2024 VC Recap & 2025 Vision ???????

Week of January 6th, 2025

Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!

We’ve scoured the vast landscape of the web to bring you a comprehensive roundup of the industry’s top news articles, all in one convenient place. We keep you ahead of the game and in the know about all things related to the vibrant world of investments

?? STARTUPS

ROUNDS AND UNICORNS

The Largest AI Startup Funding Deals Of 2024 (5 minute read)

1. Databricks: Raised $10 billion at a $62 billion valuation led by Thrive Capital, marking the largest VC raise of 2024. The company, known for its AI and ML data processing tools, plans to use the funds for AI product development, acquisitions, international expansion, and employee liquidity
2. OpenAI: Secured $6.6 billion at a $157 billion valuation, making it one of the world's most valuable private companies. Led by Thrive Capital, the round included investments from Microsoft, Nvidia, and SoftBank. The funding was structured as convertible notes to address governance changes, including its shift to a for-profit benefit corporation
3. xAI: Raised a second $6 billion round -previously raised $6 billion in May at a $24 billion valuation- bringing xAI’s valuation to $50 billion, with participation from the Qatar Investment Authority, Valor Equity Partners, and others
4. Waymo: The autonomous vehicle firm raised $5.6 billion from Alphabet, its former parent, at a valuation exceeding $45 billion. This was its first funding round since 2021
5. Anthropic: Amazon's $4 billion November investment brought its total stake in AI startup Anthropic, creator of the Claude assistant, to $8 billion. Anthropic uses AWS as its primary cloud provider and AWS chips for model development

The Biggest Non-AI Related Rounds Of 2024 (5 minute read)

1. Epic Games: Raised $1.5 billion in February at a $22.5 billion valuation, down from $31.5 billion in 2022. Disney participated, aiming to boost exposure for its characters, including Marvel
2. Generate Capital: Secured $1.5 billion in January to fund green infrastructure projects, including solar and wastewater treatment. The renewable energy company has raised $7.1 billion to date
3. Tricentis: Received $1.3 billion from GTCR in November, valuing the DevOps firm at $4.5 billion. The Austin-based startup focuses on software testing
4. Wiz: Raised $1 billion in May at a $12 billion valuation. The cybersecurity firm, originally from Israel, reported $350M in ARR and eyes an IPO
5. Pacific Fusion: Raised $900 million in October to develop nuclear fusion energy. The funding, led by General Catalyst, is milestone-dependent

INDUSTRY

Generative AI funding reached new heights in 2024 (4 minute read)

Generative AI saw record-breaking growth in 2024, with startups raising $56 billion across 885 deals, a 192% increase from $29.1 billion in 2023. Major funding rounds included Databricks' $10 billion, xAI's $6 billion, Anthropic's $4 billion investment from Amazon, and OpenAI's $6.6 billion. Despite this surge, M&A accounted for a modest $951 million, excluding high-profile acqui-hires by Google and Microsoft

• U.S. startups dominated the landscape, with international companies securing just $6.2 billion, though notable deals included Moonshot AI in Beijing ($1 billion), Mistral in France ($640 million), and DeepL in Germany ($300 million)
• However, the sector faces challenges like oversaturation in similar verticals, rising computing costs, and investor pressure for revenue growth
• This trend is expected to drive global data center spending to $250 billion annually

Private wealth offers lifeline for emerging VCs (5 minute read)

Emerging venture capital firms are increasingly relying on high-net-worth individuals and retail investors as a lifeline, as traditional large limited partners like pensions and endowments become harder to secure. With smaller investment minimums, micro funds have attracted private wealth portfolios ranging from $5 million to $100 million, creating a durable pipeline for emerging managers

• The private wealth segment, which controls $450 trillion in assets, is projected to deploy over $7 trillion to private markets by 2033
• Since 2019, more than 200 funds focused on this segment have launched, managing nearly $400 billion collectively
• VC firms are doubling down on this approach, seeing it as a viable way to sustain operations and grow, even major players like Sequoia and StepStone are tapping into private wealth

?? ECONOMIC SNAPSHOT

5 reasons to be optimistic about the 2025 economy (5 minute read)

As 2025 begins, the U.S. economy remains a beacon of resilience despite global uncertainties. While there are external risks and potential challenges ahead, several factors continue to drive optimism about the nation's economic future:

