Will the M&A market pick up next year and, with it, the IPO pipeline?
And what about the tech job market, which again saw tens of thousands of workers in the U.S. alone lose their jobs in 2024?
Every year, we offer up some predictions for the startup world in the coming year. Sometimes we’re right — as in last year, when we correctly predicted that IPOs would not come roaring back in 2024. Sometimes we’re wrong — also last year, when we expected the AI frenzy to cool (lol).
So, along with a big grain of salt, here are the five top trends we’re watching in the new year.
An M&A rebound?
There is a lot of optimism that the change of administration in the federal government will jump-start a slow M&A environment that many believe to be over-regulated.
M&A dealmaking involving VC-backed startups has slowed through the past few years — per Crunchbase data — and that has greatly affected VCs’ ability to give returns to their LPs and therefore raise new funds.
Many VCs hope a change in the Federal Trade Commission and U.S. Department of Justice will jump-start M&A activity after years of an overzealous regulatory environment quashed deals such as Amazon‘s proposed $1.4 billion acquisition of iRobot.
While big deals that got tied up in reviews make the headlines, other smaller under-the-radar deals failed to materialize because they have become more expensive and deemed not worth the money and hassle.
However, while change is inevitable at the regulatory agencies, there still is concern about how friendly the economy and new administration will be to both tech and M&A.
Increased tariffs — which President-elect Donald Trump has promised — could cause inflation rates to spike again, driving up interest rates. Also, while Trump has talked about less regulation he has also been critical of the power Big Tech holds. His nomination of Gail Slater — a frequent critic of Big Tech — to lead the Justice Department’s antitrust efforts has likely caused some pause in Silicon Valley.
Nevertheless, many are hopeful the M&A market will pick up — and with it the IPO pipeline — and liquidity from past investments will flow freely.
Is 2025 the year IPOs return?
After another slow year in 2024 for new tech listings, there is an expectation that the IPO markets will pick up in 2025. A year ago, the outlook was not bullish. What’s changed?
“I think there’s a lot of confidence in the market. Stock markets are trading at all-time highs,” said Ran Ben-Tzur of legal advisory firm Fenwick & West. And “there’s been a rotation back to focusing on growth, which obviously is great for tech.”
For now, two high-profile companies have filed: Sweden-based Klarna, a buy now, pay later provider that has confidentially filed with the Securities and Exchange Commission, and Cerebras Systems, an AI chip company that filed in September.
“We should see companies start to test the public markets in 2025 across sectors — fintech, cyber, AI, and SaaS, among others,” said Nina Achadjian, a partner at Index Ventures, via email.
“We’ll start to see momentum in the beginning of the year, and really accelerate, as the year goes on,” predicted Ben-Tzur, who saw early momentum in 2024 that then tailed off.
AI and blockchain could equal big bucks
AI funding continues its torrid pace. More than half of last month’s $28 billion in global venture funding went to companies in the AI sector, with AI companies in everything from robotics to marketing to healthcare raking in funding.
Generative AI companies that build models, such as xAI and Anthropic, raise massive rounds seemingly at will, while many applications and agentic AI also seem to have little issue raising still-big rounds.
Just last month, San Francisco-based Writer, a creator of quick-start AI applications and agents for workflows in healthcare, retail and financial services, locked up a $200 million Series C that valued the enterprise-focused generative AI platform at $1.9 billion.
However, some are looking to the intersection of tech’s new big thing — AI — and Web3, its last big thing.
More specifically, what role could blockchain help in developing the AI economy, especially with so many startups creating AI agents? Some investors see significant potential between the two — especially as blockchain and Web3 worm their way back into people’s consciousness with the explosion in crypto prices.
It is possible for AI agents to work even faster on blockchain since security is already built in — not something that was added later, as it was on our current Web 2.0 platforms. The efficiency could make AI even after and more dynamic, while being more user friendly and cheaper for enterprises.
It’s very much early days for the blockchain and AI intersection, but certainly something to watch.
A white-collar recession will persist
During the peak of the unicorn boom in 2021, heavily funded startups were on a hiring spree. That enabled skilled workers to enjoy both high-paying jobs and some degree of career mobility in areas from programming to marketing to project management.
Of course, it didn’t last. Things turned south beginning in 2022, with scores of one-time highflyers cutting staff and those still employed increasingly opting to stay put. It’s a bit tough to gauge where we are in the cycle presently, but anecdotally and per media reporting, it appears tougher than usual to land a well-paid job at a mature tech company or funded startup.
For 2025, we predict that the job market will remain challenging in scores of once-hot areas for tech hiring. Mature startups and public companies, in particular, will be vigilant about ballooning costs, and avoid the kinds of moonshot efforts many once pursued.
One could argue that generative AI, where funding and hiring remain elevated, is an exception. However, the counter-argument is that these are the companies developing the technologies best-suited to replace human labor in other white-collar industries. So what’s good for them, might not be good for the rest of us careerwise.
Space and defense tech will boom
The days when Silicon Valley was squeamish about developing military tech are clearly over.
As of mid-November, defense tech startups — defined as those in the military, national security and law enforcement sectors — had already raised nearly $3 billion in 85 rounds, per Crunchbase data. That represents a new record for venture investment in the sector, beating out the $2.6 billion raised by such startups in all of 2022.
A number of factors play into the tech industry’s new coziness with defense tech. Governments are scrambling to incorporate the most advanced AI technology into their weapons and defense systems as conflicts proliferate from Ukraine to the Middle East. U.S.-China tensions are likely to stay heated under the incoming Trump administration, especially when it comes to China’s ambitions with Taiwan.
There’s also a large amount of overlap between defense tech, aerospace and industrial tech — sectors that are likely to have strong support from the White House and allies like SpaceX CEO Elon Musk.
The Pentagon‘s 2025 budget request stands at $850 billion, with large allocations for unmanned systems and AI. Spurred on by the Ukraine-Russia conflict, Europe is also spending billions on defense tech research, including new AI-powered smart weapons, more advanced drones and better radar technology.
For 2025, we predict that venture investment in defense tech will continue to grow, buoyed by government spending and friendlier relations between Silicon Valley and D.C.
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Illustration: Dom Guzman
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