Startup Spotlight: Funding Trends and Emerging Players

Startup Spotlight: Funding Trends and Emerging Players
June 4, 2025 | Analyst Briefing for Institutional Investors

Executive Summary

The venture capital (VC) landscape in 2025 is characterized by a significant concentration of capital in artificial intelligence (AI) and climate technology sectors. While overall deal volumes have declined, the average deal size has increased, indicating a strategic shift towards quality over quantity. Secondary markets are gaining prominence as alternative liquidity avenues amid a subdued IPO environment. This report provides a comprehensive analysis of current funding trends and highlights emerging startups poised for substantial impact.

Key Funding Trends

1. AI Dominates VC Allocations

• In Q4 2024, VC-backed companies raised over $62.2 billion, a 57% increase from Q3 2024, with AI deals representing over 60% of this total investment.

• In Q1 2025, AI companies received 20% of all global venture deals.

2. Climate Tech Investment Surges

• AI-centered climate ventures raised $1 billion more in the first three quarters of 2024 than in all of 2023, highlighting the synergy between AI and climate solutions.

• Climate adaptation and resilience technologies featured in 28% of climate tech deals, indicating a focus on sustainable solutions.

3. Secondary Markets Provide Liquidity

• Secondary deal volumes exceeded $100 billion in 2024, offering both investors and founders alternative exit strategies amid a tepid IPO market.

4. Data-Driven Investment Strategies

• By 2025, over 75% of deal analysis is expected to be informed by data and analytics, reflecting a shift towards data-driven decision-making in VC investments.

Emerging Startups to Watch

Exowatt

Backed by notable investors including Sam Altman, Exowatt is pioneering renewable energy solutions tailored for AI data centers. Their modular energy platform addresses the escalating power demands of AI infrastructure.

Sesh

Sesh has secured $5 million in seed funding to revolutionize artist-fan interactions through mobile wallet technology. By leveraging AI-driven analytics, Sesh aims to tap into the $34.5 billion superfan economy.

Crete Professionals Alliance

With backing from Thrive Capital, Crete is executing a $500 million roll-up strategy in the accounting sector, integrating AI to enhance operational efficiency across its acquisitions.

Merlin Ventures

Merlin Ventures has launched a $75 million fund focused on early-stage cybersecurity startups, particularly those in Israel. Their strategy includes preparing these companies for U.S. government contracts, capitalizing on the growing demand for cybersecurity solutions.

Sarvam AI

Sarvam AI, an Indian startup, raised $41 million in Series A funding to develop large language models tailored for Indian languages. Their focus on regional language processing positions them uniquely in the AI landscape.

Strategic Implications for Investors

• Sector Focus: Investors should consider increasing allocations to AI and climate tech sectors, given their robust funding and growth trajectories.

• Diversified Funding Participation: Engaging with micro-VCs, angel syndicates, and alternative funding platforms can provide early access to high-potential startups.

• Liquidity Planning: Utilizing secondary markets can offer timely liquidity options amidst uncertain IPO landscapes.

• Global Opportunities: Exploring international markets, particularly in regions like Israel and India, can uncover innovative startups with scalable solutions.

Conclusion

The venture capital environment in 2025 presents a dynamic mix of opportunities and challenges. By staying attuned to emerging trends and adopting a diversified investment approach, investors can position themselves to capitalize on the evolving startup ecosystem.