1. Strong Consumer Spending: The historic recovery from the pandemic crash continues, powered by robust consumer spending that has defied high inflation and interest rates
2. Falling Gas Prices: Gas prices have declined for three consecutive years, with an average projected cost of $3.22 per gallon in 2025. This has alleviated inflationary pressures and bolstered consumer confidence
3. Real Wage Growth: Paychecks are increasing faster than prices, enabling Americans to gain real wage increases that help combat higher living costs
4. Federal Reserve Rate Cuts: After aggressive rate hikes, the Fed has cut rates in three consecutive meetings, which could stimulate economic growth in the coming months
5. Pro-Business Policies: President-elect Trump’s focus on tax reform, deregulation, and cutting government waste is expected to boost productivity and economic efficiency

While the outlook for the U.S. economy is optimistic, several risks could alter its trajectory. Proposed tariffs could halve economic growth to just 1% in 2025 and heighten the likelihood of a recession if fully implemented. Labor market strains, such as mass deportations, could disrupt key industries, pushing up wages and inflation

Is an Economic ‘Soft Landing’ Coming to the U.S. in 2025? (5 minute read)

The question of whether price pressures can normalize in 2025 without causing a spike in unemployment is key to achieving the "soft landing" investors and economists have been watching for. Over the past two years, the Federal Reserve has worked to reduce inflation without pushing the economy into recession. Although it didn’t meet its 2% inflation target in 2024, it kept unemployment low and the economy growing

• According to Wells Fargo, the probability of a soft landing has increased to 42%, while recession likelihood has decreased to 28%
• However, the Fed needs inflation to continue falling to achieve a soft landing, with some concerns that President-elect Donald Trump’s proposed tariffs could exacerbate inflation and slow economic growth
• While a soft landing is rare historically, many economists do not expect a recession in 2025, but they warn that tariff-related disruptions could slow growth

Economic Forecast For 2025 And Beyond: Growth With Continued Inflation (5 minute read)

The U.S. economy is expected to grow in 2025, but at a slower pace than 2024. While inflation will remain above the Federal Reserve's target, President-elect Trump's policies are expected to limit production while stimulating spending. The main risk is not a recession, but a limited production capacity due to falling immigration. Growth for 2025 is projected at 2.1%, down from 2.7% in 2024

• Federal spending continues to rise, but U.S. exports are stagnant, and imports have increased. Interest rates are expected to stay high, with possible minor cuts
• The Fed is unlikely to hit its 2% inflation target and may ease interest rates slightly if inflation shows minimal progress
• Risks to the forecast include international conflicts, particularly China-Taiwan tensions, tariffs and retaliatory actions, and reduced immigration
• If mass deportations occur, sectors like construction and agriculture could suffer, leading to a short-term production decline

US Economy Surprised Again in 2024 Despite Fed, Election Drama (4 minute read)

In 2024, the U.S. economy defied expectations of a slowdown, with solid growth despite challenges like elevated interest rates, a cooling labor market, and uncertainty around the presidential election. The U.S. is expected to be the top performer among G7 nations, according to IMF projections. However, inflation remained persistent, and sectors like housing and manufacturing struggled due to high borrowing costs

• Consumer spending remained resilient, driven by wage growth and household wealth, advancing 2.8% in 2024, but signs of strain emerged
• In the labor market, job growth slowed, and unemployment edged higher, with job openings declining and some workers facing difficulty finding new roles
• Inflation progress stalled in the second half of the year, with the Fed remaining cautious on further rate cuts

???? IMPACT & CLIMATE RESILIENCE

US VC female founders dashboard (3 minute read)

Venture capital funding for female founders has stabilized after a sharp decline from the highs of 2021. Although U.S. companies founded or co-founded by women now represent a smaller share of total deals, they are capturing an increasing portion of the total capital raised

• In Q4, female (co-)founded companies raised $16.8 billion, compared to $7.7 billion in Q3. In terms of deal count, these companies had 628 deals in Q4, down from 716 in Q3
• For female-only founded companies, they accounted for 6.4% of the total deal count, while female and male-led companies represented 18.7%
• In terms of capital raised, female-only led companies secured 1.9%, whereas female and male-led companies attracted 20.8%

?? IPO & EXITS

The Crystal Ball: The 2025 outlook for IPOs, M&A, and the regulatory landscape (5 minute read)

The outlook for venture-backed exits in 2025 shows cautious optimism, with IPOs and M&A activity expected to rebound significantly. In the IPO market, healthtech is projected to lead with 5-8 major exits, while cybersecurity could see 6-10 IPOs over the next 18 months, reflecting the sector's growing prominence. On the M&A front, consolidation across industries such as AI, fintech, and healthtech could account for 20-30% of transaction volume

