The early-stage tech market turned something of a corner in 2024. And despite a difficult couple of years, there is – dare we say it – a glimmer of optimism as we head into 2025.
The European tech ecosystem is on track to see a total capital investment of $45B in 2024 while India witnessed multiple tech IPOs and a return of growth stage fundraise. At RTP too, we’ve partnered with some exceptional founders in 2024, including those behind enterprise data management platform Conduktor, full-stack climate-tech company Varaha and neobank Comun, to name a few.
AI, of course, continued to be hot, with AI start-ups continuing to receive the lion’s share of VC investment in 2024. And we fully expect this to influence the trends in 2025.
So, what other trends can we expect? RTP Global’s Tom Sheridan, VP in the US, Louis Dussart VP in Europe and Madhur Makkar, Principal in India – share their thoughts.
1. AI will break new grounds
Enterprises, this year, learnt that building AI applications is hard. 2025 will be the year of the application layer, with business leaders wanting quick ROI from their generative AI efforts.
As the understanding of AI’s impact matures, we expect to see greater interest in how embedded AI dramatically improves the efficiency of repetitive tasks in legacy businesses. From chemical engineering to oil discovery, we also anticipate historically uninspiring tech sectors to be front runners in returning real business impact.
2025 is also shaping up to be the year of AI legal battles. One of the active copyright lawsuits (the dispute between the New York Times and OpenAI) will wrap up and likely set a precedent for whether major LLM providers should pay more for the data they use to train their AI models.
The outcome will be a defining moment for the viability of the business models of OpenAI and similar companies building foundational AI models that received huge amounts of funding in 2024. As a second order effect, we expect to see more AI newcomers entering the market with commercial data agreements from the outset, as a competitive moat.
2. New European success stories emerge
The EU’s tech ecosystem faced scrutiny in 2024, notably in a report by former ECB president Mario Draghi. Europe is questioning its model, especially in a period of political turmoil combined with the expected impact on Donald Trump as President of the US. Yet, the value created by locally founded companies is starting to become all the more visible to all stakeholders.
In 2024, announcements of Klarna’s long-awaited IPO, Revolut’s re-valuation at $45B, and Mistral raising capital to build an alternative to Silicon Valley’s AI giants are driving real hope in Europe’s ability to produce tech products with long-term value.
In 2025, we anticipate many new early-stage companies in the AI and climate space, innovating with a very young technological paradigm or anticipating new regulation frameworks to be implemented (CSRD, CBAM), to reach product market fit and accelerate their development at scale. Similarly, deep tech and namely AI-powered hardware will see fast growth in 2025.
Our eyes are also turned to the Italian tech scene. Italy is well-positioned to follow France in developing a mature tech ecosystem. With a large domestic market ripe for disruption, and CDP Venture Capital backing start-ups, Italy mirrors France’s success with BPI France.
3. India confronts worldwide climate challenges
The focus on climate and energy in Indian markets seems to be increasing, particularly focused on sectors like renewable energy, electric vehicles (EVs) and sustainable agriculture. Today, India ranks seventh globally for climate vulnerability and there’s a huge opportunity for entrepreneurs to solve this ongoing problem using deep tech solutions.
In 2025, we expect a lot of new startups, in this space, to emerge and grow to solve worldwide problems. Read more about RTP Global’s investment in climate tech startups IBC and Varaha.
4. VCs diversify into new sectors
2024 saw the VC ecosystem focus on quality over quantity, as LPs applied pressure on funds to seek out deals that offered good cash returns. As a result, we saw a trend in VCs investing outside their typical portfolio areas. Some investments were, arguably, odd with VCs backing historically non-venture scalable businesses such as film production companies or owning hospitals.
This trend will continue, with VC firms looking outside their wheelhouse to generate returns. This could be good news for start-ups in hyped sectors like deep tech and quantum, and also for diversification in the tech sector.
5. Everyone gets a personal assistant
With the cost of compute dropping some 80% year on year, and efforts by Meta and other open source AI leaders to distribute state of the art LLMs for free, the barriers to entry for AI continue to fall.
As a result, 2025 could well become the year of personal AI; at work, home or in school. We believe this will open new investment opportunities – with Praktika leading the way on delivering personalised tutors to every child and RTP Global’s own Aurora helping parents with the complexities of organising a family. It’ll be exciting to see new consumer and edtech ideas develop.
A new year beckons
2025, undoubtedly, won’t come without its complexities. We’ll see how the inauguration of a new American President affects the markets in the US and how regulatory changes impact advancements in AI technologies.
But there’s a very good case for hope heading into 2025. The tech market has matured, and there is a growing sense of optimism that exit activity could start to return. AI will continue to fuel innovation, while countries and sectors that have previously been overshadowed will be sought out by quality-hunting VCs. Watch this space.
