS)the tax regulatory authority in the country;Enterprise Singapore(ESG)which aids Singaporean companies expand worldwide and promotes local exports;and Monetary Authority of Singapore(MAS)the central bank and financial services authority.A full list of industry-specific incentives can be found on the individual websites of these agencies.The industries eligible for tax incentives are:Financial services;Banks;Fund management;Tourism;Shipping and maritime;Global trading industries;Insurance;AseAn Briefing Issue 24 November 202216 Processing services;Research and development;Headquarter activities;Legal firms;E-commerce;and Event organization.Incentives for manufacturing and services activitiesPioneer tax incentive and development and expansion incentiveThrough the pioneer tax incentive and the development and expansion incentive,businesses engaging in the manufacture of high-value-added products or services can apply for a pioneer certificate,which entitles them to tax exemption or a concessionary tax rate of five percent or 10 percent for five years.This can be extended depending on the companys commitment to further expansion.To qualify,applicants are assessed on a qualitative and quantitative criterion.This includes:Ability to introduce create employment for Singaporeans;Introduction of new skills and expertise;The capacity for business expenditure to create economic spin-off;Manufacturing projects must commit to developing soft and hard infrastructure;Introduce new technology and know-how that can advance an industry;and Business activities must be new and have not been undertaken by other companies in the country.After the pioneer tax incentive period has ended,businesses can attain the development and expansion incentive.This awards companies that migrate to business activities that add more value(such as investing in projects that advance key industries like manufacturing),with a five to 10 percent tax break.The tax relief period is subject to a maximum of 40 years.The 100 percent investment allowance schemeThe investment allowance incentive is administered by the EDB,from which businesses can enjoy a tax exemption of up to 100 of fixed capital expenditure incurred.The EDB defines fixed capital expenditure as expenditure incurred for qualifying projects within a five-year period,which can be extended up to eight years.An extension of the 100 percent Investment Allowance(IA)scheme has been granted by the government until 2023.The approved 100 percent IA support is capped at S$10 million(US$7.4 million)and is part of the Automation Support Package(ASP),which comprises the following grants,loans,and tax support:Grant support through the Enterprise Development Grant(EDG),capped at S$1 million(US$737,705)for up to 50 percent of qualified automation projects;Loan financing of up to S$15 million(US$11.1 million)for automation equipment;and The 100 percent IA scheme.The ASP support itself ended on March 31,2021,but the 100 percent IA scheme will still be available.This program offers tax relief that can be used to offset taxable income for approved automation projects by the EDG and ESG.The approved projects by the EDB include,among others:Manufacture of new products or increase production of existing products;Promotion of the tourism industry in the country;AseAn Briefing Issue 24 November 202217 Research and development activities;Energy efficiency projects;Construction projects;Projects that focus on reducing water consumption;Provide specialized engineering or technical services;and Maintenance,repair and overhaul services for the aircraft industry.The category for expenditures covered by the investment allowance consists of:New productive equipment;Building factories in Singapore;and Acquiring patents and know-how.The land intensification allowance schemeIntroduced under the 2010 State Budget announcement,the land intensification allowance(LIA)scheme is a targeted program that aims to promote the use of industrial land towards higher-value-added activities.Recipients of this scheme will enjoy the following allowances on qualifying capital expenditure incurred for the construction or renovation of an approved LIA building structure:Initial allowance of 25 percent;and Annual allowances of five percent until the total allowance amounts to 100 percent of qualifying expenditure.The LIA is available to businesses in the manufacturing and logistic sectors that have large land takes and low Gross Plot Ratios(GPR).Incentives for innovation,research and development,and capability developmentTechSG ProgramIn January 2020,Singapores government launched the TechSG program,which aims to help Singapore-based technology companies recruit highly skilled foreign talent,and expand in the region.Companies that qualify for this program are eligible to receive up to 10 new Employment Passes(EPs)to hire foreign nationals and is valid for up to two years.Further,TechSG will support the renewal of the EP and extend them for up to three years.Thereafter,the EP must be renewed through the process implemented by the Ministry of Manpower(MOM).The EP is mainly issued to foreign managers,executives,and skilled professionals in Singapore.Individuals must also be earning a monthly salary of SG3,600(US$2,549)to be eligible.Companies that qualify for TechSG must meet the following criteria:Must be a company incorporated in Singapore with the Accounting and Corporate Regulatory Authority(ACRA);Must be a company that has a digital or technology offering as part of its core business product or service;This includes providing hardware or software technologies,e-commerce activities,digital gaming,digital media,cybersecurity,data science,and fintech,among many others;Secure more than US$10 million(in cumulative)investment funding in the past 36 months;and Receive funding from one of the TechSG investment firms in the past 36 months.There are two methods of applying for TechSG depending on the ownership of the applicant company.If the company has less than 30 percent AseAn Briefing Issue 24 November 202218local shareholding,it should submit its application to the EDB.For companies with at least 30 percent or more local shareholding,the submission should be done through Startup SG,as an entity under ES.Companies are usually told the outcome of their application within 10-15 working days.Tech.PassIn January 2021,Singapore issued a new work permit named Tech.Pass,aimed at attracting highly accomplished technology entrepreneurs,experts,and business leaders.Unlike the Employment Pass,the Tech.Pass scheme does not require the sponsorship of a local employer,giving the professional greater flexibility in their activities,such as being an employer,investor,starting a business,or becoming a director or consulting in one or more Singapore-based tech companies.This work permit also allows holders to switch between employers.The government imposed strict eligibility criteria for Tech.Pass applicants.They must satisfy at least two of the following conditions:Their last fixed monthly salary of at least S$20,000(US$14,852),or its equivalent in foreign currency;Having at least five years of experience in a leading role in a tech company that has a market valuation of at least US$500 million or have raised at least US$30 million in funding;or Having at least five years of experience in a leading role in the development of a tech product that has at least 100,000 monthly active users or at least garnered US$100 million in annual revenue.Intellectual property development incentiveThe intellectual property development incentive(IDI)was introduced in 2018 to encourage the commercialization of intellectual property arising from research and development activities.Recipients can enjoy a reduced corporate tax rate of five or 10 percent of qualifying IP income.This incentive period is limited to an initial period not exceeding 10 years,after which the taxation rate will then increase by 0.5 percent starting in the 11th year of the incentive period.Tax deductions on qualifying R&D expensesThe Singapore government has offered an enhanced tax deduction of 250 percent of qualifying expenditure for R&D projects carried out in Singapore for the years of assessment between 2019 to 2025.To qualify,companies must effectively own and can commercially exploit the IP or other results from the R&D activities.Activities that do not qualify as R&D include:Routine data collection;Management studies or efficiency surveys;Market research;Cosmetic modifications to products or production methods;or Routine modification to products or production methods.Intellectual property acquisition expensesAn enhanced 200 percent tax deduction is available for each of the following expenditure amount for the years of assessment between 2009 to 2025:The first S$100,000(US$70,700)of qualifying expenditure incurred during IP registration;and The first S$100,000(US$70,700)incurred for the licensing of IP.AseAn Briefing Issue 24 November 202219Incentives for finance and treasury activitiesFinance and treasury centerUnder this scheme,income derived from finance and treasury activities is taxed at a reduced rate of eight percent.Such approved activities include international treasury and fund management activities,investment and economic research analysis,and corporate finance and advisory services.Financial sector incentiveThrough the financial sector incentive,any income from high-value-added activities,such as transactions and services related to the equity market,derivatives market,and bond market,may be taxed at five percent,while other activities will qualify for a 13.5 percent tax rate.Financial sector technology and innovation schemeThis scheme provides co-funding to develop financial technology(Fintech)that enhances Singapores banking industry.The scheme offers support of up to 70 percent for qualifying costs such as IP rights,technical software,manpower skilling,and professional services,among others.Headquarter and internationalization incentivesInternational headquarters awardThe international headquarter award(IHQ)provides businesses a concessionary tax rate of five or 10 percent on income for businesses that commit to substantive headquarter activities,such as managing,coordinating,and controlling their regional operations from Singapore.Merger and acquisition schemeThe merger and acquisition(M&A)scheme provide the acquiring company an M&A allowance of 25 percent(capped at S$10 million(US$7.3 million)of the qualifying acquisition value capped at S$40 million(US$29.5 million)per year of assessment,stamp duty relief capped at S$80,000(US$59,000),and double tax deduction transaction costs capped at S$100,000(US$70,700).Double tax deduction for internationalizationUnder this incentive,the business can receive up to 200 percent tax deduction on expenses used for international expansion.Most DTDi deductions are subject to approval from Enterprise Singapore(ESG)and the Singapore Tourism Board.However,certain activities do not require approval on the first S$150,000(US$111,000)of eligible expenses.Progressive Wage Credit SchemeThe Progressive Wage Credit Scheme(PWCS)was introduced into the 2022 budget to help employers adjust to mandatory increases for lower-wage workers.The scheme enables the government to co-fund the wage increases of Singaporean employees earning a gross monthly wage of up to S$3,000(US$2,213).Singaporean residents and permanent resident employees are eligible for the scheme.Under the scheme,employees can receive support for gross monthly wage increases up to S$2,500(US$1,844)from 2022 to 2026,as well as support for gross monthly wage increases above S$2,500(US$1,844)and up to S$3,000(US$2,213)from 2022 to 2024.Eligible wage increases will be co-funded for a period of two years.Eligible employers do not need to apply and will be informed by the Inland Revenue Authority of Singapore(IRAS)of any payouts.Scan this QR codeVisit our mobile page andget the latest updates investors news and resources with usOur Offices in ASEANOur Alliance Members in ASEANChina.Germany.Hong Kong.India.Indonesia.Italy.Malaysia.Singapore.Thailand.The Philippines.United States.VietnamAsiapedia is a collection of resources based on what we have learned about doing business in Asia.Are you planning an expansion in Asia?Get started by speaking to our professionals todaySINGAPOREHo Chi Minh CHDa NTHE PHILIPPINESMALAYSIATHAILANDVIETNAMJBINDONESIABusiness Intelligence|Corporate Establishment and Structuring Due Diligence|Accounting|HR and Payroll|Tax|Audit and Risk Advisory Technology|Outbound Direct Investment, 1PitchBook Data,Inc.John Gabbert Founder,CEONizar Tarhuni Senior Director,Institutional Research&EditorialDylan Cox,CFA Head of Private Markets ResearchInstitutional Research GroupAnalysisOur analysts outlook on the venture market in 20232023 US Venture Capital OutlookPublished on December 16,2022PublishingDesigned by Chloe LadwigDataSusan Hu Data Analystpbinstitutionalresearch PitchBook is a Morningstar company providing the most comprehensive,most accurate,and hard-to-find data for professionals doing business in the private markets.2023 outlooksp.2 The Morningstar PitchBook US Unicorn Index will show a negative return from January 1,2023 through December 31,2023.p.4 Series C and D rounds will see the most down rounds,as these companies are currently the most starved for capital.p.6 Seed-stage startup valuations and deal sizes will continue their ascent,reaching new annual highs despite a slowdown in total deal value and count.p.8 SPAC IPOs and mergers will continue to decline while liquidations will continue to increase in 2023.p.10 Venture growth deal value will fall below$50 billion in the US.p.12 2023 US VC mega-round activity will fall below 400 deals,hitting a three-year low.p.14 US VC fundraising will fall between$120 billion and$130 billion in 2023.Kyle Stanford,CAIA Senior Analyst,US Venture LMax Navas Analyst,Venture CVincent HarrisonAnalyst,Venture CAlex Warfel,CFA Quantitative Research Analyst 2PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:The Morningstar PitchBook US Unicorn Index will show a negative return from January 1,2023 through December 31,2023.Rationale:As of December 1,2022,the US Unicorn Index has returned 1.0%YTD,while our VC-Backed IPO Index is down 59.1%.This difference is due to several factors,not the least of which being that nearly 200 unicorns have been created in the US this year.However,the pace of new unicorn creation,and the pace of unicorn rounds in general,has fallen precipitously in recent months.In November,fewer than 10 