Digital identity has undergone significant transformations in recent years, with 2020 and 2021 being especially pivotal due to the pandemic-driven digital transformation. As companies recognized the critical role of identity in their growth strategies, there was a substantial surge in investment and deal-making. The market’s evolution since the pandemic has shown impressive growth, though tempered by caution in recent times. Explore the key trends and signals to keep watching ahead, as 2023 is shaping up to be another critical year for investments in digital identity.

Explore the latest trends and signals for investing in digital identity: 

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The Growth Trajectory

The impact of the pandemic on the digital identity market cannot be overstated. It catalyzed for companies to understand identity’s pivotal role in facilitating seamless digital interactions. Consequently, there was a massive increase in investment deals within the digital identity space. In 2020, the market witnessed $29.2 billion in investments across 37 deals, almost doubling in 2021, soaring to $71.4 billion spread across 87 deals.

However, in 2022, there was a sudden drop in investment, with only $8.7 billion allocated across 32 deals. The infographic shows that 2023, so far, has seen $3.21 billion invested in 32 deals. While the reasons for this apparent slowdown demand further analysis, the data suggests that investors are treading cautiously and seeking clearer trends before making substantial commitments.

Factors Influencing M&A Decisions

Companies engaging in mergers and acquisitions in the digital identity market closely scrutinize various factors. As the industry continues to evolve, several key signals and trends are shaping their investment decisions:

• Verifiable Credentials: Streamlining identity stacks with verifiable credentials
• Identity Wallets: Poised for adoption, no clear frontrunner yet.
• Platform Trust and Safety: Balancing trust, safety, and age assurance.
• Password-less Solutions: Revolutionizing security with alternative authentication.

Expectations for 2023

As the digital transformation wave continues, investments in the identity market will likely grow further, driven by a better understanding of identity’s crucial role in modern business models. With technological advancements and user demands constantly shifting, investing in the right identity solutions will be pivotal for companies seeking to maintain a competitive edge in their respective markets.

Related stories:

• Investing in Identity: Second Order Effects of the Pandemic in 2022
• Deal Me In: 2021 End of Year Investment Flow
• Investing in Identity: Movers and Shakers 2020-2021