VC Darwinism: Evolve, Merge, or Die ??????

Week of February 24th, 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 Week’s Biggest Funding Rounds: Saronic’s Massive Raise Tops List (Crunchbase, 5 minute read)

1. Saronic (Defense): The autonomous surface vessel maker raised $600M Series C led by Elad Gil at a $4B valuation, a 4x jump in just seven months. The Austin-based startup will use the funds to build Port Alpha, a shipyard for its naval drones
2. Lambda (Artificial Intelligence): Cloud computing and AI hardware provider Lambda secured $480M Series D, co-led by Andra Capital and SGW, bringing its valuation to $2.5B. A key Nvidia GPU provider, Lambda hit unicorn status in 2023
3. Together AI (Artificial Intelligence): The AI cloud platform raised $305M at a $3.3B valuation, a 160% jump from last year. Investors include General Catalyst, Saudi’s Prosperity7 Ventures, Nvidia, and Salesforce Ventures
4. Abridge (Healthcare): The AI-driven medical documentation startup raised $250M (Elad Gil, IVP) at a $2.75B valuation. Abridge automates clinical notes and has raised nearly $458M since 2018
5. Verkada (Security): The security system developer raised $200M Series E led by General Catalyst, valuing it at $4.5B. Verkada provides AI-powered physical security solutions like cameras, access controls, and sensors

Investors Are Once Again Rapidly Minting Early-Stage Startups As Unicorns (Crunchbase, 3 minute read)

Venture capitalists have been accelerating early-stage investments, leading to a rise in unicorn startups. While not yet at 2021 levels, last year saw a 70% increase in early-stage unicorns compared to 2023, with 39 such companies emerging. A key driver of this surge is artificial intelligence, with nearly 45% of new unicorns operating in AI-related fields

• High-profile examples include Elon Musk’s xAI ($24B valuation), Safe Superintelligence ($5B), and Poolside ($3B)
• Other sectors, such as electric vehicles, robotics, Web3, defense, and fintech, also saw young companies achieve unicorn status
• Despite this trend, VCs haven't fully reverted to their 2021 habits, but the FOMO—especially in AI— is pushing valuations higher at earlier funding stages

?? ECONOMIC SNAPSHOT

DOGE Layoffs Pose ‘Growing’ Risk To U.S. Economy And Markets, Says Apollo Economist (Forbes, 5 minute read)

Elon Musk’s Department of Government Efficiency (DOGE) layoffs may be more severe than expected, with economist Torsten Slok warning of growing risks to the economy and markets. Slok estimates DOGE-related layoffs could reach 1 million, impacting federal contractors beyond the 300,000 widely cited job losses. These cuts, combined with President Trump’s focus on reducing government contracts and grants, could lead to a rising unemployment rate

• While the broader economy remains strong, with 4% unemployment and 2.3% GDP growth in Q4 2024, concerns about market instability persist
• Some, like Morgan Stanley’s Michael Wilson, argue that DOGE’s cost-cutting may cause short-term pain but will ultimately create a healthier fiscal environment, allowing for lower interest rates and private sector growth
• The $36.2 trillion national debt has doubled since 2015, raising concerns about long-term economic sustainability

S&P 500 Swoons in Last 15 Minutes of US Trading: Markets Wrap (Yahoo Finance, 5 minute read)

U.S. stocks experienced a decline, with the S&P 500 falling by 0.5%, and the Nasdaq 100 dropping by 1.2%, as investors grew cautious ahead of Nvidia’s earnings report. The S&P 500 dropped below 6,000, while the Nasdaq 100 lost more than 1%. Hedge funds reduced their exposure to major tech stocks, particularly the "Magnificent Seven," as Nvidia’s earnings were expected to significantly impact the market. Investors are wary of any potential disappointment from Nvidia, given its dominance in AI and high valuation

• Meanwhile, individual stocks such as Alibaba and Berkshire Hathaway moved in opposite directions, with Alibaba falling amid tensions with China, while Berkshire Hathaway rose due to an increase in operating profits
• The market has been trading sideways recently, with the S&P 500 remaining within a 4% range for the past three months, the narrowest range since 2017
• Strategists are optimistic that a breakout to the upside could occur, driven by strong economic fundamentals, robust earnings, and healthy fund flows
• While there is concern over high valuations, Wall Street strategists expect U.S. equities to continue to outperform, especially given the strong earnings growth outlook

US economic growth falters and goods prices spike higher, according to flash PMI surveys (S&P Global, 5 minute read)