completed rounds resulted in a post-money valuation of$1.0 billion or more,well below the 48 completed in January,which saw the years monthly high.With few new unicorn rounds maintaining the recency bias toward private values,public comparables will impact unicorn pricing more,putting downward pressure on the index as the public market remains depressed.Risks:While it continues to look less likely,a public market turnaround would push the Unicorn Index into positive territory.Not only would increasing public comparable prices put upward pressure on private values,but new unicorns and new financings for current unicorns would also continue to have a positive impact on the index as they have in 2022 and 2021.The Morningstar PitchBook US Unicorn Indexes,which debuted in November,provide insight into the opaque pricing of unicorns,companies with a post-money valuation of$1.0 billion or more.The indexes are calculated daily using the most recent private valuations and changes in public and private comparable companies.Arguably the most important piece of the pricing model is the most recent valuation of a company,pinning the value of a unicorn to its price upon completion of the round.The further away from that round the company gets(there is a roughly 18-month span between unicorn rounds),public and private comparable companies increasingly impact the companys valuation.When we look at the 2022 US index return of 1.0%,the large number of unicorn rounds throughout the year has tied many index constituents to their most recent priced round,most of which were at a valuation step-up.At the same time,we have not yet seen a marked increase in private company down rounds during the economic slowdown.In 2022,the median step-up for late-stage valuations has been 2.1xhigher than the median step-up in 2021.However,this figure has decreased rather quickly throughout the year.The median late-stage step-up in Q3 2022 was just 1.8x,indicating that private valuation growth,which would underpin unicorn valuations,is growing at a much slower rate.We expect this trend to continue in 2023 so long as the public market is less receptive to high-growth,high-loss companies,as many unicorns are likely to be seen.Kyle Stanford,CAIASenior Analyst,US Venture Lead 3PitchBook Analyst Note:2023 US Venture Capital OutlookThe US Unicorn Index has returned much higher than what was seen in the broader public market or in our VC-Backed IPO Index.However,in November just nine deals were completed for a post-money valuation of$1.0 billion or more.We believe this trend will continue,potentially falling even further as the pressure created by stagnating value in the private market constrains activity.We also believe that down rounds and further slowing of valuation growth are likely to be trends in US venture in 2023.These factors will increase the public markets effect on the indexs pricing.4PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:Series C and D rounds will see the most down rounds,as these companies are currently the most starved for capital.Rationale:When we compare the estimated capital demanded by startups to observed deal value in each quarter,we can track deal activity dislocations in the market.Relative to historical trends,all stages have seen a massive dislocation of deal activity starting in Q4 2020,but nowhere is this more pronounced than in the late stage.In Q4 2022,3.5 times more capital was demanded than deal value observed.This could mean that the late stage became the most overextended during the VC dealmaking frenzy of 2020 and 2021.As these companies grapple with the new reality of higher interest rates and stricter deal terms,they will not be able to raise at their previous paces,high cash burn rates,or valuation levels.Depending on how long it takes for the IPO window to open,we may see these companies cut operations significantly to increase runway at the expense of short-term growth.If or when these companies need additional capital from the private markets,many will have to raise it at a reduced valuation.Risks:Investors on the capitalization tables of these late-stage companies may not want to see their own investments written down and could come in to support these companies at the last rounds valuation to extend the runway of the companies.Additional capital provided to a company to keep it afloat would be better than a failed business.This occurrence could be especially prevalent if 2023 starts off with a heavily improved IPO market where investors can rationalize additional capital investment if they see a light at the end of the tunnel.Furthermore,investors that were anxious to see a piece of these highly valued companies could have skimped on due diligence and may have left themselves even more exposed than in normal markets.This could increase the incentive to send good money after bad,so to speak.In the chart below,we plot the estimated capital demand by stage over that stages observed deal value.This could be thought of as the amount of demand that was fulfilled by the market,or apace of dealmakingmetric.We can see below that companies in the late stage are the most capital-starved,with a demand of 3.5 times what was actually fulfilled in 2022.Their estimated capital demand has seen the least amount of support in terms of observed deal activity.We estimate the capital demanded by startups using a bottom-up analysis where each deal generates estimates into the future based on historical deal size step-ups and the distribution of time between rounds at the time of that fundraising.By reviewing our reported deal value over time,we have determined that we tend to add 10%of deal value to the most recent quarter due to a reporting and collection lag.Therefore,we have added 10%of deal value to our reported deal value in the current quarter only.Alex Warfel,CFAQuantitative Research Analyst 5PitchBook Analyst Note:2023 US Venture Capital OutlookWe see the biggest growth in capital demand relative to deal size at the late stage because these companies are large enough to put capital to work in a meaningful way.Smaller,early-stage companies may not have had the ability to expand operations significantly in a market like that of 2020 and 2021,when capital was cheap.However,this operational expansion came with greater ongoing expenses that required greater funding in the future if the revenue from those operations could not be converted into profit.When the funding market slowed down in 2022,startups had to respond with layoffs,capital raises from other sources such as venture debt,and so on.Source:PitchBook|Geography:US*As of December 1,20220.0 x1.0 x2.0 x3.0 x4.0 xQ1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4201720182019202020212022*Early-stage VCLate-stage VCVenture growth3.5x2.5x1.4xEstimated VC demanded as a multiple of observed deal value by quarter6PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:Seed-stage startup valuations and deal sizes will continue their ascent,reaching new annual highs despite a slowdown in total deal value and count.Rationale:Seed-stage startups are more insulated from public market volatility than their early-and late-stage counterparts because they are at the most nascent stages of the VC lifecycle.Having just raised their first round of institutional capital,they are farther away from an IPO and can bide their time until paths to liquidity reopen.In recent years,and more prominently following the 2022 economic downturn,investors traditionally allocating capital to late-stage startups have moved upstream,targeting the earlier stage to capture larger returns and secure access to promising startups.Dramatic reductions in the cost to start and scale businesses,the prolonged time between startup foundings and seed rounds,and the expansion of participants at the seed stage have contributed to the development of a more robust pre-seed market.This has led to larger capital raises and valuations at the seed stage that are more in line with historical metrics associated with Series A or later rounds.Moreover,the economic downturn could cause investors to encourage seed startups to raise additional capital,which would extend their runway past the 18-month standard and translate to larger deal sizes at this stage.Risks:The frozen IPO market has diverted investment dollars traditionally committed to late-stage companies to younger startups.Should market conditions improve and paths to liquidity return,seed-stage deal metrics may stagnate or fall in response to larger check writers returning to their original investment strategies.Seed-stage startups have a higher rate of failure and thus higher investment risk;this could cause GPs to be wary of allowing deal sizes and valuations to continue increasing because more of their portfolios could be exposed to this risk.Additionally,GPs could exercise stricter due diligence of startups and limit seed-stage deal-metric growth in order to mitigate the recent years relaxed due diligence protocols,which have led to unsustainable valuations hurting late-stage startups and forcing them to consider marking down their portfolios.Seed-stage startups are more mature than they have ever been.With a median of 2.4 years since founding,they are nearly double the age of seed-stage startups a decade ago.Their maturity has contributed to the median seed-stage deal size,valuation,and step-up YTD of$2.8 million,$10.5 million,and 1.9x,respectively,surpassing 2021s record-high figures.Amid the tepid public market conditions and the Federal Reserves(the Feds)monetary tightening,seed deal metrics have increased QoQ.Q3 saw a record-high median deal size of$3.3 million,reinforcing this stages insulated nature due to the extended time to an IPO.Further supporting the prospect of seed-stage growth in 2023 is the large number of micro-funds(funds with less than$50 million in capital commitments)closed in recent years.Venture funds typically make their investments over a period of three to five years,so we have examined the micro-fund fundraising activity over the last decade,breaking it into five-year periods.In the five-year period from 2018 to 2022,1,770 micro-funds were closed,amassing$24.4 billion in capital commitments.In the five-year period starting Max Navas Analyst,Venture Capital 7PitchBook Analyst Note:2023 US Venture Capital Outlookin 2013,1,280 micro-funds were closed with just$15.6 billion in commitments.The increasing amounts of capital allocated to micro-funds as well as the number of micro-funds competing for deals have bolstered seed-stage deal metrics in recent years.The micro-funds closed from 2013 to 2017 largely contributed to the 2018 median seed-stage deal size and pre-money valuation of$1.8 million and$6.0 million,respectively.The record highs set by seed-stage metrics in 2022 are due in part to the expansion of micro-fund activity over the last five years,and as a result we can assume that there will be a healthy number of micro-funds actively investing at the seed stage in the coming year.Traditional late-stage investors also play a significant role in the growth of seed deal metrics.In recent years,we have seen experienced managers such as Tiger Global,Greylock Partners,and Andreessen Horowitz commit to investing or raising$1 billion,$500 million,and$400 million,respectively,to back founders at the seed stage.1,2,3 The general need for larger-size funds to write larger checks in order to maintain their expected return profiles will support the growth of seed-stage deal metrics in the coming year.In addition to late-stage venture capitalists launching seed-stage funds,we have also seen larger venture capitalists increase their participation in seed-stage deals and drive up the median deal size.Using PitchBooks data,we examined the seed-stage investment activity of Accel,Andreessen Horowitz,Greylock Partners,Intel Capital,Khosla Ventures,Kleiner Perkins,Lightspeed Venture Partners,and Sequoia Capital between 2020 and 2022 and found that the collective participated in 154 seed-stage investments in 2020 and had already made 208 investments through mid-December of 2022.The subset of 2020 seed investments had a median deal size of$4.0 million,well ahead of the same years overall median seed-stage deal size of$2.0 million.Through mid-December of 2022,the median deal size had increased to$6.4 million,also well ahead of the overall median seed-stage deal size of$2.8 million.This activity lends itself to our bullish prospect of seed-stage deal-metric growth in the following year.1:Tiger Global Partners Commit$1 Billion for Early-Stage Tech Funds,The Information,Berber Jin,March 7,2022.2:Greylock Raises$500M for Seeds,Greylock Perspectives,September 21,2021.3:Introducing a16zs Seed Fund,Andreessen Horowitz,August 27,2021.Source:PitchBook|Geography:US*As of September 30,2022$0$2$4$6$8$1020122013201420152016201720182019202020212022*Top and bottom quartile rangeTop decileMedianBottom decileAverageSeed deal value($M)dispersion8PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:SPAC IPOs and mergers will continue to decline while liquidations will continue to increase in 2023.Rationale:Elevated market volatility has dramatically depressed valuations in both public and private markets and has effectively halted public listings through 2022.This impact has been noticeable not only for traditional IPOs but also for companies looking to go public via a SPAC.Rising interest rates,which impact consumer buying and borrowing power and thus earnings for companies,have challenged the sky-high valuation multiples of 2020 and 2021.Additionally,increasing regulatory scrutiny has negatively affected the primary value propositions that SPACs offer to private companies,such as the ability to reach public markets faster than a traditional IPO.These factors,among others,have resulted in a sharp decline in SPAC issuance and combination activity and in many cases have led to SPAC dissolution and capital returning to investors.We expect these trends to be a driving theme in 2023 as turbulent market conditions continue to dampen investor and private company interest in SPAC vehicles.Risks:Going public via a SPAC can still be an attractive option for some private companies,and given the large number of SPACs that have yet to find an acquisition target,it is possible that we will see an increased number of mergers in 2023.As pointed out in our latest US VC Valuations Report,deal value and count have decreased significantly for many late-stage companies and unicorns,demonstrating a difficulty to raise capital in the private