The “year of transformation” heralds new business models, greater trust in AI and a potential fintech super cycle

The start of 2026 will continue the upward economic momentum seen at the end of 2025, as lower interest rates and an IPO-friendly environment fuel the venture capital space. Pipelines remain robust, thanks to new technologies in the digital assets and Generative AI (Gen AI) spaces.

While some economic forecasts point to potential slowdowns in the second half of the year, we are optimistic. We believe the AI revolution is an enduring theme in venture capital, and innovative startups will continue to find pathways to growth by delivering unique enterprise solutions and consumer value propositions.

We view 2026 as a “year of transformation” as software engineers change how they interact with AI agents, content creation evolves beyond the scope of marketing and AI-native startups introduce new business models and upend how legacy companies operate. We also expect fintech to bounce back after a challenging two years.

Engineers start to lean on their AI agents

As more AI agents take on routine software engineering tasks, their human engineer counterparts will overcome initial skepticism and grow to trust their new partners. While humans learn to accept that agents can independently create production-level code, they will be trusted for more mundane – but critical – tasks such as reviewing code, unit testing and documentation.

For large enterprises, this shift will be critical as it will decrease burnout among engineering teams and allow them to simultaneously maintain headcount and scale workloads. Startups will benefit, since they could potentially extend the life of their funding, helping them stay appropriately resourced and focused on product design and development. Articles abound on how some AI companies have scaled to $100MM in ARR with fewer than 100 employees.

Leaning into GEO

Content creation will become an even greater collaborative experience, as enterprises react to AI SEO – also known as GEO – strategies and translate them into business wins, and even revenue. Technology teams will play a bigger role, as they work with marketers and content creators to go beyond pure insights and execute campaigns that optimize content for both LLMs and humans – not an easy task. There will be no “death” of SEO, but instead a shift in emphasis, as searching for keywords takes a back seat to learning how to “speak” to AI platforms.

AI SEO startups will need product suites that clearly demonstrate value to enterprises beyond surface-level analytics. Companies want to take action not just receive advice. Successful startups will enable companies to stay relevant in a multi-modal world that will only get more complex, as frontier models introduce analytics platforms that provide insights on their embedded advertising products.

Unlikely bedfellows

Amid the flurry of M&A deals, we will notice a new trend: venture capital backed startups will start to merge, making unlikely partners of firms who typically compete for deals. This trend, which started with a trickle in 2025, will accelerate as startups look for ways to sustain growth and achieve scale for a potential public listing or PE exit. This will be particularly focused among companies that have high ZIRP-era valuations.

These startups face a fork in the road as to their fate: develop a blockbuster new product or find a good partner and combine businesses. One bonus for the latter could be that newly combined firms will command higher multiples, thanks to their greater size and scale.

AI-native companies go on the hunt

Companies designed around AI, from operations and human resources to engineering and product development, will take over process-oriented and task-heavy legacy businesses. AI-native startups will seek out these legacy businesses as M&A targets across legal, accounting and compliance sectors, where new AI business models can more rapidly, and more cost effectively, deliver. In other words, these AI native companies may look to more mature players to distribute their new tech to an established customer base, or through existing channels.

Flush with capital and efficient service delivery, AI-native startups will move manual service providers into the 21st century by creating a host of automated services powered by AI agents. Added tailwind for these AI-native startups: enterprises, looking for cost efficiencies, will look to bakeoff results and might opt for the lower-cost, AI-native options over legacy solutions providers.

Agent, I’ll take that in a size medium

Agentic commerce will win hearts and minds and grow as a percentage of the global ecommerce market. Agents will increase their roles in the shopping journey, expanding beyond pure recommendations, to increasingly embed across discovery, curation, payments and post-purchase. Companies with payment solutions will need to think about staying top of wallet, as agents will eventually make independent decisions on how to pay for products.

We expect startups to lead the way in new shopping experiences, demonstrating new business models that optimize for those evolving consumer preferences, as well as account for emerging regulatory schemes that require trust and fraud protections.

Fintech makes a comeback

The Fintech market will roar back, thanks to emerging technologies like digital assets, embedded fintech and Gen AI, that are fueling what could be the next “super cycle” in venture capital. The success of recent FinTech IPOs, coupled with the rising stock prices and market caps of existing public fintech companies, are optimistic signs for a bullish 2026 in the sector.

Venture capital investment into fintech startups globally reached nearly $22 billion in the first half of 2025 – an 11.1% increase compared to the same time period in 2024. Adding in a more accommodative monetary policy and healthy secondary markets, which together increase the overall amount of investment capital to be deployed, and fintech is poised for a buoyant 2026.

These predictions cover areas where we are actively looking to invest. If you are building a company in one of these spaces and would like to partner with Citi, we want to hear from you! Reach out to one of our investors to set up a conversation. See you in 2026!