What will this year bring VC? We asked a few money

A new year brings hope for a better tomorrow – sort of, at least. In the financial world, nothing is certain. Number of companies in the US he has entered sharply while venture capitalists spend money only on the biggest names in Silicon Valley, according to the Financial Times. AI is the only category that seems to matter, and it doesn’t seem to be changing anytime soon. But the new year has just begun, and perhaps there is also an impetus for change.

We spoke to some VCs to gather their predictions for the new year — the good, the bad, and the potentially unexpected.

Their answers have been edited and shortened for clarity.

What are your best and worst predictions for 2025?

Nekeshia Woods, managing partner at Parkway Venture Capital

Advantages: As wealthy people lower their expectations of returns on fixed income and cash equivalents, they will focus more on the private markets for higher returns. This strategy is expected to invest more than $7 trillion in the private markets by 2033. In response to the expected increase in wealth, we have seen large wealth and asset managers use equity capital as a way to diversify their private equity markets. These institutions have chosen a way to provide access to the best businesses while taking part in the $7 trillion that is expected to be invested in the private markets through new channels. Fund managers simultaneously engage with these institutions to find new LPs that generate new, sustainable, and long-term investments.

More benefits: We expect that the AI ​​field will begin to see integration, especially through acquisitions, in areas where AI can be a commodity, such as large-scale language models. AI companies that have become leaders in their field are opening up new market segments with proprietary data.

Gabby Cazeau, partner at Harlem Capital

Advantages: The IPO market will open up again, and we will see some big IPOs bringing in the much needed funds. It’s a win for everyone. In the early stages, spending will increase, perhaps not until 2021, but beyond 2022-2024. It sounds like 2025 will be the year of advertising as well hopefully the official start of the next bull.

Bad things: 2025 will be a make or break year for AI startups marketing businesses. Many AI startups have grown rapidly but are still stuck in the “experimental” phase, having new budgets rather than being part of a larger software application. Most won’t jump, leaving a few startups on the chopping block as churn and growth slowly takes over.

Triin Linamagi, founding partner at Sie Ventures

Advantages: The emergence of GP-only and angel funding will drive more investment into legacy companies – a much-needed evolution in the ecosystem.

We’ll look at unique and well-defined innovation strategies, with real-world, industry-leading revenue streams that deliver value to startups. This change is not only beneficial for startups but can also bring good returns for investors. Funding for diverse startups will continue to grow, especially in areas such as sustainability and healthcare, where diverse ideas can lead to innovation and impact.

Disadvantages: A positive M&A or IPO deal is unlikely until the end of 2025 as the market remains volatile. A few affiliates will be reluctant to send money, waiting for a successful distribution to the paid-up funds before making new payments.

Michael Basch, founder and managing partner at Atento Capital

Advantages: The long-term increase in LPs is the opening of the IPO and M&A markets. A lot of money and companies that are taking high schools. Revamping the expectations of zombie companies that are profitable will not have the effect that VCs on the table of cups write, selling at a fixed price to private companies. Combinations and roll-ups in the filling area (eg, GLP-1s).

Disadvantages: Unicorns continue to fall which is largely redefined due to increased market volatility and revised expectations.

Austin Clements, managing partner at Slauson & Co.

Advantages: The IPO market will reopen following the success of Service Titan, as will M&A activity for private companies. Ultimately realizing these gains will increase the income of LPs behind many investment companies. This will allow LPs to commit to new investments – more venture capital than in previous years.

Disadvantages: (LPs) may be reluctant to commit to new fund managers after seeing a lot of poor performance in past moves. The negative side effect is that some of the more advanced methods may have more problems getting money.

Which trends do you think will remain? Who will go?

Woods

What will be: The action is interesting for investors with dry powder. Marketers will continue to move away from looking at things that use (the) “number of users” as a key factor and move towards savings, customer pipeline, and capital requirements before investing. The speed of money will also keep the environment friendly and economical. We do not expect the financial industry to return to the extremes of the past few years but to continue to thrive.

What will happen: The outlook for IPO projects is slightly better. The re-established confidence of the founders of the public markets and the comps combined with the ways to run for the dwindling funds and the high-value companies that have survived the recent funding difficulties, have the right size to be more relevant to the market. We believe that investors are also interested in investing in small-cap stocks, thanks to the mega-cap boom that has moved U.S. indexes to all-time highs and returned greater shareholder value. While there are several companies whose valuations have yet to follow the market, there are others, especially in the technology space, that are ready for the public market.

Cazeau

What will be: Small groups are raising money. We’re seeing teams of one or three people hitting $2 million+ ARR using AI tools – doing more with less and doing better than ever before. This kind of growth was not heard before 2024 and reflects the increasing number of startups that are automating internal processes and new software tools. The big question now is how these teams will grow and build strong organizations, but it’s great to see such growth with such a lean setup.

We’ll also see a resurgence of reinvestment – platforms to address talent shortages in the arts, manufacturing, hospitality, healthcare, and other areas where programs can’t transform.

Linamagi

What will be: AI is here to stay. The prevalence of AI in 2024 marked a significant change, and I believe this will only increase. While it offers great opportunities – such as improving decision-making, improving sales, and improving operations – it also brings challenges. For example, human knowledge and experience are still important, especially when analyzing the causal groups and their power. This change will require LPs to think critically about how they choose managers and build their communities.

What will happen: The way to make money is to pray. I expect that we will see a little but quick and meaningful trading from investors. This, which is already visible in 2024, indicates the end of the growth mindset for all prices. Instead, investors will prioritize profitable strategies and sustainable businesses, which will continue to be a sign of attractive opportunities.

Basch

What will be: (The) short list of winners in the AI ​​space will continue to command the attention of marketers at premium prices. (There will be a) continuation of the trend of VC-backed companies being closed as the capital markets (be) more selective in terms of funding (and) continuation of the trend (of) VCs, especially the seed stage, (being) unable to raise new capital because of the difficult performance in 2020 or 2021 vine.

Clements

What will happen: The last round was a big shift with more investors backing SaaS businesses and fewer backing consumers. I think this will start to backfire as AI creates more jobs for consumers that weren’t possible a few years ago. Consumer tech will make a welcome comeback in 2025.

What unexpected things do you think will happen in 2025 in the world of entrepreneurship and startups?

Cazeau

We may see mergers or closures of big-name unicorns, many of which have been industry darlings for decades. The industry has enough capital to reach 2025, but not enough growth to move forward. We are already seeing consolidation, and this may increase until 2025.

Linamagi

A major climate-related disaster, political conflict, or economic downturn can reshape the startup and VC landscape.

Basch

The rise of business development dollars to focus on hard technology, as software changes due to artificial AI. Hard technology as defined by bio, tech, hardware, other forms of deep technology play a major role. (There will also be) a huge increase in companies that raise only seeds and have a minimum investment of $100 million in three years of existence – revealing a new math that can work for startups and VCs because of the distribution companies. quick access to high-quality products that are compatible with existing products.

Clements

Something unexpected is that OpenAI can adapt to be a for-profit organization so that Microsoft can get it for a bigger purchase than ever before.