market.Accessing public capital via existing SPAC vehicles could be a potential route to funding given IPOs have been nearly nonexistent this past year,though there will certainly be challenges along the way.US SPAC activity has decreased significantly in 2022 amid volatile public markets,with just 78 SPAC mergers totaling$38.2 billion YTD.Our teams SPAC research note from Q3 2022 observes that outside of the SPAC spike in Q4 2021,this is a continuation of the trend we have seen since the end of Q1 2021.Indeed,SPAC formations are also down with just 69 SPAC IPOs observed this year,which is the lowest annual total we have seen since 2019.Given the propensity for SPAC favorability to coincide with positive market performance,we expect these figures to continue to decline as we head into 2023.Regulatory and legal headwinds have also contributed to the SPAC decline;most notably,in Q3 2022,President Biden signed the Inflation Reduction Act of 2022 into law.The act included a nondeductible 1%excise tax on the repurchase of corporate stock by a publicly traded US corporation after December 31,2022.This excise tax will apply to any redemption by a US-domiciled SPAC,consequently incentivizing sponsors with no viable target in sight to close shop before the years end.We have already observed this trend as several high-profile SPACs have liquidated this year,including two from Chamath Palihapitiyas investment firm Social Capital.With more than 450 SPACs currently on the market with a merger deadline in 2023,half of which with deadlines in Q1 2023,we expect a significant increase in the number of SPAC liquidations by the end of Q1 2023 as investors seek to recoup their capital and invest in asset classes better suited to navigate the current market environment.Vincent HarrisonAnalyst,Venture Capital 9PitchBook Analyst Note:2023 US Venture Capital OutlookFurthermore,public market performance of companies that have gone public via SPACs will play a role in influencing investor appetite.Unfortunately,companies that have managed to go public via the SPAC route have been especially battered by turbulent market conditions;at the time of this writing,PitchBooks DeSPAC Index shows a-64.5%YTD return for public companies that have gone the SPAC route,compared with-17.3%and-29.6%YTD returns for the S&P 500 and Nasdaq,respectively.While not a perfect proxy for comparison,this sizable difference,among other factors,has curbed SPAC formation and fundraising.We expect SPAC formation to continue its decline well into 2023,considering not only underperformance relative to major public index returns but also increasing regulatory scrutiny and overall market volatility.Additionally,of the more than 450 SPACs still looking to strike a deal,we expect more than 50%to liquidate and return cash to investors in 2023.Source:PitchBook|Geography:US*As of November 23,2022Source:PitchBook|Geography:US*As of November 25,2022$0.2$0.8$1.5$2.9$1.8$7.6$9.4$15.9$87.7$166.0$13.41071117929375422955669$0$50$100$150$20020122013201420152016201720182019202020212022*Aggregate post value($B)Deal count0 00cJanFebMarAprMayJunJulAugSepOctNovDeSPAC IndexS&P 500Nasdaq202120222022*SPAC IPO activityDeSPAC Index return versus public market indexes returns10PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:Venture growth deal value will fall below$50 billion in the US.Rationale:Our venture growth dataset showcases the latest stage of VC and could be thought of as a pre-IPO stage of investment.Venture growth deals are generally the largest in the venture market,with the median deal coming in at$20.0 million in 2022,double that of the late stage.Being this large,the venture growth stage is heavily reliant on nontraditional capital,especially from crossover investors,which have quickly retreated from the opportunistic venture strategy they have deployed over the past couple of years.This leaves the venture growth stage with a high number of companies and much lower capital availability.Alongside this,we may simply see fewer companies looking to raise at this stage of VC,instead focusing on sustainable growth and cost-cutting in order to stay away from the difficult capital-raising market.Risks:Similar to the risks associated with our Unicorn Index outlook,a public market U-turn that begins to unlock the high value held by crossover investors could pull these institutions back into the venture market.One of the reasons crossover investment activity has been so high in recent years is because of the relatively lower liquidity risk that VC investments at the growth stage have presented.More than 87%of the record$781.0 billion in exit value generated in 2021 came from IPOs,which many growth-stage companies will need to realize returns.There is also a large pocket of capital tied up in SPACs that could be liquidated and recycled into the venture growth market.Our venture growth stage highlights a small portion of venture deals that account for a much larger portion of capital invested5.5%of US deal count and 26.6%of US deal value in 2021,to be exact.The$90.9 billion in venture growth investment in the US VC market during 2021 was a record high by a wide margin,with the prior high-water mark being just$44.8 billion.The capital crunch at the top of the venture market has shown to be especially challenging for venture growth in 2022.Through November 23,only$51.5 billion was invested in the venture growth stage.The quick pullback from crossover investors is problematic for venture growth because many deals within this space,especially the largest,rely on nontraditional capital.80.5%of the venture growth deal value in 2021 included participation from nontraditional firms.Over the past five years,an average of 73.9%of venture growth deal value derived from deals with nontraditional investor participation.The activity of these institutions is vital.In Q3 2022,crossover investors,the largest nontraditional investors,participated in less than$12 billion in deal value,making 211 investments across the entire venture landscape.Compared with the record quarters for each of these figures,both of which occurred in 2021,that is$33.0 billion less and 304 fewer investments.The volatile market has revealed nontraditional investor activity in VC to be simply opportunistic.For many nontraditional investors,liquidity risk is high.Hedge funds and mutual funds must remain liquid enough to service redemptions(mutual funds have strict liquidity regulations),and the current economic climate has shown to make the market even more illiquid than normal.Kyle Stanford,CAIASenior Analyst,US Venture Lead 11PitchBook Analyst Note:2023 US Venture Capital OutlookWhen we look at our estimate for capital demanded and compare it with our estimate for capital supply for the stage,we see that a wide gap has formed in 2022.This void of funding for venture growth sets 2023 up to be very challenging for companies needing capital.Not only could they remain unable to access the public market through IPO,but without the necessary supply of capital,which will generally be needed to fund large deals,it is more likely that companies that find themselves at the venture growth stage will experience down rounds or even failure.Source:PitchBook|Geography:US*As of November 23,2022$7.8$9.6$17.6$24.3$22.0$19.6$29.5$35.8$44.8$90.9$51.5429491542511480526608674720988738$0$20$40$60$80$10020122013201420152016201720182019202020212022*Deal value($B)Deal countVenture growth deal activity12PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:2023 US VC mega-round activity will fall below 400 deals,hitting a three-year low.Rationale:Mega-rounds,defined as rounds with deal sizes of$100 million or more,have become more prevalent in recent years with surplus capital and the high number of investors chasing VC deals.The VC dealmaking environment of the last few years encouraged a growth-at-all-costs mentality,encouraging startups to return to market quicker at higher valuations and seek larger amounts of capital.In the wake of the 2022 economic downturn,investors are presently focused on the capital efficiency,path to profitability,and justifiable valuations of startups.This shift in investor mentality,coupled with depressed public markets affecting late-stage deal metrics and comparables analysis,will thwart the mega-round activity in the coming year.Risks:There are close to 1,300 privately held unicorns that have been unable to go public due to the frozen IPO market.Unicorns as well as startups that have previously raised mega-rounds are likely to raise a mega-round in a subsequent financing because their unprofitable operations may have grown to require additional large capital injections to sustain their activity until an exit.2021 was a record year for mega-rounds,and the companies that raised those rounds will likely need to return to market by 2023.Their return could prop up mega-round activity.Additionally,2022 saw a record amount of capital consolidate in larger-size VC funds.This consolidation could lead to larger checks being written and ultimately increase the total number of mega-rounds next year.Mega-rounds have fallen on a QoQ basis throughout 2022,from 201 rounds in Q1,to 161 rounds in Q2,to 103 rounds in Q3.Considering the fourth quarters preliminary data,we expect an additional 80 to 100 mega-rounds will be completed,bringing this years annual total to around 550 deals.Stemming from the pressure of public market uncertainty and frozen paths to liquidity,this years mega-round activity will be a far cry from the 836 mega-rounds observed in 2021.Using our prior conjecture,extrapolating 2022s fourth-quarter activity,and anticipating a further slowdown leads us to expect less than 100 mega-rounds will be observed per quarter,culminating in a 2023 annual figure of less than 400.Most mega-rounds occur in the late stage,so it is pertinent to examine the recent dealmaking trends of startups in that stage.Late-stage deal metrics have fallen well below 2021 figures,indicative of the unsustainable growth fostered in recent years.Through Q3 2022,the median late-stage deal size was$11.5 million,a 20.6%drop from the 2021 full-year figure of$14.5 million.As median deal sizes decline,we can expect fewer mega-rounds to occur.The top-decile late-stage deal size was$75.0 million in Q3,a dramatic reduction from the record high of$143.7 million in Q4 2021.Even the highest-performing late-stage deals are getting squeezed,making the prospect of expansionary mega-round activity in the coming year improbable.Tandem to the conversation of mega-round activity is the participation of nontraditional investors,which overwhelmingly contribute to the growth of the largest startups prior to their public listings or other exit events.From 2018 to 2021,nontraditional investors have participated in 91%of mega-rounds and 93%of mega-Max Navas Analyst,Venture Capital 13PitchBook Analyst Note:2023 US Venture Capital Outlookround deal value per year on average.Through Q3 2022,nontraditional investors participated in mega-rounds with deal value totaling$88.5 billion,significantly less than the$181.9 billion in mega-round deal value they participated in last year.Nontraditional investors offer a necessary capital source to help startups exceed deal sizes of$100 million.If nontraditional investors reduce their investment in VC markets,mega-round activity will fall.We expect nontraditional investor participation to shrink further in the coming year,limiting the number of startups that can successfully raise mega-rounds.Finally,it is important we address the risks of the plethora of startups that raised mega-rounds in prior years potentially returning to market in 2023 to raise again.Using PitchBook data,we examined the median time between rounds for startups that have raised mega-rounds and saw a median between 1.0 and 1.2 years from 2019 to 2022.Based on this,we will focus on startups that raised mega-rounds last year,as they will likely need to return to market soon if they have not already.Of the 832 startups that raised mega-rounds in 2021,104 already returned to market this year,meaning fewer of those startups will need to return in 2023.Due to the harsher VC environment,we expect a fair number of the remaining startups to consider venture debt to supplement their need for equity financings.Startups that opt to raise venture debt could lessen the burden on raising equity;for example,if a startup were to secure$50 million in equity and take on$50 million in venture debt,their financing round would not show up as a mega-round despite having mega-round capital.If they are unable to secure venture debt,they may resort to down rounds with deal sizes less than$100 million,seek out acquirers to generate a liquidity event,or even go out of business.Consequently,we are skeptical of the continued growth of mega-round activity in the coming year and forecast fewer than 400 rounds closing.Source:PitchBook|Geography:US*As of September 30,2022050100150200250$0$10$20$30$40$50$60Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3201720182019202020212022*Deal value($B)Deal countVC mega-round deal activity by quarter14PitchBook Analyst Note:2023 US Venture Capital OutlookOutlook:US VC fundraising will fall between$120 billion and$130 billion in 2023.Rationale:Despite US VC fundraising reaching a historic high in 2022,we expect a slowdown to occur in 2023 as LPs grapple with liquidity concerns and consider alternative investments in other asset classes positively affected by rising interest rates.Declining public equity valuations can create adenominator effectfor many LPs,such as endowments,pension funds,and sovereign wealth funds(SWFs),whose venture asset holdings become too large relative to other asset classes outlined in their mandates.Our in-depth methodology for this phenomenon can be found here.Declining public market valuations also create an additional liquidity crunch for many LPs,as public equity markdowns reduce the capital they can expect to receive as lockup periods for recent exits expire.Rising interest rates,which are largely to blame for the downward trend in equity valuations,have also created lower-risk opportunities for LP capital in other asset classes,taking even more attention away from private market fundraising.Risks:Allocations to venture assets within an LPs portfolio typically represent a small overall percentage;therefore,large reductions in allocations may not occur.Furthermore,as pointed out in our Q3 2022 Global Private Market Fundraising Report,established fund managers with successful track records,especially