• Technology and fintech are anticipated to recover, potentially yielding valuations exceeding $100 billion cumulatively, though activity will likely remain 40-50% below 2021 peaks
• AI-focused companies like CoreWeave and others are predicted to drive 10-15 significant IPOs
• Changes in the regulatory landscape, including reduced antitrust scrutiny and policy shifts under a Republican-led government, could unlock 10-15 previously stalled deals, boosting exit volumes by 15-20% YoY
• With pent-up demand from VCs managing aging portfolios, combined IPO and M&A activity could reach $200-300 billion in 2025

US set for IPO comeback as private equity firms seek to offload holdings (5 minute read)

Wall Street bankers are preparing for a revival in IPO activity in 2025 as private equity firms take advantage of strong U.S. stock markets to offload flagship holdings. Companies like Medline and Genesys have already filed IPO paperwork, with many more expected in early 2025. This optimism stems from robust stock market gains in 2024, a pro-business outlook under president-elect Donald Trump, and Federal Reserve interest rate cuts

• US IPOs raised $32 billion in 2024, a 60% increase from 2023 but still below the 2021 peak of $150 billion, with hopes to exceed the pre-2020 annual average of $38 billion
• Private equity firms are prioritizing IPOs of larger, profitable companies, reflecting a shift in investor sentiment after losses from speculative startups during the pandemic-era IPO rush
• Fintech is expected to dominate early 2025 listings, with Klarna and Chime aiming to go public, possibly at valuations between $15 billion and $20 billion

??? AI8 VENTURES HIGHLIGHT

Trumponomics 2.0

Following President-elect Donald J. Trump’s victory over Kamala Harris, the financial world witnessed an immediate response. In just one week, the S&P 500’s value surged by $1.9 trillion, pushing stocks to record highs. The U.S. dollar strengthened globally and Bitcoin achieved unprecedented highs.

Wall Street is preparing for more government spending, lighter regulation, bigger deficits, and accelerating growth under a Trump administration and a Republican-led Congress.

Biden’s Economic Legacy

The Biden era was marked by headlines of massive layoffs and a cost of living crisis. The average worker faced double-digit increases in food, energy, housing, and other essential expenses that impacted middle-class families the most and consumed the bulk of household budgets. Despite record highs in the stock market, nearly half of Americans believed the nation was in a recession. Is this Biden’s fault? No. Global supply chain disruptions, stimulus checks, the aftermath of COVID-19 lockdowns, and the ripple effects of geopolitical tensions all contributed to soaring prices. Did Americans blame Biden? Election results suggest they did. Two-thirds of voters believed the economy was on the wrong track.

Hence, Trumponomics 2.0.

Trump’s campaign capitalized on promises of economic revival, pledging to deliver low taxes, low regulations, low energy costs, low interest rates, and low inflation -Trumponomics.

Alpha Insights on Trump and AI in Mexico City

What an incredible experience at the NAA International Symposium and Startup Pitching Last week, we hosted our first?Alpha Insights?event in Mexico City, where we brought together industry experts, investors, and entrepreneurs to discuss the evolving landscape under the new U.S. administration. We dove into how the election of Donald Trump, "Trumponomics," and the transformative role of AI are shaping the future of investments, regulations, markets, taxes, and cross-border opportunities.

Missed the event? We’ve curated the key insights in our Alpha Insights Special Edition: Trumponomics Report. Understand everything VC-related that happened in 2024 and how profit will shift under Trump 2.0

(Trumponomics 2.0 Special Edition starts on page 22)

Read Full Report

Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2024 Venture Capital Report.

Last year, Michael Burry, the legendary fund manager who famously profited from shorting the US housing market in 2008, bet more than $1.6 billion on a Wall Street crash by shorting the S&P 500 and Nasdaq-100. Nothing happened.

This year, Warren Buffett’s cash reserves reached a record $276.9 billion as Berkshire Hathaway trimmed its stock holdings in Apple. Some view it as a routine adjustment, while others speculate that Buffett perceives an overheated, overvalued market.

Everyone talks about a soft landing, but warning signs are flashing and the world seems to be teetering on a delicate balance. Is there something we’re missing? Is there an unseen factor at play?

Read Full Report

If you have any comments or feedback, just shoot an email @[email protected]!

Happy reading,

AI8 Ventures’ Research & Investment Team