If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here.​

​2025 Predictions​

Every year I make a list of predictions & score last year’s predictions.

Here are my predictions for 2025.

1. The IPO market rips. ServiceTitan’s success has revealed the retail & instititutional demand for high growth software. Stripe, Databricks & many others generate huge liquidity for VC funds. The pull from the public market & desire for AI drive M&A to 5 year highs, enabled by a laxer FTC M&A policy.
2. Google continues their surge in AI. They lept from no placement to top 1 or 2 on the OpenRouter rankings. They further advance their market share. Grok benefits from Elon’s position in government to become a viable contender with OpenAI & Anthropic.
3. Voice becomes a dominant interface for humans with AI as speech models are pushed on device & the accuracy/latency astounds. Voice produces text, image, & video. Why type? It’s the start of a generation of people who will never learn to type on a keyboard. (This one will be hard to grade!)
4. US VC investment remains roughly around $210-$230b, but VC fundraising increases by 20% as LPs invest some distributions into the asset class, in pursuit of AI growth.
5. Consolidation is the theme for the Modern Data Stack. Buyers look to standardize on single platforms as cost-pressures persist. More than $3b of M&A in the category is announced. Software & data engineering teams continue to fuse.
6. The first $100m ARR company with 30 or fewer employees is created. An AI native product coupled to an AI native team produces incredible market cap creation efficiency.
7. After years of declines, the US web3 engineering populations grows by 25% as the government embraces crypto & web3. This opens to the door to 30% more token listings & a successful consumer app built on a web3 stack.
8. Data center spending by hyperscalers eclipses $125b for the year as the AI race fuels demand for GPUs. Broadcom is the hottest semiconductor stock of the year.
9. Stablecoin supply increases 50% to $300b as more businesses adopt this payment mechanism for B2B payments. Stablecoin volume is greater than 3x Visa’s transaction volume.
10. Observability, SIEM, & Business Intelligence begin to use the same data lake. Usage-based pricing for many software companies creates a need for a single data lake. The data lake becomes the dominant data architecture across all workloads.

Here are my predictions from last year.

1. The IPO market remains closed through the first 6 months of the year. But a few mega issuances, especially Stripe & Databricks in the summer or fall, re-open it for others. The Fed cuts rates, which helps.

   Score: 0. Only 3 IPOs! Maybe next year!

2. M&A accelerates throughout the year. The anticipation of a rate change drives fear of target acquisition valuations. In the last two years, M&A has totaled about $49b & it surges to above $60b driven by AI acquisitions. PE becomes an important buyer of companies growing 10-25%, as it did in 2018, driven by lower debt costs.

   Score: 0.9. M&A was up $10b y/y but not so much by AI.

3. AI & data continue to dominate the funding landscape as founders & investors seek novel applications of the technology. A handful of companies achieve record-setting growth rates.

   Score: 1. AI funding is now half of all VC funding. Companies are attaining record growth rates.

4. The share of AI-enabled web searches approaches 50% of all consumer search as consumer behavior patterns evolve, especially on mobile.

   Score: 1. Most GenZ & Millennials default to AI search, & for many Google.com search, an AI Overview graces the top of the page.

5. The BTC ETF drives a resurgence in interest in web3 financing. The winter forced many companies to evolve from open-source projects to revenue-generating businesses. We see the first broadly successful tokens with dividends (likely outside the US). This innovation reinvigorates very early-stage IPOs. We also see more ARR-based web3 businesses achieving scale. Record inflows into tokens fuel all-time highs in Bitcoin, Solana, & higher performance L1s who offer better price/performance to market.

   Score: 1.0. BTC at $100k & the ETF is the fastest growing ETF in history.

6. US VC investment falls from $275b in 2022 to $200b in 2023 & sustains at about $200-220b in 2024 as LP interest in venture attenuates after the euphoria in 2020 & 2021. Valuations remain relatively steady except for AI businesses, which command a premium to market of about 10-25%.

   Score: 0.7. US VC investment totaled $210b in 2024. AI premiums are closer to 2-5x.

7. The discussion around AI regulation becomes a critical topic in the US during the election because machine-generated content exacerbates international meddling in US politics. But the overwhelming desire for the US to continue to lead the innovation wave it started creates safe harbors, the same provisions which enabled the web to flourish, are applied to AI.

   Score: 0.5. Yes, AI regulation was a hot topic. But the election impact didn’t materialize as expected.

8. Companies & startups in particular begin to report meaningful improvements in productivity from AI, reducing their headcount growth, but growing revenue just as much as projected. ARR per employee increases 10%, twice the decade long average.

   Score: 0.7. Microsoft, ServiceNow, & Salesforce all report productivity gains from AI measured in the hundreds of millions of dollars.

9. Data lakes become the dominant data architecture across business intelligence & observability workloads as more startups leverage Amazon S3 free replication. Cloudflare R2’s architecture for very large data sets drives a meaningful growth in its usage, predominantly for AI.

   Score: 0.5. The narrative in data has certainly become the data lake. The R2 architecture hasn’t materialized.

Total : 6.3/10

Down from 4.0/5.0 last year! But it was an election year so I’m cutting myself some slack.

​