those who have done well despite poor market conditions,have had great success in capitalizing on LP interest;globally,68.4%of total VC raised went to established managers in 2022,compared with 58.3%and 54.9%in 2021 and 2020,respectively.This upward trend illustrates the probability for larger,established fund managers to increase their market share of active LPs with flexible allocation mandates in 2023.The exit environment of 2022 has been lethargic relative to previous years,with just$63.4 billion in exit value generated YTD(not including Adobes acquisition of Figma,which is expected to close in 2023),a significant decline from last years record of$781.5 billion.As discussed in our most recent PitchBook-NVCA Venture Monitor,this years total exit value,which we expect to be the lowest since 2016,is a real cause of concern because the lack of liquidity driven by the slowdown in exit activity could discourage LPs from recycling capital into the VC ecosystem.Even in cases where VC valuations may remain stable or are marked up,resulting in unrealized gains,cash returns to LPs ultimately dictate where future dollars are allocated,including to existing capital commitments or into new funds.Additionally,strong markdowns in public markets have reduced the amount of capital returns that endowments,pensions,and SWFs can expect to receive if and when they choose to sell shares from recent exits whose lockup periods have expired.The lack of realized value relative to 2021s record exit value generation is likely to cause a capital crunch for many LPs,and this reduction in capital puts a strain on existing liquidation mandates,so there is likely to be some hesitation when considering recycling any available cash into the relatively illiquid VC market.Given the ongoing uncertainty around public market conditions,we expect the amount of capital commitments from these investors to continue to decline Vincent HarrisonAnalyst,Venture Capital COPYRIGHT 2022 by PitchBook Data,Inc.All rights reserved.No part of this publication may be reproduced in any form or by any meansgraphic,electronic,or mechanical,including photocopying,recording,taping,and information storage and retrieval systemswithout the express written permission of PitchBook Data,Inc.Contents are based on information from sources believed to be reliable,but accuracy and completeness cannot be guaranteed.Nothing herein should be construed as investment advice,a past,current or future recommendation to buy or sell any security or an offer to sell,or a solicitation of an offer to buy any security.This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.15PitchBook Analyst Note:2023 US Venture Capital Outlookin 2023 as these firms look to satisfy liquidity regulations and other mandates outlined in their investor policy statements.Interest rates have marched upward for most of 2022 as the Fed continues its most aggressive set of rate increases since the 1980s.While these rate increases have been the primary cause of equity valuation declines in public and private markets,they have inversely created a safer way for investors to lock in positive returns in other asset classes.As of December 6,2022,the benchmark 10-year Treasury yield finished at 3.5%,while the two-year Treasury yieldwhich is even more sensitive to near-term Fed policy changesfinished at 4.4%.These figures are some of the highest we have seen since the 2007-2008 global financial crisis.Considering the fact that higher yields translate to falling bond prices,and higher risk-free rates increase the return needed from VC investments,it is likely we will see investors allocating more capital to fixed-income instruments as a lower-risk path to cash returns.Doing so would theoretically reduce the amount of capital allocated to other alternative,illiquid asset classes,such as VC,thus further reducing fundraising levels in 2023.However,it is important to note that many investors predict a recession is on the way,which could eventually lead the Fed to halt rate increases or lower them entirely,therefore reducing the attractiveness of such a strategy.Source:PitchBook-NVCA Venture Monitor|Geography:US*As of September 30,2022$128.4$74.7$113.0$77.1$70.2$101.9$132.4$268.8$324.5$781.5$63.48949421,1331,1131,0201,0731,2391,2801,2271,868906$0$100$200$300$400$500$600$700$800$90020122013201420152016201720182019202020212022*Exit value($B)Exit countVC exit activity, 2023 Sales Trends Report UK Spotlight Strategies,Data, Insights for Global LeadersXSales organizations at leading companies around the world are committed to growing better and today,that means focusing more on how you sell than what you sell.The highest performing sales teams prioritize building rapport with prospects,listening to their challenges,and developing meaningful relationships.The fundamentals have remained the same;like Zig Ziglar said,Stop selling.Start helping.But the way that we do this has changed quite a bit.In a competitive and rapidly changing environment,how you engage with prospects and customers is why you win or lose business.Businesses with cobbled tech platforms are experiencing acrisis of disconnection,and seeking out new ways to align teams,data,and the customer experience.Buyers are committed to sharing their experiences and learning from their peers experiences,and third-party analyses like those from G2 and Gartner are becoming increasingly more integral to the buyers journey.At HubSpot,were honored to have been identified as Leaders in the 2022 Gartner Magic Quadrant for Marketing Automation Platforms and the G2 Grid for the Best CRM Software in 2022.This recognition is compelling to our audiences because its based on their reviews and experiences with our tools.Over the past 10 years weve been listening to our customers and building our platform to help them grow better,and their successes have,in turn,helped us grow and scale.Christian KinnearChief Sales Officer,HubSpotForeword2023 Sales Trends Report2The deepest and most durable relationships take time and commitment,thats why delighting customers is more important than closing the initial deal and moving on.Weve learned that the customer journey starts with the sale,and companies that deliver better customer experiences at every phase create brand promoters who fuel the Flywheel.Find ways to beautifully blend technology into your marketing and sales processes to answer questions,guide the user,and provide resources.But make it extremely easy to get in touch with a human being,and the right human being,or risk losing a prospect or a paying customer.Digital technology is necessary for a top-notch customer experience,since customer expectations for personalization and an intuitive user experience are higher than ever.With brand new data from over 1,000 sales leaders across different countries,markets,and audiences,weve put together a comprehensive analysis of sales trends and strategies to help you succeed in the year ahead.Weve also gathered insights from trusted sales leaders to show how to put the data into practice and see measurable results.I hope the data and takeaways from this report help you lead your team confidently in 2023.2023 Sales Trends Report3ForewordIntroductionCHAPTER 1:Top 6 Sales Goals for 2023 CHAPTER 2:Top Sales Challenges(and Tips to Solve Them)CHAPTER 3:How to Get the Most Value from Phone Calls as a Sales Channel with AircallCHAPTER 4:Sales Metrics to Track in 2023Table of ContentsCHAPTER 5:Lead Generation StrategyCHAPTER 6:Year-Over-Year Comparison of Sales Performance in 2021 vs.2022CHAPTER 7:Sales CultureCHAPTER 8:Trends from Effective SalespeopleCHAPTER 9:UK Sales Trends OpportunitiesClosing258 2538414348 515557662023 Sales Trends Report4The Evolving Hybrid Sales LandscapeSales has evolved over the past several years.All industries have seen a shift from in-person selling and networking to virtual and hybrid strategies.Automation and technology have redefined sales efficiency,and new sales intelligence apps join the marketplace weekly.During a time of economic uncertainty,efficiency is top of mind for sales leaders,who are experiencing budget cuts and tighter margins.Today,weve seen that sales managers measure productivity based on CRM usage.With longer sales cycles and more relationship-building prior to closing deals,CRMs have proven critical to keeping track of prospects and meeting their needs at scale,while keeping operational costs down.Younger generations are gaining decision-making power and growing in the sales force,and they communicate much differently than previous generations.Theyve grown up as digital natives,and many have never worked in an office environment.Fundamental sales strategies remain effective,but with new tweaks to fit into todays tech stack.New Survey Data Insights from 1,000 Sales ProfessionalsHubSpot partnered with Aircall to survey 1,000 global sales professionals around the world to learn what sales channels and strategies are working,how sales teams can hit their targets in 2023,where to find qualified leads,and more.The data revealed that the buyers journey continues to grow and change,and top sellers have adapted to meet new(higher)customer expectations.Introduction2023 Sales Trends Report5Consumers expect hyper-localized content,targeted communication via a variety of multimedia touchpoints and channels,and strategic consultation at every stage.And with an exponential rise in the volume of virtual messaging,the top challenge in sales in 2022 is standing out from the competition.With a looming recession,budgets and headcounts are shrinking across departments buyers want to see how every decision they make will impact revenue,and want to feel confident that they will have dedicated support once they sign on with a new solution.In this report,well review high-level trends in B2B and B2C sales,provide executive insights from leaders at top companies,and cover the strategies and tools that sales leaders can use in 2023 to reach their goals.Report MethodologyHubSpot surveyed 1,000 sales professionals via online survey in July-August 2022 from B2B and B2C organizations in the U.S.,UK,Japan,Canda,Australia,France,and Germany.2023 Sales Trends Report6Tools,data,and automation that help eliminate friction from the selling process.Powerful all-in-one CRM and sales software for teams Find new opportunities to connect with prospects Build trust and establish lasting relationships Automate administrative tasks,giving reps time to connect Access detailed revenue analytics and forecasting Boost sales team productivity Integrate with HubSpot and other leading CRMs Track sales performance Onboard new teammates more effectivelyFoster productiveyet personalizedselling,at scale.The phone solution for savvy sales teamsGet a Sales DemoTry Aircall for Sales2023 Sales Trends Report72021 was a surprising year for sales following the pandemic,a global shutdown,and a complete transformation in the way that we work and live,42%of sales professionals still managed to exceed their goals.In 2022,41%report exceeding their goals,despite challenges like a crowded solutions landscape,fewer high-quality leads,and difficulty finding and reaching qualified prospects.For the year ahead,the main sales goal leaders hope to achieve builds off of the momentum of the past few years 45%of sales leaders want to exceed sales targets and quotas.But they plan to reach these goals in new ways.Sales teams are leveraging technology,focusing on demonstrating value,and building their own marketing and media channels to increase market share.One in four sales leaders identified their main goal for 2023 as up-selling or cross-selling existing customers.Selling to existing customers has lower acquisition costs,and happy customers can drive significant business growth when they become brand promoters.Chapter 1:Top 6 Sales Goals for 20232023 Sales Trends Report8Other high priority goals in 2023 include making the sales process more efficient,leveraging CRMs to their full potential,improving sales and marketing alignment,and winning more market share in a competitive online space.Todays sellers need to build trust in new ways,and its harder to reach executives and decision makers with the growing majority of leaders working remotely.Technology like CRM platforms and sales intelligence tools are helping uncover new opportunities and guide more effective conversations.Goal 1:Exceeding Sales Targets and QuotasThe top sales goal across B2B and B2C teams is to exceed sales targets and monthly or yearly quotas.Whats changing in this area is the strategies that are successful in converting leads into customers.In 2023,expect sales tactics to become even more specialized by audience,niche,phase of the buyers research journey,and sales intelligence information.For B2B sellers,the most effective sales strategies for winning new customers are setting up face-to-face meetings,highlighting solutions to customer problems,and establishing competitive advantages in the market.2023 Sales Trends Report9On the B2C side,sellers have found success establishing rapport during the sales process,offering discounts and promotions,creating membership rewards programs,and optimizing their e-commerce sites.Prospects are less interested in seeing how it works and more interested in making sure you understand their needs,have a comprehensive idea of their requirements,and that the product will work.Dan Tyre,Sales Director,HubSpot2023 Sales Trends Report10Goal 2:Making the Sales Process More EfficientAs customer expectations rise,sales representatives have to add even more to their discovery checklists,which adds time and administrative tasks to their daily schedule.Almost one third(29%)of sales professionals top goal for 2023 is to make their sales process more efficient.And the most popular tools to improve sales efficiency are Troops,Zoho,LeadIQ,LinkedIn Sales Navigator,and the HubSpot CRM.More than one in five sales professionals reports that the top reason prospects back out of deals is the length of the sales process,so any steps to speed up approvals and timelines helps you stand out and increases the likelihood of closing the deal.Almost one-third of sales professionals top goal for 2023 is to make their sales process more efficient.Things like email templates,call recording functionality,and calendar management links are new features that are taking sales productivity to the next level.Dean Moothart,Director of Client Solutions,LeadG22023 Sales Trends Report11Goal 3:Prioritizing Existing CustomersMore than three-quarters of sales professionals(76%)report that 