In the past, you'd have different people playing in different slices of capital—pre-seed, seed, angels, then venture, then growth equity. But now, what happens if a startup only needs to raise two rounds?
As 2025 kicks off, the investment outlook is seeing positive tailwinds. As of now, some experts are saying we won't be expecting a full-fledged VC rebound, but a transformation in how startups are funded is on the horizon.
According to Amar Rathor, venture partner with a corporate venture fund for ANZ Bank, AI is reshaping startup funding and early-stage investment activity is picking up, with Fintech at the forefront of investors' minds. However, traditional VC may still be in for a longer wait before they return to previous highs.
Bouncing back: In response to chatter that 2025 could be a rebound year, Rathor says, "I think it's more of a startup and funding rebound versus a real VC rebound. We're a little way away from a VC rebound, and I think we still have to sort of see how AI disrupts the whole startup funding space."
The emergence of AI is enabling entrepreneurs to launch and scale businesses with significantly less capital than before. By leveraging automation, AI-driven startups can operate with fewer employees, require fewer funding rounds, and target niche markets in a way that was previously impossible. This shift is redefining the traditional funding playbook, making capital-light models more viable than ever.
Capital round disruption: One of the biggest changes in the investment world is how capital is being distributed. "In the past, you'd have different people playing in different slices of capital—pre-seed, seed, angels, then venture, then growth equity," Rathor explains. "But now, what happens if a startup only needs to raise two rounds?"
While the ecosystem isn’t quite there yet, some founders are already choosing to build leaner, more focused companies with minimal funding. This raises important questions about the long-term role of venture capital. If startups can thrive on less capital, does the traditional VC model shrink, or does funding get distributed across a larger number of smaller companies? Additionally, with fewer rounds of fundraising, consolidation and M&A activity may become the dominant exit strategy over IPOs.
The fact that the deals are happening at a faster pace is a healthy sign for the ecosystem.
Momentum in Fintech: Despite uncertainty in the broader VC market, early-stage investments are already gaining momentum, particularly in fintech. "We’re seeing early-stage activity pick up already, at least in the fintech space," Rathor notes. While AI is playing a role across all industries, fintech startups have been among the quickest to adopt it, integrating generative AI into their workflows to drive efficiency and growth.
"Klarna has already been a public use case or a case study to see the sort of way a firm can deploy AI agents," he says, highlighting the growing importance of AI-powered automation in financial services. Meanwhile, M&A deals are showing signs of life, hinting at possible exit opportunities for startups, though IPO activity remains sluggish. "The fact that the deals are happening at a faster pace is a healthy sign for the ecosystem," Rathor adds, even if valuations are nowhere near the highs of 2021.
Horizontal movement: Beyond fintech, AI’s influence is undeniable across industries. "AI is horizontal. There is no business that is not touched by AI, at least in the startup world," Rathor observes. Whether in e-commerce, payments, or enterprise software, startups are finding ways to integrate AI into their operations, which is now determining who dominates in a given industry. According to Rathor, AI’s adoption and strengthening influence is now reshaping how investors assess opportunities—companies that fail to incorporate AI into their business models may struggle to compete for funding.
