Things I Think I Think - Q1 2025
It’s been a rollercoaster of a quarter on so many fronts. Let’s slow things down with another homage to legendary sports columnist Peter King.
Here are 5 Things I Think I Think - Q1 2025 Edition:
1. I Came in Like a Wrecking Ball
A lot of people thought they knew what was coming with the new administration, but the breadth and velocity of actions has impressed even the most seasoned political pundits.
I’ve said before that I have zero background in government or public policy, so I’m not going to try to unpack or opine on everything that’s going on. Rather, I’m going to share a few thoughts from the perspective of someone in venture:
The fundraising environment has, thus far, been completely immune to the day-to-day geopolitical drama (and, in fact, is very much on fire — more on that later). It remains an excellent time to raise if you’re a founder.
At this point, it’s fair to assume that tariffs of one form or another are here to stay. Plan accordingly.
Like many in tech, I was surprised by the recently-announced pardons for several startup founders convicted of fraud given the number of VCs in the administration’s inner circle. Hunter Walk has a good summary of why the right amount of fraud in Seed stage startups is greater than 0% but it shouldn’t be pardoned.
Speaking of VCs, I previously predicted that we would see a meaningful amount of vitriol directed at VCs as the new administration made move that were seen to have been influenced by the “VC arm” of the Republican party. With DOGE’s efforts mostly attributed to Elon Musk and talk of tariffs the primary economic topic, that hasn’t happened.
2. Fundraising is on 🔥
In my new year’s update, I predicted that the first half of 2025 would be hot from a fundraising perspective and wow…has it ever been!
Rounds are coming together with breathtaking speed. Virtually every founder I’ve worked with this quarter ended up in an oversubscribed scenario, with valuations at or above their target.
Some of this is stems from the entry of significant dry powder into the system that was sitting on the sidelines for the past couple of years. Some of this, undoubtedly, comes from the excitement surrounding all things AI.
Additionally, I think a not-insignificant part of the energy and enthusiasm in the ecosystem right now is due to the fact that we’re finally nearing the end of the washout of companies that raised too much during the ZIRP days. Investors are seeing more fast-growing, inspiring startups and fewer struggling companies in search of salvation, which is impacting their psychology.
In other words, investors are feeling more positive because their day-to-day experience is more positive.
Sound silly? A few years ago, I wrote about the impact that the adrenaline of deal flow has on investor behavior. When VCs see fewer deals or fewer companies that they perceive to be high quality, their rate of investment slows. What we’re seeing now is the inverse: investors are seeing a high rate of high-quality startups, which is keeping their level of enthusiasm — and thus, their willingness to invest — high.
It’s only been one quarter, but it’s feeling like we’ve finally moved back from glass half empty to glass half full on the fundraising front (at least, at the early stages — there remain a significant number of Series B and later companies in the danger zone).
As we head into Q2, I have two fundraising-related predictions:
When the final numbers are tallied up, I expect that Q1 2025 will have been the biggest startup fundraising quarter in North America in years (even without Open AI’s unprecedented $40B funding round).
Q2 will continue the momentum, although I won’t be entirely surprised if VCs start their summer slowdown a few weeks early. If you’re planning to raise before the summer, make sure you start before Memorial Day.
3. Elbows Up
In my Q4 update, I noted that the G7 countries were all falling behind the U.S. in terms of productivity and wondered aloud whether the tech communities in Canada, the UK, or any of the other countries would step up in the same way we were seeing in America. Talk of tariffs and trade wars in the early days of the new administration has since pushed a number of founders, investors and policy makers into action.
When the first round of tariffs was announced, I wrote about the unprecedented level of anger amongst Canadians. Canadians were (and still are) pissed. One outcome has been the Build Canada initiative, a coordinated effort from the tech and business community to promote a range of policy changes focused on increasing Canadian productivity in the lead-up to that country’s federal election.
We’re starting to see similar initiatives across the pond in Europe. For example, a group of prominent investors and founders including Harry Stebbings of 20VC and my former colleague Rina Onur Sirinoglu recently announced Project Europe, a new fund modeled after Peter Thiel’s famed Thiel Fellowship. But the urgency around Europe’s actions doesn’t yet seem as high as those in the Great White North (at least, not within the tech community). I suspect this has a lot to do with the fact that Canada is physically proximate to the U.S. and has a major federal election this month.
At a time when Canadian entrepreneurs on both side of the border are trying to make sense of what these changes mean for them, the coming weeks will tell us a lot about how influential Canada’s tech community really is.
4. San Francisco is Still the Place to Be
With so much of the tech news cycle focused on the impacts of tariffs and other actions from the new administration, it might not be as apparent to the outside world how fast San Francisco is moving right now. But it absolutely, unequivocally remains the place to be.
I was recently in San Francisco for YC Demo Day and the energy and activity dwarfed the prior demo day, which is notable as that was the first in-person demo day since Covid. The San Francisco Palace of Fine Arts was packed to the brim with investors and founders, and the buzz around AI and the emerging impact of vibe coding was palpable.
5. AI has its Studio Gibli Moment
I was going to end this post by sharing some thoughts on the emergence of vibe coding, but that was before Open AI released its latest image generation capabilities in an update to GPT‑4o. This past weekend, millions of people around the world rushed to reimagine their photos in the style of Studio Gibli.
While this viral trend might seem like nothing of particular significance, anyone who’s studied technology adoption knows the impact that moments like this can have.
According to Sam Altman, ChatGPT added more than a million users in a single hour on Monday. For context, it took 5 days to add that many users during the app’s viral launch. For many people around the world, the opportunity to “Gibli-fy” their images served as their introduction to AI.
I don’t think it’s an exaggeration to suggest that we’ll look back at this release as a turning point in the mainstream adoption of AI. Numerous technological waves have been driven by photo-related capabilities. It makes perfect sense to me that the opportunity to leverage AI in such a magical way would trigger the imaginations of the public-at-large. (Sorry, but AI’s killer app was never going to be “deep research”).
I’m not a consumer guy, but I can’t help but wonder if we’ll see a wave of AI-driven consumer apps catch fire in the coming months. Either way, it will be exciting to see how the adoption of these technologies changes as we transition into the “early majority” phase of the technology adoption lifecycle.