A new year brings hope for a better tomorrow — at least. One kind. In the world of venture capital, nothing is predictable. Number of companies in the US It has fallen sharply. As reported by the Financial Times, only Silicon Valley's biggest names are splashed by venture capital investors. AI is the only category that seems to matter; And it doesn't look like that's going to change any time soon. But the new year has begun and so is the impetus for change.
We spoke with a few VCs to round up their predictions for the new year — the good, the good. Bad and unexpected things can come to an end.
Their responses were edited and condensed for clarity.
What are your pros and cons predictions for 2025?
Nekeshia Woods, Managing Partner at Parkway Venture Capital
goodness: By lowering their return expectations for fixed income and cash equities, the wealthy; They will look more aggressively to private markets for superior returns. This channel is expected to invest over $7 trillion in private markets by 2033. In response to this anticipated influx of capital, we have seen large wealth and asset managers use venture capital as a differentiation strategy among their private market offerings. These institutions have taken risk as a strategy to offer access to the best deals while capturing a portion of the $7 trillion to be invested in the private markets through net new inflows. Fund managers new to their funds; We will simultaneously partner with these institutions to gain access to a new pool of LPs, creating a consistent and long-term capital stream.
Better: We expect the AI field to begin to see consolidation, primarily through acquisitions in areas where it can become a commodity, such as large language models. AI companies that will become leaders in their field are opening up new market segments and owning private data.
Gabby Cazeau Partner City of Harlem
goodness: The IPO market will fully reopen and we will see some big name IPOs bring much needed liquidity. It's a win for everyone. In the early stages, The pace of investment may be up to 2021 levels, but certainly over 2022-2024. 2025 feels like a banner year for venture capital. I hope so. The official start of the next bull run.
Evil: 2025 is the year AI startups will sell to businesses. Many AI startups are growing rapidly but are still stuck in the “experimental” phase, living on innovation budgets rather than being part of mainstream software consumption. Many won't make the leap because of turnover and slow growth.
Triin Linamagi is the founding partner of Sie Ventures.
goodness: The emergence of solo GPs and angel funds will increase investment into early-stage companies, a much-needed evolution in the venture capital ecosystem.
According to the industry, We will see more specialized and well-defined investment approaches, with savvy investors delivering meaningful value to founders. This shift is likely to provide better returns not only for startups but also for investors. The allocation of capital to diverse founding teams will continue to grow in sectors such as sustainability and healthcare, where diverse perspectives can drive innovation and impact.
Evil: Meaningful M&A or IPO activity is unlikely until late 2025 as market conditions remain challenging. Limited partners will be reluctant to deploy capital, awaiting better distribution to paid-in capital metrics before committing to new funding.
Michael Basch, founder and general partner of Atento Capital
goodness: The opening of the IPO and M&A markets has increased liquidity for LPs. More funding and mid-tier companies as well. Expectations of profitable zombie companies are redefined by selling VCs on the cap table to private equity at a more fundamental price. Aggregates and conjugates at unsaturated sites (eg, GLP-1s).
Evil: Unicorns continue to decline, with a significant reset in valuations due to market resizing and resetting growth expectations.
Austin Clements; Managing Partner Slauson & Co.
goodness: IPO markets will reopen after Service Titan succeeds, as will M&A activity for private companies. Ultimately realizing these gains will increase liquidity for the LPs behind many venture capital ventures. This will allow LPs to access new funding—more venture funding than in previous years.
Evil: (LPs) may be more reluctant to commit to new fund managers after seeing so much unruly behavior in the last cycle. An unfortunate side effect is that some of the most innovative strategies will have great difficulty obtaining funding.
What trends do you think will remain? Which ones will go?
Wood
What will happen next? Dealmaking will be fine for dry powder investors. Investors will continue to move away from looking at products using “number of users” as a primary consideration, and money as a primary consideration before investing. It will lead to customer pipeline and costs. Investment momentum will maintain this investor-friendly environment. With the investment boom experienced over the past few years, venture firms will continue to take a balanced approach without expecting returns.
Where will you go? The outlook for IPO activity is moderately positive. With founder-public markets and conglomerates waning confidence, and recently freed from fundraising constraints, high-value companies have right-sized their valuations to align more closely with the market. With mega-cap tech stocks driving US indexes to all-time highs and delivering huge equity returns, we believe it's important for the consumer to invest in small-cap stocks. Although there are still many valuation firms that have yet to catch up to the market. There are still some companies in the tech space that are primarily ready for the public market.
Cazeau
What will happen next? Small teams increase income. We're seeing one-to-three people achieve $2M+ ARR using AI tools — doing more with less and better than ever before. This kind of growth is unheard of before 2024 and highlights how much startups are automating internally with new software tools. The big question now is how these groups will scale and build strong organizations. But to see such progress with such a light composition is impressive.
skilled trades; manufacturing industry Hospitality We will also see a resurgence in reskilling investment in platforms that address skills shortages in healthcare and other areas that cannot be automated by software.
Linnagi
What will happen next? AI is here to stay. By 2024, the widespread deployment of AI has marked a significant shift, and I believe this momentum will only increase. decision making, improving consent; And while it offers huge opportunities – such as streamlining operations – it also presents challenges. For example, Human intuition and experience are important, especially when evaluating founding teams and their dynamics. This evolution will require LPs to think more critically about how they select managers and structure their portfolios.
Where do you go? A blow-and-pray investment approach. We expect to see discounts with some due diligence and meaningful value addition from investors, even if the discount is reduced. This trend is evident by 2024; Signaling the end of the growth-at-all-costs mentality. Instead, investors will prioritize trends toward profitable and sustainable business models that will remain a hallmark of attractive opportunities.
Basch
What will happen next? (4) A short list of winners in the AI space will continue to attract significant investor attention at premium valuations. The continued trend of (and) VCs (especially at the seed stage) in the capital markets (funding) and the trend of VC-backed companies closing down in the capital markets (due to an inability to raise new funds) will continue. A rough performance to the 2020 or 2021 vintages.
Big Lee
Where will you go? The latest cycle is a profound shift in the way enterprise SaaS companies are backed by investors and fewer consumer applications. I think this will reverse as AI creates more applications for users that were not possible a few years ago. Consumer technology will make a welcome comeback in 2025.
What is the most unexpected thing in the world of venture startups in 2025?
Cazeau
We may even see famous unicorns merge or close, many of which have been industry darlings for years. These companies have enough money to make it to 2025, but not enough for further growth. We are already seeing some collections, This is likely to accelerate by 2025.
Linnagi
a significant climate hazard; A geopolitical conflict or economic shock has the potential to fundamentally reshape the startup and VC landscape.
Basch
Venture dollars looking at hard technology are on the rise as next-generation AI commoditises software. biological technology hardware, Hard technology takes center stage in other forms of deep technology. (Also) companies raising just a seed round have grown exponentially and had sub-$100 million exits in three and a half years of existence – revealing new math that can work for founders and VCs as companies that distribute quickly acquire leading-edge products that complement their existing offerings.
Lee
One unexpected thing is that it can be converted to OpenAI. A for profit organization Only so that Microsoft can acquire it in the biggest acquisition yet.