Will the M&A market recover next year and with it the IPO pipeline?
And what about the high-tech job market, which is once again set to lose tens of thousands of workers in the United States alone in 2024?
Every year we offer some predictions for the startup world in the coming year. Sometimes we’re right, like last year when we correctly predicted there wouldn’t be a resurgence in IPOs in 2024. We may also have been wrong last year when we predicted that the AI craze would cool down (lol).
So here’s a sneak peek into the top five trends we’re looking at in the new year.
M&A rebound?
There is much optimism that a change in federal government will reinvigorate the slow-moving M&A environment that many believe is overregulated.
According to data from Crunchbase, M&A deals involving VC-backed startups have slowed in recent years, significantly impacting VCs’ ability to return profits to LPs and thereby raise new capital. giving.
Changes at the Federal Trade Commission and the U.S. Department of Justice have prompted many venture capital firms to engage in M&A activity, after deals such as Amazon’s $1.4 billion proposed acquisition of iRobot were scuttled by an overzealous regulatory environment for years. I hope that it will become more active.
While the big deals that resulted in reviews made the headlines, other smaller, less obvious deals never materialized because they were deemed too expensive and not worth the money and effort.
But while regulatory change is inevitable, concerns remain about how friendly the economy and new administration will be to both technology and M&A.
President-elect Donald Trump’s pledged tariff hikes could cause inflation to spike again and push interest rates higher. And while President Trump has talked about deregulation, he has also criticized the power Big Tech has. The appointment of Gale Slater, a frequent critic of Big Tech, to lead the Justice Department’s antitrust efforts likely caused some stagnation in Silicon Valley.
Nevertheless, many are hopeful that the M&A market will recover, and with it the IPO pipeline, allowing liquidity from past investments to flow freely.
— Chris Metinko
Will 2025 be the year that IPOs make a comeback?
Although new high-tech listings remained sluggish in 2024, there are hopes that the IPO market will recover in 2025. The outlook a year ago was not bullish. What has changed?
“I think there’s a lot of confidence in the market. The stock market is trading at all-time highs,” said Ran Ben Tulu of the legal advisory firm Fenwick & West. “We’re moving back towards a focus on growth, which is obviously great for technology.”
So far, two well-known companies have applied. Klarna, a Sweden-based buy now, pay later provider that secretly filed with the Securities and Exchange Commission, and AI chip company Cerebras Systems, which filed in September.
“In 2025, we should see companies begin testing public markets across fintech, cyber, AI, SaaS, and other areas,” Nina Achajian, partner at Index Ventures, said in an email.
“We’ll start to see momentum from the start of the year and it will accelerate further as the year goes on,” Ben Zur predicted, adding that 2024 saw some early momentum before slowing down.
— Gene Teare
AI and blockchain could equal big money
Funding for AI continues at a breakneck pace. More than half of the $28 billion in global venture funding last month went to companies in the AI field, with AI companies in everything from robotics to marketing to healthcare raising money.
Generative AI companies that build models like xAI and Anthropic are raising large rounds seemingly at will, but many application and agent AIs still have little trouble raising large rounds as well. Apparently not.
Just last month, San Francisco-based Writer, which develops quick-start AI applications and agents for healthcare, retail, and financial services workflows, raised a Series C that valued its enterprise generative AI platform at $1.9 billion. secured $200 million.
But some are focused on the intersection of the new technology centerpiece, AI, and its last one, Web3.
More specifically, what role can blockchain play in the development of the AI economy, especially as many startups are developing AI agents? With blockchain and Web3 returning to the public consciousness due to the explosion in prices, we see great potential between the two.
AI agents can run faster on blockchain because security is already built-in, rather than being added as an afterthought like current Web 2.0 platforms. Efficiency can make AI more dynamic while making it more user-friendly and cheaper for businesses.
The intersection of blockchain and AI is still in its infancy, but there are certainly things to watch.
— Chris Metinko
The white-collar recession will continue
At the peak of the unicorn boom in 2021, startups that had raised large amounts of money were in a hiring rush. This has enabled skilled workers to enjoy both well-paying jobs and a degree of career mobility in fields ranging from programming to marketing to project management.
Of course, it didn’t last. From 2022, things will turn south, with former high-flyers increasingly retrenching their jobs and those still employed choosing to stay on. It’s a little hard to tell where we are in this cycle right now, but anecdotes and media reports suggest that higher-paying jobs at mature technology companies and funded startups are more likely than usual. It seems difficult too.
In 2025, we predict that the job market will remain challenging in many areas that were once hot spots for technology talent. Mature startups and publicly traded companies in particular will be wary of rising costs and avoid the moonshot initiatives that many companies once pursued.
Some might argue that generative AI, where funding and employment remain at high levels, is an exception. But the counter-argument is that these companies are developing technologies that are best suited to replace human labor in other white-collar industries. So what’s good for them may not be good for the rest of us career-wise.
— Joanna Glasner
Space and defense technology booms
The days when Silicon Valley was reluctant to develop military technology are clearly over.
As of mid-November, defense technology startups in the military, national security, and law enforcement sectors have already raised nearly $3 billion in 85 rounds, according to data from Crunchbase. This is a new record for venture funding in this space, surpassing the $2.6 billion raised by these startups in all of 2022.
A number of factors are at play in the technology industry’s newfound familiarity with defense technology. As conflicts escalate from Ukraine to the Middle East, governments are scrambling to integrate cutting-edge AI technology into their weapons and defense systems. Tensions between the United States and China are likely to further intensify under the incoming Trump administration, particularly regarding China’s ambitions toward Taiwan.
There is also a lot of overlap between defense, aerospace, and industrial technology, and these areas are likely to receive strong support from the White House and allies like SpaceX CEO Elon Musk.
The Pentagon’s 2025 budget request is $850 billion, with a large amount allocated to unmanned systems and AI. Spurred by the conflict between Ukraine and Russia, Europe is also spending billions of dollars on defense technology research, including new AI-powered smart weapons, more advanced drones, and better radar technology.
Looking ahead to 2025, we predict venture investment in defense technology will continue to grow, driven by government spending and friendly relations between Silicon Valley and Washington, DC.
— Marlies van Romberg
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Illustration: Dom Guzman
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