VCs Feel the Market Cheer Heading into the Holidays
Plus, Chime files to go public
The Main Item
Investors expect 2025 to be a stronger year for valuations and IPOs
VCs are desperate for some good vibes, and it appears they’re finally getting them just in time for the holidays.
After a tough couple of years for the venture industry, investors I’ve spoken with this week are cautiously optimistic that the tide is turning in their favor.
ServiceTitan’s IPO popped last week, exceeding expectations. Bitcoin crossed the long awaited benchmark of $100,000 this month, and the prospect of a friendlier administration in the White House has spelled good news for crypto startups. Databricks is about to close one of the largest venture rounds ever, closing in on $10 billion at a $62 billion valuation.
Another bull signal: SoftBank’s recent commitment to $100 billion for US projects.
Masayoshi Son, always a shrewd player of the political moment, travelled to Mar-a-Lago on Monday, where he joined incoming President Trump in announcing the deal.
The move is a classic Trump play: he gets credit for the AI investment even though it’s clear Son would have been writing big checks to AI companies regardless. Son is happy to play: he made a similar pledge alongside Trump back in 2016.
SoftBank became synonymous with big, questionable bets during the last investing frenzy—WeWork and the robot pizza delivery startup Zume come to mind. That was the ZIRP era though, when money was easy and Son was backed by Saudi Arabia and the UAE. Those times aren’t coming back.
Son made some good bets too, namely Arm, which saw big returns in an IPO last year. Even discounting the political theatre, the return of a big spender like Son to the venture arena could be a welcome sign for an industry that’s been feeling the hurt for the past two years.
I’ve heard from my conversations with investors that while deal flow is beginning to slow down for the holidays, this December has been the busiest in two years, or since the downturn began. More growth rounds are getting done than before, said one investor on background, as folks work to hit their deal quotas for the year. If you’ve been following the latest tweets from Arfur Rock, this certainly tracks — the anon dished that consumer darling Partiful landed fresh funding at a $400 million valuation and that HR startup Mercor wrapped up a Series B round at a $2 billion valuation. (A spokesperson for Partiful disputes the claims in the tweet).
Deals at the earliest stages are still flowing too. We heard a new generative AI tool Valent, which builds a detection algorithm to find if models were trained on copyrighted content, will likely close its pre-seed round this week with capital from Flybridge and Pioneer Square Labs.
The final tallies of venture funding from the end of the year are still being calculated, but a sneak peak from Crunchbase shows that global venture funding in Q4 is on track for the strongest quarter in 2 years, up just over 20% year over year and quarter over quarter. AI startup funding had a breakout year, with over $100 billion to AI companies as of Dec. 17.
And enterprises look poised to spend more on AI tools in the new year: PitchBook's latest enterprise tech outlook shows that dealmaking to DevOps startups, or those that provide developer tools for engineers and enterprises, spiked at the end of this year. A new, more lax regulatory environment could see SaaS companies hunting for early stage acquisitions to bulk up their AI stacks as the tools market becomes saturated.
Many caveats apply, of course. Large, flashy late-stage deals make up a growing part of the total dollars invested, and startups looking for A and B rounds are still likely to face a bumpy road, at least compared with boom-time peaks. The direction of interest rates and equity markets, which have a huge impact on VC investing dynamics, are especially uncertain as the Trump Administration comes to power.
There are plenty of zombie startups, and funds, still out there, and we’ll likely be hearing more about some of them calling it quits.
But for now, we can end the year with some holiday cheer and a small side of wish-casting.
Five Notable Deals
Databricks, SandboxAQ, Hostaway, Vultr, Zhipu
Databricks announced its massive funding round — one of the largest in venture history — this week, while growth-stage startups across regions and industries locked down big sums before the end of the year.