10% of their company revenue comes from upselling.And 68%say that 10% of total company revenue comes from cross-selling.Prioritizing existing customers impacts both direct revenue on upsells and cross-sells,and also influenced revenue.The three most effective opportunities for up-selling existing customers are:After successfully meeting your clients goal01When youve identified issues with your clients strategy that your service or product can help solve02When you are setting goals with your client032023 Sales Trends Report12Upselling and Cross-Selling Strategies for Existing CustomersUpselling and cross-selling requires a deep understanding of your customers,their goals,and their actions.People give business to people they trust and enjoy working with,and they have more choices than ever before.In the LinkedIn Global State of Sales Report,almost half(46%)of sales representatives said their biggest challenge was incomplete data.Upselling and cross-selling rely on accurate data and automation,which support an exceptional customer experience.Without a foundation of a solid relationship with your customers,discounts and promotions,which are the most effective sales strategy for existing B2B and B2C customers,will only go so far and last so long.2023 Sales Trends Report13When it comes to B2B sales,there are multiple decision makers at the table.And these decision makers have done their research online before ever jumping onto that first demo.Competitive intelligence solutions are enabling sales teams and giving them insights in real time so they can confidently know when to say,Only with my solution can you getAnd thats what wins more deals,says John Judge,SVP of Sales at Crayon.Using sales intelligence tools,understanding industry trends and nuances,and providing thoughtful suggestions to help customers hit their goals are some of the top ways sales teams are adding value and successfully selling to current B2B and B2C customers.2023 Sales Trends Report14Goal 4:Winning More Market ShareSix in 10 sales leaders feel that having dedicated sales enablement support is very important or extremely important to making sales.And salespeople at companies with dedicated enablement teams perform better and are more likely to exceed their goals.When sales enablement and marketing teams establish a wider presence in the market,it makes it easier for sales teams to close deals and focus on customer challenges,rather than having to start from square one with laying a foundation of trust and brand recognition.In 2023,sales enablement teams should focus on creating and generating:Product demos based on use cases Up-to-date customer testimonials and case studies Reviews Current market research reports Shareable social media content2023 Sales Trends Report15Other ways that sales teams are winning more market share are offering discounts and promotions with industry partners,and down-selling to capture leads at an earlier growth stage than the ideal target audience.Take the HubSpot Academy Sales Enablement Training Course Get Certified in Sales Enablement2023 Sales Trends Report16Goal 5:Improving Sales Marketing Alignment When sales and marketing teams are misaligned,it leads to missed sales and revenue,lost qualified leads,and a poor impression of the company as a whole.More than half of sales leaders(52%)say that misaligned sales and marketing teams have cost them revenue,and more than one-third(36%)report that it prevents both teams from succeeding.A third of sales leaders(33%)also find that when sales and marketing arent aligned it wastes marketing budget.In 2022,one in five sales professionals feels that sales and marketing teams arent very aligned,or not aligned at all.2023 Sales Trends Report17When sales and marketing teams are aligned,it a)increases revenue,b)improves the customer experience,c)increases lead quality,and d)helps teams close more deals,along with more benefits to both teams.How Sales and Marketing Teams Can Work Better,Together When marketing and sales teams arent on the same page,it wastes budget,and creates frustration for both sides.For example,if marketing spends a quarter of their budget on a campaign that generates low-quality leads,everyone suffers sales representatives spend time calling unqualified prospects,the marketing team sees low engagement,and no one hits their targets.2023 Sales Trends Report18When these teams work together,they can help each other grow better.The biggest barriers to sales and marketing alignment,from a sales perspective,are:The first step towards bringing sales and marketing together is establishing one source of truth in terms of contact profiles and data.When teams can accurately track the success of marketing initiatives all the way down to sales and brand ambassadors,they can more confidently report on ROI and make informed decisions about marketing campaigns.Lack of effective communication between teams(38%)Lack of input from sales on marketing content(27%)Lack of alignment on goals/strategies(30%)Sales and marketing teams use different tools(26%)Difficulty sharing data between sales and marketing teams(26%)01030204052023 Sales Trends Report19Sales Enablement Content to Create Generate in 2023 Market research reports Customer testimonials case studies Reviews Email templates Social media content Product demos Competitor analyses010203040506072023 Sales Trends Report20Goal 6:Leveraging Your CRM to Its Fullest PotentialTwo of the top five obstacles to sales and marketing alignment are a)having different tools,and 2)difficulty sharing data between teams.For teams hoping to better leverage their CRM,the first step is to make sure its connected to your marketing and revenue optimization tools.The more teams using a shared data source and contact management system,the more connected the user experience isAnother underrated consideration is supporting the tools your teams actually use.Regularly analyze user data in the sales tools that you invest in to find out what the top performers use the most and which tools are connected to the highest revenue customers.Survey sales teams to learn what tools they are using to help them find new prospects,do research,conduct outreach,follow up with leads,and manage their pipeline and if any of these tools are outside of your teams tech stack,find a replacement that integrates with your systems.40%of sales professionals feel that their CRM is very effective or extremely effective at improving sales marketing alignment.2023 Sales Trends Report21To get the full benefit of your tech stack,it has to feel natural to lean on it.If half of your marketing,sales,and service teams dont leverage these tools,then the data isnt accurate and the ROI cant be properly measured.Tracey Quinn,Associate Inbound Growth Specialist,HubSpot2023 Sales Trends Report22In 2022,the top sales challenge is standing out from the competition.Other top challenges include meeting quotas,getting in touch with decision makers,and lead quality.For sales managers,consider your team quotas for 2023,and how frequently you revisit them.Due to market shifts,the same expectations from previous years may be harder to hit this year.To address sales challenges like finding quality leads,getting in touch with decision makers,keeping prospects engaged,and building rapport,salespeople should consider building out a personal branding strategy.The#1 channel for getting in touch with decision makers is LinkedIn,making it a great place to share useful content about the industry.Video content is one of the most popular forms of marketing,and sees incredible engagement on LinkedIn,Facebook,and YouTube.When prospects develop a relationship with you via social media first,theyre more likely to feel ready to purchase from you when the time is right.Chapter 2:Top Sales Challenges(and Tips to Solve Them)2023 Sales Trends Report23Challenge 1:Standing Out From the CompetitionTo stand out against the competition,prepare to exceed prospects expectations at every interaction.The standard for software and tech companies today is personalized email marketing,educational content and events,and experienced reps available for in-depth exploratory calls.So in order to rise above the crowd,you need to be one step ahead of the already high standards in helpful,inbound selling.Read user guides or use tutorials to learn your CRM and sales software inside and out.Gather sales enablement materials like industry-specific demos,case studies,reviews,testimonials,and analytics tools or reports.Keep up with industry news,trends,and reports to help prospects guide strategy and show the potential ROI to their supervisors or other decision makers.Set up alerts and automation to help you follow up with prospects at the right time and provide valuable resources.01020304With the sheer number of competitors offering any specific SaaS solution,running a strong sales process is more important than ever.When sales reps push for a close,without having executive buy-in and a clear ROI,more deals will be lost to no decision and timelines will push.Jayme Manos,Senior Manager,Enterprise Sales,HubSpot2023 Sales Trends Report24Challenge 2:Meeting Quotas Setting and meeting sales quotas in 2023 will both be harder than in previous years.Nearly three-quarters of major advertisers report that the economic downturn is impacting their 2023 budget decisions,and 30%are cutting ad budgets.Using this as a preview of the marketing space at large,salespeople should expect prospects to be careful with their spend and deeply consider purchases in the coming year.To meet quotas and convert leads,the most effective strategy sales representatives can use is making phone calls both for those selling remotely,and overall.Two thirds of salespeople also use discounts and promotions,and more than half report that they increase sales.The most popular promotion among sellers is bundling a suite of products,followed by free trials.Hear from Sales LeadersTo make sure I meet and exceed my monthly quota,I take the time to understand the prospects timeline and if there are any hidden parts of the process(this usually includes the legal team or other stakeholders),so I can plan and get ahead of it.Beyond that,I always make sure my calendar is as open as possible so Im available to hop on calls and can reply to client emails as quickly as possible so they have the answers they need to make decisions.Finally,I make sure to only take meetings with prospects and clients that I think are most likely to find value from Aircall.Elizabeth Beggs,Strategic Account Executive,Aircall2023 Sales Trends Report25 Leadership tip:16%of salespeople believe that unrealistic quotas are one of the top reasons for turnover in sales roles.Regularly evaluate your team quotas and check in with reps on how theyre feeling ahead of the end of month or end of quarter.A solid sales trend I see in 2022 is the utilization of a multi-touch connection process that absolutely includes a warm call on the telephone that can be a first step in starting a sales conversation.Dan Tyre,Sales Director,HubSpot2023 Sales Trends Report26Challenge 3:Getting in Direct Contact with Decision-Makers In 2023,67%of sales representatives will work under a hybrid or fully remote basis,and globally,almost 70%of professionals work remotely.Industry events have largely shifted to virtual and hybrid formats,and many leaders and decision makers have physically moved to new locations farther away from their HQ.If theyre not already,salespeople need to get comfortable with virtual networking and establishing their own presence on social media.Almost three quarters of sales professionals say that LinkedIn is the most effective platform for researching prospects.Hear from Sales LeadersWhen it comes to getting to the right decision maker,get straight to the point.In my experience,a simple,direct question leads to a simple,direct answer.Of course,sometimes that answer is no,but asking things in a long convoluted way might cause confusion or distrust about intentions on the prospects side.Overall I have seen a lot more success with one or two-line emails than with essays.Louise Ryan,Business Development Representative,Aircall2023 Sales Trends Report27Challenge 4:Lack of High-Quality Leads To address lead quality issues,the first place to look is sales and marketing alignment.Its important for sales and marketing teams to share the same understanding of the ideal customer profile or buyer persona,and regularly review what this means.Develop and update these assets based on sales data,lifetime value,and which customers turn into promoters.After the target customer has been identified,sales teams use tools like LinkedIn Sales Navigator,HubSpot Sales Hub,LeadIQ,and others to find and engage with prospects at the right time.2023 Sales Trends Report28Hear from Sales LeadersI see it as an opportunity to get more creative with my outreach strategy.Believe it or not,there are warm leads everywhere.Whether it be on LinkedIn,review sites,etc.,you just have to find them.Having that hunting mentality is critical because there is always a business out there that needs your product/service but youre going to have to put in that little extra work to find them when warm leads lack.Chris Butera,Business Development Representative,Aircall2023 Sales Trends Report29Challenge 5:Keeping Prospects Engaged Throughout the Sales Process To maintain a prospects interest throughout the sales process,which can be lengthy depending on the scale of the software package or service,you need to understand your buyer in terms of the bigger picture context.What are their goals?What is their busy season?How has their industry been impacted by the staffing shortage?Are companies in their industry going through layoffs?How do they prefer to communicate?What metrics do they report to their manager?During the B2B and B2C sales processes,sales representatives most frequently communicate with prospects two to seven separate times,which adds up when you consider that most have dozens of prospects theyre working with at a given time.Using automated sales management tools and a CRM that adds lead intelligence and logs communications with prospects(like phone calls,emails,and actions)can help sales teams manage the hundreds of data points they need to use to successfully bring in new customers.2023 Sales Trends Report30Hear from Sales LeadersI keep my prospects engaged throughout the sales process by making sure I make it all about them.I like to ask questions to really understand where they are as a business and what theyre hoping to