The February flash PMIs revealed a sharp slowdown in U.S. business growth, accompanied by rising goods prices. The U.S. Composite Flash PMI Output Index fell from 52.7 in January to 50.4, a 17-month low, signaling near-stalled expansion. In contrast, Japan’s PMI rose from 51.1 to 51.6, while the UK and eurozone hovered near stagnation. U.S. GDP growth is now projected at just 0.6% annualized for February, down from 2.4% in Q4 2024

• The slowdown was primarily driven by the services sector, which contracted for the first time in over two years, making the U.S. the only G4 economy with declining services activity
• Companies cited government policy uncertainty, federal spending cuts, and tariffs as major contributors to weaker sales and activity
• On the other hand, U.S. manufacturers saw a boost in output, recording the largest monthly increase in nearly a year, contrasting with declines in the eurozone, Japan, and the UK

???? IMPACT & CLIMATE RESILIENCE

?

Which US companies are pulling back on diversity initiatives? (AP, 4 minute read)

A growing number of major companies —at least 15 so far— are scaling back or eliminating diversity, equity, and inclusion (DEI) initiatives in response to legal challenges, conservative activist campaigns, and President Trump’s executive orders targeting such programs. Many have dropped workforce diversity goals, supplier diversity programs, and corporate sponsorships related to DEI, citing shifts in external pressures and legal risks. Among the companies retreating from DEI efforts:

• Goldman Sachs ($46B revenue) scrapped its board diversity requirement for IPO clients
• Google ($324B revenue) dropped its leadership diversity goal and adjusted policies following Trump’s executive order
• Target ($107B revenue) shut down programs supporting Black employees and Black-owned businesses
• Meta ($116B revenue) disbanded its DEI team and abandoned its “diverse slate” hiring approach
• Amazon ($554B revenue), McDonald’s ($24B revenue), and Walmart ($648B revenue) scaled back DEI programs and paused participation in corporate diversity rankings

Evolve or Die: The Future of DEI Entrepreneurship in the Trump Era (Inc, 2 minute read)

Under the Trump administration, DEI-focused businesses must navigate a rapidly shifting landscape as opposition grows. While diversity initiatives have historically adapted to challenges, the current environment demands strategic repositioning. Here are four key trends for DEI entrepreneurs:

1. Rebranding DEI: Companies will shift from race- and gender-based metrics to skills-based initiatives, such as leadership development and language proficiency, to align with business needs and avoid legal scrutiny
2. Values-Based Market Shifts: Businesses taking clear stances on DEI are polarizing customers and investors. Startups that maintain consistent values can capture market share among increasingly divided consumers
3. Industry Consolidation: With tighter budgets and legal challenges, larger firms are acquiring specialized DEI startups offering recruitment, leadership, and training solutions
4. Direct-to-Consumer Growth: DEI education and training are shifting away from corporate programs to independent learning platforms, allowing individuals and small businesses to engage directly

?? IPO & EXITS

Startups Go Shopping: More VC-Backed Companies Bought Their Brethren Last Year (Crunchbase, 2 minute read)

VC firms have struggled to return money to their LPs due to sluggish IPO markets and valuation corrections post-2021. As a result, M&A has become a key liquidity strategy, with stronger startups acquiring weaker ones that face funding challenges. Startup M&A activity rebounded in 2024, with nearly 400 deals where startups acquired other startups—a 31% increase from 2023, though still below 2021-2022’s peak of nearly 1,000 deals

• Despite the increase in deal-making, valuations remain lower than 2021 levels, with many sellers accepting reduced prices
• Regulatory scrutiny in the tech sector, particularly from the FTC and DOJ, adds uncertainty
• Notable deals include: Stripe acquiring stablecoin platform Bridge for $1.1 billion and AlphaSense buying Tegus for $930 million

These fintech players could be next to hop on the IPO train (Pitchbook, 5 minute read)

Fintech VC exits saw a notable rise in Q4 2024, reaching $7.4 billion across 65 deals, marking the highest level since Q2 2022. Major IPOs included ServiceTitan, Ibotta, LianLian Digitech, and Baiwang, with ServiceTitan standing out as one of the biggest success stories of the year

• Significant acquisitions also shaped the market, such as Tegus being acquired by AlphaSense and Featurespace’s sale to Visa
• With Chime, Klarna, and Mynt already confirming IPO plans, attention is now shifting to other high-potential fintech startups like Stripe and Revolut
• The recent uptick in successful exits signals that the fintech sector is gaining momentum, setting the stage for a stronger public market in 2025

??? 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 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