accomplish with solutions like Aircall and HubSpot,and then I assure them that Im here to help.I always inform them that Im working off of their timeline given the information that they share with me.Christell Cherenfant,Account Executive,Aircall2023 Sales Trends Report31Challenge 6:Difficulty Getting Meetings With Prospects Timing is everything.Reach out at the wrong time,youre a nuisance.Reach out at the right time,and youre the answer to a prayer.Its well known in the industry that the best salespeople spend most of their time on calls with prospects listening.Keeping prospects engaged throughout the sales process can be challenging for a sales executive.The key here is really understanding your prospect;their business model,growth goals,challenges,and KPIs.This will help you tailor and personalise your communications.Keep bringing relevant new insights,valuable articles,and high-value CTAs.By sharing regular,tailored and insightful content,youll ensure a prospect thats motivated to stay engaged throughout the buyer journey.Crevan OMalley,Senior Director of EMEA Sales,HubSpot2023 Sales Trends Report32As an Outbound BDR,one of the biggest challenges I face is holding the attention of a prospect if they arent ready to commit at that initial conversation.Something Ive found to contribute to my success is not only to follow up but also to make notes pertaining to that prospects specific circumstances.That way,every prospect feels like they are the only one youre talking to,allowing for that great customer experience right from the get-go.Olivia Smith,Business Development Representative,AircallGetting in front of the right people can be incredibly challenging for sales executives.The first key way to secure a meeting is to understand your prospect and make sure youre adding value in each of your communications.By understanding their challenges and goals,youll be able to tailor your messaging and make yourself a useful contact.Also,dont be afraid to stand out from the crowd by testing new channels like video or voice notes to make your contact more personable.Alan Slevin,Manager,Business Development UKI,HubSpotHear from Sales Leaders2023 Sales Trends Report33In order to secure meetings with qualified prospects,the best strategy is to listen.And to make it easy to meet with you.When listening for signals that a prospect is ready to meet,use these questions as a guide:Has the prospect viewed the pricing page?Have they requested additional pricing information?Did they recently download a case study?Have they used the chat feature on your website?Did they attend an event with your company or a partner?Have they asked for recommendations for new products on social media?Social selling requires a combination of social media savvy and sales tools that can automatically flag key readiness indicators and send automatic alerts.Get the Sales Playbook to Social SellingWhy Prospects Back Out of Deals The number one reason prospects back out of deals is that they arent ready to purchase.Remember timing is everything.Other key reasons like prospects not being convinced that the product or service is right for them,or that it doesnt solve their problems largely signal a disconnect between the prospect,the messaging,and the solution.Collect data on why prospects are backing out of deals to find out where the breakdown is happening.Look at the entire process,from initial outreach,to nurturing,to customer mavrketing and retention.Align sales and marketing teams around the same buyer persona and make sure its easy for everyone to access up-to-date sales enablement materials.2023 Sales Trends Report34Reasons Prospects Back Out of DealsTips to Solve Prospect ChallengesIm not ready to make a purchase.I dont think your product/service is worth the price.Ask about budget cycles and the decision-making process Use data to guide the right time to send contracts Incorporate decision-makers earlier in the sales process Provide case studies for similar sized businesses with ROI details Down-sell to a freemium version or a trial and let the product sell itself Use a comparison matrix with competitors2023 Sales Trends Report35I dont think your product/service is right for us.I cant get approval from my supervisor.The sales process is taking too long.Your product/service isnt solving the right problem.I dont trust you enough to commit yet.Send case studies from the same industry or use case with data and testimonials Offer an extended free trial Show the prospect how your product/service works with their existing tech stack Adjust buyer personas to leadership and decision makers Bring decision makers in earlier Automate follow-up tasks and reminders Bring decision makers in early Use digital proposal apps that integrate with your CRM Offer an extended product demo Offer an extended free trial Offer an extended free trial Send case studies or testimonials Suggest a more flexible pricing plan2023 Sales Trends Report36Its no secret that phone is one of the most successful sales channels,ranking right below in-person meetings and right above social media and email.Its direct,personal,and effective,leading to positive outcomes as you build rapport with prospects and customers alike.Lets break down a couple of ways you can leverage voice to reach your business goals.Chapter 3:How to Get the Most Value from Phone Calls as a Sales Channel with Aircall2023 Sales Trends Report37Use Phone Calls to Keep Track of Customer Data From a data standpoint,phones can provide essential context to help you keep track of leads throughout the customer journey,especially when you connect your business phone to key business tools like your CRM or help desk.By connecting these tools,youll be able to quickly access order info,customer details like their name and contact information,and see their interaction history so you can get a sense for the problems theyre navigating and how you can help.For Aircall customer Humanitix,they integrate voice with HubSpot to coach team members and improve their customer experience.All recordings are brought into Hubspot,which is really helpful,so when we do need to listen to a call,we can quickly pull up the contact and listen.If were doing a call feedback session,well jump into the call recording within Aircall itself,said Michael Shaskey,Humanitixs Head of Growth.Beyond call recording,integrations make it easier to focus on what matters most.Whether tracking communications or linking updates to specific contacts,our work is seamless,said Bree Wright,Head of Client Acquisitions at The Photo Studio.2023 Sales Trends Report38Sell Anywhere with Modern Cloud-Based Phone Solutions Another benefit of investing in a modern business phone is being able to sell no matter where youre located.When it comes to remote selling,44%of survey respondents ranked phone calls as the most effective way to close deals(21%of respondents preferred email and 18%preferred video chats)since they allow for you to really build relationships with prospects and create a positive and memorable experience.When you leverage cloud-based phone features like international and local numbers,youre able to expand your global reach and speak to prospects wherever they are(and see major cost savings on international calling in the process).2023 Sales Trends Report39For Superscript,having the ability to easily scale a remote-friendly phone system was key to their growth.Aircall just really took a lot of stress out of the situation itself.It allowed us not only to execute a remote working option for all members of staff,but it allowed us to then continue with a really solid hybrid policy across the business,says Daniel Prescott,Head of Customer Operations at Superscript.Not having to worry about the telephony system as we expanded into European marketsand allowing people to always feel connectedis so great.No one feels like theyre a million miles away from a colleague.For all they know,they could be sitting right next to them.2023 Sales Trends Report40Among 1,000 global sales professionals,the sales metric deemed the most important to track in 2023 is average profit margin,followed closely by year-over-year growth and conversion rates.Customer acquisition cost(CAC)used to be a top metric for sales,but it can be hard to measure and has lost popularity in recent years.Chapter 4:Sales Metrics to Track in 20232023 Sales Trends Report41Salespeople are most likely to track average profit margin and their own productivity metrics,along with year-over-year growth.For sales leaders,when asked what they do track,they say CRM usage,calls made,emails sent,and conversations.They want to know whats happening at the moment and keep a close eye on overall progress and productivity.But when asked whats most important to track,leaders are looking for calls made,follow-ups on high-quality leads,CRM usage,and proposals sent.In 2022,CRM usage is the most important indicator of productivity in sales.2023 Sales Trends Report42One of the top challenges for salespeople is a lack of high-quality leads.But 41%say that they do receive quality leads from their marketing teams.Wheres the disconnect?In 2022,salespeople find that the best quality leads come from referrals,followed in a distant second by social media,tradeshows and events,telemarketing,inbound marketing,and digital marketing efforts like website,blog,and SEO.Whatqualityleads means has changed over the past few years,largely due to changes in consumer behavior.Chapter 5:Lead Generation StrategyAccording to sales teams,the best quality leads come from referrals.Finding High-Quality Leads In 2021,the top marketing channels for lead generation were social media,SEO,and account-based marketing.In 2022,influencer marketing and short-form video became priority channels for marketing growth,along with virtual events and mobile-focused web strategy.More than half(56%)of sales representatives feel that lead quality has stayed the same or gotten worse from 2021 to 2022,which could be attributed to marketing and sales strategies needing to catch up with the times and pivot more quickly than they needed to in the past.The ways that people engage online and do research have changed drastically,and today sales and marketing teams should focus on referral programs,social media and encouraging user-generated content,and virtual events.2023 Sales Trends Report43Using Social Media for Lead Generation In 2023,B2B sales reps plan to use LinkedIn,Facebook,and Instagram to find new prospects and leads.B2C sales reps are more likely to use Facebook and Instagram,and more than half are also on LinkedIn.YouTube and TikTok are growing as channels for both B2B and B2C sales and marketing,with short-form video on the rise in the professional space.2023 Sales Trends Report44Sales Pipeline Averages Sales leaders need ways to benchmark their teams performance and understand what a healthy sales pipeline looks like in a given quarter in the context of the regional and global economy.In 2023,sales leaders can estimate that in order to see sustainable growth,sales representatives should get 1-40 leads per week.And 78%of salespeople have anywhere from 1-40 prospects moving through the sales process at a given time.As an additional point of reference,the average SaaS sales cycle is 84 days.2023 Sales Trends Report45Chapter 6:Year-Over-Year Comparison of Sales Performance in 2021 vs.2022Eighty-five percent of sales representatives reported meeting or exceeding their sales goals in 2021.That number dropped slightly in 2022 to 82%.The biggest changes to the sales process in 2022 were:More demand for establishing trust and rapport with prospectsNeeding to use even more personalization to close deals.Using solution-based sales pitches rather than product or service-based pitches0103022023 Sales Trends Report46Another major change noted was a new focus on prioritizing existing customers over new ones.Upselling and cross-selling require different strategies,tools,and expectations from sales managers,so sales teams should identify these goals ahead of time and only pivot after analyzing performance from each quarter.When asked if selling remotely has an impact on sales performance,one in five(21%)salespeople feel that its harder,but more than one third(36%)find that its easier to sell virtually.This could be due to the fact that all the information they need is right in front of them,or because some salespeople feel more comfortable and confident in their own homes.For hybrid sales representatives,however,46el that selling remotely is less effective.2023 Sales Trends Report472023 is going to be a different year for salespeople as the sales landscape has changed so much.Before this year,sales reps could go onsite to build trust and demonstrate why their product was superior to their competition,and theyre no longer able to do that.Most companies I am working with are still not going into the office,so they have to figure out a way to build this trust virtually.Chris Moore,Strategic Channel Account Manager,HubSpotOverall,sales win rates,deal sizes,and close rates have stayed the same or increased since 2021,showing promise for the year ahead.2023 Sales Trends Report48Sales culture is shifting,and leaders now understand what encourages happy employees,and what leads to burnout.Prioritizing a strong sales culture improves employee satisfaction,prevents turnover,and helps employees do their best work.Chapter 7:Sales CultureWhat happens when you work for an employer that celebrates your diversity,empowers you to take ownership,and promotes values that align with your own?You are inspired to do your best work,you grow phenomenally,you deliver spectacular results.Radwa Khorshid,Senior Manager,EMEA BDR,HubSpot2023 Sales Trends Report49I hypothesize that the hierarchical nature of sales organizations will flatten and accelerate over the next five years.More people are working from home leading to more focus on the output of work,the leveraging of technology to get that output,and cleaner communication.We must simplify things,and therefore,processes.I think well see a shift of more doers and less menagers on sales teams.Stuart Blake,VP of Sales,Help ScoutClear goals and expectationsTrust between sales repsTrust between reps and leadershipWith 67%of sales teams operating under a remote or hybrid model in 2023,leaders will need to invest in virtual teambuilding and collaboration tools,and consider a more flexible org structure than in the past.The top three most important aspects of internal sales culture that help sales teams succeed are:2023 Sales Trends Report50Retaining Talent Fostering Success on Sales Teams Experienced salespeople are in high demand and will continue to have their choice of companies and teams into the year ahead.For leaders looking to avoid turnover and support their teams in hitting their goals here are some dos and donts.2023 Sales Trends Report51DosDontsGreat Sales Leadership in 2023Watch for signs of burnout and stressFacilitate team bonding and mentorshipRecognize team members for their achievementsEncourage work-life balanceProvide thorough feedback and actionable tipsPush teams without checking inSilo employees in their own workFoster too much competition between reps and create a toxic environmentSet unrealistic goals and expectationsWait until yearly evaluations to give feedback2023 Sales Trends Report52High performing sales representatives have a few things in common most importantly,they say sales and marketing at their company are strongly aligned(more than in the past),and beyond that,they use their CRM and analytics heavily during the sales process.Successful sales teams are more likely to have a dedicated sales enablement team,use social media for sales,and use sales tools for productivity,forecasting,and sales management.Chapter 8:Trends from Effective Salespeople2023 Sales Trends Report53For so long I thought sales was about Closing The Sale.What Ive realized is how much more enjoyable selling can be when you focus on GIVING value.Not only does it help facilitate a better sales process with more meaning and better discovery,it feels a lot better,too.The best sellers and leaders Ive interviewed focus on how they can be the best in the world at giving.Jordan Benjamin,Principal Partner Sales Manager,HubSpotThe most important traits for sales leaders in 2023 are:Good listening skillsAdaptabilityAbility to motivate their teams2023 Sales Trends Report54The UK and Europe as a whole have been experiencing steady growth over the last decade,and its only picking up even more in the past few years.Companies are growing globally and localising their sales and marketing efforts for new and emerging markets.And entrepreneurs in Europe are rapidly bringing new businesses to unicorn status.The European market is built by many small SMBs who are much more technologically savvy these days.And they are willing to use new technologies to grow.Sales teams in the UK report that the biggest change going into 2023 is turning the focus onto existing customers,and upselling and cross-selling to their current audience.Other trends in sales and marketing include:in-person meetings making a comeback,social media growing as a prospecting tool,and messaging apps opening up a huge opportunity for reaching the UK market.Chapter 9:UK Sales Trends OpportunitiesEuropean businesses are growing incredibly fast.And in fact,European funds have outperformed U.S.funds for the last couple of years.Its not a coincidence that many U.S.funds are looking to invest in European markets.These success stories and unicorns have created a big pool of talent who know how to build businesses using the growth mindset,Itxaso del Palacio,a Partner at Notion Capital shared on the European Startup Show podcast.2023 Sales Trends Report55We surveyed 100 salespeople across large and small businesses in the UK who use a mix of sales models to find out what trends will be important in 2023 and what theyre seeing in the market today.Here are the top sales trends and opportunities for the UK market.UK Sales Teams are Focusing on Cross-Selling and Upselling Existing Customers The#1 change that UK sales reps saw in the field from 2021 to 2022 was a shift towards selling to existing customers over finding new customers.In the UK,teams are prioritising upselling and cross-selling initiatives and improving sales and marketing alignment more so than the global average.Half of the UK companies surveyed report that existing customers represent over 50%of their revenue.And since more than one third(38%)of salespeople say that making sales has become harder in the past year,sales and marketing teams need to find ways to re-engage their customer base and turn happy customers into brand promoters.Marketing teams may need to create new sales enablement content like market reports and case studies to sell new product features,use cases,or packages.Find out how the Flywheel Model drives business growth and customer delight.2023 Sales Trends Report56The best ways that UK sales teams have found to convert existing customers include:1)Establishing rapport2)Offering discounts/promotions3)Running retargeting programs4)Optimising your site5)Partnering with influencers on social media2023 Sales Trends Report57Recent data from Bizzabo showed 724%growth in in-person events in 2022,and events like INBOUND returned to convention centres for the first time this year since before the pandemic.Leaders need to ensure their teams are equipped to network effectively in-person,especially younger team members who may not have ever worked in an office or attended a conference before.In-Person Selling is Making a Comeback in the UKSales representatives in the UK are more likely to follow an in-person sales model(35.5%)in 2023 versus the global trend(32%).And,the most effective sales channel worldwide is in-person meetings,which aligns with the UK.2023 Sales Trends Report58Email and Video Calls are Scalable Effective for SalesThe top sales channel in the UK is email,but globally,phone calls are ranked higher.Additionally,video chat is more popular for remote selling and overall in the UK versus the global trends.Both email and video calls are low-cost,sustainable channels for selling locally and internationally.Plus,most CRMs integrate with email marketing and video call solutions,so everything is automatically recorded and added to the contact record,reducing the amount of manual work it takes to be a great salesperson.2023 Sales Trends Report592023 Sales Trends Report60Post-Pandemic,New Sales and Marketing Channels are Emerging in the UKSocial media is considered one of the top five most effective sales channels among UK sales teams.More than half(58%)of UK teams say they use social media to find new prospects,compared to 50%globally.The most effective social media platforms to find new prospects in the UK are:1)LinkedIn,2)Facebook,3)YouTube,4)Reddit,and 5)Instagram.One in five(21%)salespeople in the UK say they use text messaging for remote selling,but none report that its effective,which is surprising,seeing as 75%of adults in the UK use WhatsApp.Sales and marketing teams should work together to find a WhatsApp messaging sales strategy that works for their audience to boost conversions.2023 Sales Trends Report61UK Sales Teams Are Doing Something RightUK sales teams consider win rate one of the top three most important metrics to track in 2023,which differs from the global favorite of year over year growth.How are sales leaders in the UK setting up their goals for the new year,and how do they compare to global sales metrics and benchmarks?Sales conversion rates are higher in the UK than the global average,so perhaps there is a higher priority on qualified leads,and managers want to see them close.Sales teams who report sales conversion rates higher than 10%Global=34.5%UK=46.7 23 Sales Trends Report62In 2023,UK sales teams should embrace in-person events and networking opportunities,refine their messaging strategy,develop an upselling and cross-selling plan,and analyse email and video performance.2023 Sales Trends Report63ClosingConsumer trends and the global economic market will continue to shift over the coming months sales teams need to be ready to pivot their strategies and showcase exactly why they stand out from the competition.Sales leaders should prioritize sales and marketing alignment and create an environment of support among sales reps on the team not one of competition.As companies expand internationally and begin selling in new markets,they can learn from local analyses and prepare new sales teams with localized sales enablement content like market research reports,testimonials and case studies,reviews,and email templates.The biggest takeaways for sales teams as they plan their goals and strategies for the year ahead are to align data and tools between customer-facing teams,create personalized content,establish trust and build rapport,and leverage their CRM and automation.When you join HubSpot,you gain access to:or get 20%off HubSpot software todaySign up for free Educational resources and tailored trainings to help you grow your business Thousands of integrations that fit in with your existing tech stack 24/7 customer support and an active community of usersWith Aircall,you can:Try Aircall for Free Access customer information at your fingertips as soon as the phone rings Automatically log call activity in HubSpot to boost productivity Activate HubSpot workflows using your call activity to follow up with customersCompanies that align sales and marketing scale faster and see more conversions connect your teams in our combined ecosystem.HubSpot and Aircall customers grow better together.2023 Sales Trends Report64, Powered by Narrow Band Internet of Things(NB-IoT)Igniting connected digitalisationApril 20222Document Classification:KPMG Confidential 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Foreword KPMG in IndiaTelecom has long been synonymous with mobility and connectivity in India,the second most populous country in the world with 1.3 billion people.The telecom industry today is entering an exciting era of innovation.IoT(Internet of Things)as a technology especially NB-IoT(Narrow Band IoT)promises to create better and secure experiences for all by transforming connectivity.After almost two years under siege from COVID-19,the business sector has far more confident outlook for 2022 as companies take the initiative to invest in growth.The momentum for digital transformation to set the agenda and drive the recovery has never been stronger.Companies and clients are looking to move quickly on ambitious development projects and digital initiatives that would make their businesses more efficient,more resilient,and more competitive.NB-IoT would help usher this digital transformation by(a)enabling traditional businesses to operate smartly via smart meters,smart trackers and(b)opening up new industry opportunities like eHealth and smart city.As per IEEE(The Institute of Electrical and Electronics Engineers)Narrowband Internet of Things(NB-IoT)is an emerging cellular technology that will provide improved coverage for massive number of low-throughput low-cost devices with low device power consumption in delay-tolerant applications1.Around the world more than 150 operators are actively investing in NB-IoT technology of which more than 100 have commercially deployed NB-IoT network2.Owing to this boom in technology usage NB-IoT infrastructure from chipsets to modules to devices,are now available from a range of companies start-up or well established,small or big.In the Indian Union Budget 2022,production linked incentive(PLI)payouts for electronics/technology products,which includes IoT devices as well,is budgeted at INR 53 billion in FY 23 with a 5-year fiscal outlay of INR 459 billion3.This budgetary push by Indian Government is expected to aid the local sourcing of NB IoT infrastructure-thus aiding in NB IoT adoption by different sectors in India.The union budget also has focused on digital and connectivity,5G,access and customer premise equipment which would also boost NB-IoT.As the economic barriers recede along with a clear regulatory framework on the working of NB-IoT devices,increase in adoption is expected to happen.With more industries coming forward for different use cases for NB-IoT,this technology is likely to be viewed as having a positive impact on the growth trajectory of the people,business and India.Chaitanya GogineniPartnerBusiness ConsultingKPMG in India2 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Dipayan GhoshAssociate PartnerTelecom,Media and Technology SectorKPMG in IndiaSources:1:IEEE wireless communication letters,Volume 5,Issue 6,Dec 2016 2:NB-IoT and LTE-M:April 2021 Member Report,GSA(Global Mobile Suppliers Association)3:FY23 union budget documents,KPMG analysisAkhilesh TutejaPartner and National HeadTelecom,Media and Technology SectorKPMG in India3Document Classification:KPMG Confidential 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Foreword Jio ThingsIoT has potentially impact the economy by several trillion dollars.IoT is the foundation of digital transformation.IoT is the key to disrupt consumer experiences.Everything that we heard about IoT was just an expert opinion.Facts have been far from reality!Technocrats,business leaders and operational managers all have agreed that IoT is the way forward,unfortunately,no one talks about how to scale it!Getting a positive return on IoT investments is a question executives look forward to crack.A number of challenges like lack of reliable technologies,constrained device management,security concerns,analytical capabilities,and uncertainty about IoT standards and protocols have limited organisations to realise potential value from their IoT investments.Bottom line is,that the way to unleash the power of IoT was just not available.The IoT market by theory is huge and can grow at an almost unthinkable clip,but the practical barriers on IoT adoption have ensured that revenues and paybacks do not become a reality but are always a part of boardroom cerebral hypothesis!This whitepaper has come up with all the answers that the fragmented world was looking for!As businesses become more demanding in terms quality of output,uptimes and cost competitiveness,it is imperative for any IoT Service Provider(IoTSP)to put all the pieces together and become a one-stop-shop to unlock the true value that IoT can generate!Enterprises and consumers today demand superior technology,reliable results and most importantly managed services which is nothing but reliable aftermarket support!So how do IoTSPs deliver a 10X experience with cost constraints especially in developing market like India?How can IoTSPs unlock IoT data,bring scale and build a sustainable IoT factory that would last for decades to come?The whitepaper helps you with a6C Mantrathat would help stitch all the pieces together for a successful IoT implementation.These include Coverage of network,Costof ownership,Connecting at scale,Cyber security,Constrained device support and Customer experience.With the advent of NB-IoT the wait for a technology that covers all the 6C aspects is over!NB-IoT not only has the potential to connect billions of sensors but also is secure,extremely cost effective,easy to deploy and maintain and of course is a global standard.Internet of Behavior will soon be reality with help of NB-IoT!In order to achieve this reality,a strong and committed leadership and a clear and compelling vision to address business problems is needed.Unlocking value from any technology requires more than blind investments and needs to have a clear definition on end-to-end thinking,as IoT doesnt only consist of multiple technology layers like hardware,network,platform,portals,dashboards,but also field services like installation and aftermarket support!All of this is incomplete without domain knowledge!We hope you find this whitepaper insightful and enlightening.Let the democratisation of technology begin Happy reading!Anand BhandariVertical HeadNB-IoT,Smart Assets&Smart Utilities Jio Things Ltd.Ritu MandalBusiness Manager IoT Business Consulting Jio Things Ltd.3 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Swapnil Khandave Technology Head NB-IoT,Smart Assts&Smart Utilities Jio Things Ltd.4Document Classification:KPMG Confidential 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Executive summary4 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Digital transformation is a significant priority for companies worldwide,more so after COVID 19.CEO surveys and industry reports point to a significant wave of investment aligned to rebound in customer sentiment/demandConsumer tech has really advanced,Front office/Customer experience(CX)transformation has delivered significant value to businesses worldwide.Technology companies are using cloud/SaaS(Software as a Service)transformation to disrupt industries across sectors.But enterprise technology has lagged behindMid office and back office transformation has not been on par,after the big shift due to ERP.Tremendous value remains to be unlockedBackbone for enterprise digital transformation is the IoT ecosystem.Lots of advances made in IoT building blocks sensors/devices(smart/connected),connectivity(cellular,LPWAN,5G),platform/analytics(cloud,edge)IoTis being leveraged in some use casesinurbanlogistics,manufacturing,etc.However,it has not lived up to potential formultiple reasons,mostly centered aroundeconomics/paybackdevices(hardtomaintain/serviceinhostileenvironments),cellular/4G(expensive for rural applications),cloud/edge(significant upfront investment)What isNB-IOT:It is aformofLP-WAN,4G/5Glite standard,backwardscompatible,being launchedglobally.It is compatible withexisting mobile technologies.5Document Classification:KPMG Confidential 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Executive summary(continued)5 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Why NB-IoT It presents a compelling proposition due to its 6Cs(coverage,cost,connectivity,constraints,cybersecurity and customer experience).NB-IoTcan power a wide variety of use casesacross sectorsNB-IoT is witnessinggrowing investment globally telco OpCos,device OEMs,platform companies,system integratorsTheNB-IoTmarketinIndiaisalready present and growingsince 2018 and has the potential toenhance adoption of IoT owing to itslow cost,low power and massivedevice supporting capabilities.However,there are potential challenges and constraints to reaching full potential(regulations,alternative technologies like Satellite broadband).These require interventions such as policy and industry support Conclusion NB-IoTis an exciting Made for India and Made in India technology.As the dream of Digital India takes shape,this technology would play a key role across B2B and B2C sectors and Government/public services6Document Classification:KPMG Confidential 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Table of contents6 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The digital transformation opportunityThe Digital Enterprise Powered by IoTNB-IoT:A Capability EdgeNB-IoT in India:Outlook and Road AheadConclusion:An Opportune Moment010203040507101726307 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The digital transformation opportunity78 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Digital transformation has become a significant priority for businessesworldwideAccording to a study commissioned by Forrester Consulting on behalf of KPMG in July 2020,67%Of the respondents say theyve accelerated their digital transformation strategy as a result of COVID-19 69%Of the respondents say their digital transformation strategy was ahighortoppriority prior to the pandemic 63%Of the respondents said theyve increased their digital transformation budget as a result of COVID-19COVID-19 has made organisations relook at their business modelsTo better understand how COVID-19 has impacted companies digital transformation strategies,in mid-late summer 2020,KPMG conducted various surveys to understand how organisations are reviewing their digital strategy in the wake of COVID-19.The crisis has seen the emergence of 4 models:Pre-COVID 19,private and public organisations were on a journey towards a digital business model,traveling at various speeds.But the scale ofthe current pandemic has forced a dramatic acceleration,both in the required investment in digital transformation and the speed of change.Customer centricity amid social distancing became a challenge during the COVID-19 led pandemic.This was true especially for businesses which were dependent on face-to-face interactions with theircustomers to drive business.With restrictions such as quarantine and remote working,businessesfaced an unimaginable dilemma How to stay closer to the customer while staying away from them?While some organisations found new ways to connect with their customers through digitalinterventions using chatbots,social media,online collaboration platforms,others struggled.Withcustomers going increasingly digital,businesses realised the need for a larger digital engagementacross functions to enhance their competitiveness.Hard reset modeATransform to re-emergeBSurge modeCModified business as usualDOrganisationsthatscalerapidlybecauseconsumerbehaviourchangedpermanentlyduringtheCOVID-19 era.These organisationswould need to protect the gains thattheyhavemadeduringthepandemic.Those that can keep themomentum gained from COVID-19would prove to be opportunistic andagile.Example:Online collaborationsoftwareOrganisationsseenasdailyessentials that could suffer duringthe consumer slowdown but recovermore quickly as consumer demandrebounds.Example:UtilitiesTo be adopted by organisationsthat struggle to recover due topermanentlylowereddemandfortheirofferings,insufficientcapitaltorideoutextendedrecession,and/orpoordigitaltransformationexecutionresultingindelayedrecovery.Example:Hospitality,AviationOrganisationswhosebusinessmodel has changed along withhowtheircustomerswanttointeract with them.Their recoverycould be along a protracted path,requiringcapitalreservestotransform operating models tokeepupwithnewconsumerexpectations.Example:Retail9 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Organisationsview aligning their front,middle and back-office functions as critical to drive an enterprise-wide digital transformationHow it all workstogetherFigure 1:the Digital One Office FrameworkThe Outcome driven Front OfficeMobile engagementTouchless interactionReal time actionable data for greater personalisationDesigning processes to meet desired customer outcomesDigital underbellyDigitalisation of manual processesAutomation and standardisation of processes Cybersecurity and cloudification of processes,IT and softwareIntelligent digital processesPredictive analytics Machine learning,cognitive and AI Internet of Things(IoT)BlockchainIntelligent support functionsDesign thinking to unify outcomes Broadening of roles to align with outcomes Digital change management across support functions:IT,HR,supply chainThe Nervous SystemThe Circulatory SystemThe Neural NetworkIntegrating the Front Office and Back Office into One OfficeCustomer experienceFront officeMiddle officeBack officeThe COVID 19 pandemic drove explosivechangestocustomerexperienceexpectations and demands across theworld.Andthischangewasntonlylimited to the customers;businesses alsoexpected intuitive,easy and seamlessexperiences from their suppliers.While business organisations respondedto this sudden shift by adopting digitalsolutions focused on front office,theysoonrealisedthattheirback-officeprocessesandstructureswerenotdeveloped to support this transformationover the long term.Toenableaconsistentcustomerexperience(furtherenabledbyanenhanced employee experience),it isessential for organisations to embracethe One Office concept.OneOfficeisrealisedwhenthecustomer needs and experiences are thefront and centre of the entire business.Theoldbarriersbetweencorporatefunctions(oftenreferredtoasfrontoffice,middle office andback office)are dissolved and constraints of legacyERP systems are minimised.This allowsthebusinessestoinvestindigitaltechnologies and capabilities that enableit to cater proactively to its customersneeds at the forefront of the market.79 per79 percent cent of C-suite respondents view aligning middle-and back-office operations to support customer experiences asmission criticalorincreasingly important.Source:State of Operations and Outsourcing 2017survey,KPMG USBack office:The nextfrontierof technology 10 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The Digital Enterprise Powered by IoT1011 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IoT is the foundation for digital transformation driven by a collaborative ecosystem for bringing data driven insights for enhanced performance IoT is a network of devices that collect and share data for analysis.IoT has evolved from standalone industry to a mainstream set of tools that can be used,often paired with another technology,to solve challenging business issues8More than just devicesData CollectionData StorageProcessingData CleansingModeling and PredictionThingsDataStrategy/OperationsSecure NetworksSensorsDevice ConnectivityAutomation/RoboticsRecommendationsPeople/EnterpriseData VisualisationData AccessApplications/cloud platformBusiness AnalysisDeploymentIterationCollectionAnalysisBlockchain Interoperability:Challenges in establishing and maintaining interoperability between different IoT systems Integration:Integration of various products with the right IoT platforms Unstructured data and processing:Challenges in managing unstructured data on the parameters of variety,volume and velocity Data security and privacy:Development and implementation of sound data security and cyber security policies for the purpose of consumer protection Authentication and device management:Identification and authentication of IoT devices on single platform that requires system architecture and formalisationCollect:Interconnecteddevicescollectbehavioraldata and environmental datathat can be analysed andvisualised.Deploy:Devicesandsystems(i.e.,things)areconnected to the internetthrough low-cost sensorsAnalyse:Humanscanmonitor and learn from thisdata,informingmoreaccurate business decisionsandimprovedcustomerinteractionsIterate:In maturity,deviceswouldautonomouslyactbased on this data stream,ultimately making businessdecisionsChallenges for IoT introduction Figure 2:IoT collaborative ecosystem12 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Six principles for creating business value with IoT123456Clearly define why you are looking to utilise IoTDefine the business problem to be solved and the benefit sought in terms of cost reduction,customer experience,quality,productivity,growth,improving products or risk reduction?Define a clear problem statement,use cases,value statement and success criterionIoTs power is when talking,sharing and connecting happens.From devices to people,processes and dataThe richer the sharing,the wider the span,and the more benefit that will be achievedOpen standards and interoperability play a critical role,reducing cost and improving successIoT will disrupt the way your business operatesNew experiences,new processes and new products will emergeDont assume your current team has all skills or mind set to work optimally in this new environment without extra trainingA balanced mix of creative,analytic,data,technical and business process skills will be critical with the ability to span silos and functionsDefine the business problemCollaborate to create valueRe-think skills and cultureApply the adage think big,start smallDevelop a richer understanding of IoT benefits and risks for your business through testing and learning solutionsAssess successes and failuresMeasure the value and degree of disruptionRun gradually bigger experiments as you learn building stronger capabilitiesWith value comes risk.IoT will likely take your business places its never beenUnderstand any regulations or risks associated with your initiativeSecurity,privacy,safety are important(but are not the only things)to considerEnsure you are thinking across customers,employees,assets,partners and all other stakeholdersIoT requires a connected ecosystem of components to deliver valueYour solution wont rely on one vendor or product,but many working togetherWith your problem in mind,create a clear view of who your partners need to be in each area,and how you want them to work with each otherExperimentKnow the risks and rulesEstablish your ecosystem13 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Evolution of IoTIoT Evolution over the yearsTill 20202020-20212022 onwardsDigital disruption era focused on technology adoptionAccelerated IoT adoption to focused sectoral implementationIoT in conjunction with other technologies gaining momentum During2010-2020,periodknownfordigitaldisruption,focusedmainlyontechnologyadoption Itwaswitnessedthattechnologieswereintertwining into every industry and industry valuechains Industry convergence was witnessed as firms sawhuge competition from outside sectors,such as fromeCommerce,automobiles,and manufacturing TrendssuchasacceleratedIoTadoptiontofocusedsectoralIoTimplementationacrossbusinesses was observed during 2020-2021 Changingconsumer/patientpreferencesandwork-from-anywhere model drove IoT applicationacross sectors HealthTech,EdTech,and RetailTech sectors arethe top-most sectors showing high adoption for IoT Adoption of IoT/IoB(Internet of Behaviour)attainingground Internet of Behaviour refers to the data gathering(bigdata,businessintelligence,customerdataplatforms etc.
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