Let's dive deeper into what is trending this past week in startups!
🌟 Editor's Note
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🎯 BLUF: Bottom Line Upfront
Peter Walker’s AI Fundraising Trends: ARR per FTE is the hot metric, bridge rounds and “seedstrapping” are on the rise, and AI deal sizes are surging despite less deals overall.
Perplexity Labs Launch: Turn ideas into reports, dashboards, or mini apps in minutes, perfect for prototyping pitch decks or automating deep research.
Claude 4 is Out: Claude Opus 4 is crushing the industry-leading SWE-benchmarks, while Sonnet 4 is perfect for everyday tasks.
AI-Driven Job Loss Warning: Anthropic’s CEO warns AI could replace 50% of entry-level white-collar jobs within 5 years, with tech layoffs already topping 62,000 in 2025.
SF Office Revival from AI Boom: AI startups are reversing SF’s office slump, leasing millions of square feet and potentially halving vacancy rates by 2030.
Sus State AI Usage Report: The California gov claims zero “high-risk” AI use across 200+ state agencies, which is questionable given the state’s history.
🔥 Quick Highlights from Me
Yesterday: Thanks to everyone who came to our first morning coffee event! We’ll send out the video soon for the live AdvancingVC podcast. Check out the LinkedIn Post!
Caffeine & Capital: We'll be hosting another morning event on June 18 for more coffee and conversations in two weeks. Sign up on Luma!
WorkTech Pitch Night: Join us on June 30 for an exciting pitch night featuring hot startups revolutionizing work productivity, hiring, and performance. Sign up on Luma!
🔍 Sobering Insights from Peter Walker on AI Fundraising Trends
Last Thursday, I attended an incredible talk by Peter Walker, Head of Insights at Carta, at Inception Studio. Peter delved into the latest trends in fundraising and AI:
📉 What Do Funding Rounds Look Like?
Decline in Seed-to-Series A graduation: Only 15.4% of companies that raised a Seed round in Q1 2022 advanced to Series A within two years, down from 30.6% for the Q1 2018 cohort. Competition is tighter, and investors are far more selective.
Extended funding timelines: Fundraising timelines are getting longer as the typical 18-24 month cadence is breaking down. Some founders aren’t raising again cause they can’t. Others aren't, because they don’t need to.
Prevalence of bridge rounds: In Q1 2024, 42% of seed-stage investments were bridge or extension rounds, marking the highest percentage in over a decade. Startups are trying to buy time.
Emergence of ‘seedstrapping’: Founders are increasingly raising modest initial rounds ($1-$5M), aiming for profitability and scalability without more funding, a trend known as ‘seedstrapping.’
🚀 How Does AI Fit In?
AI investment surge: Global AI startup funding reached $100 billion in 2024, an 80% increase from the previous year. “AI isn’t a category. It’s a theme that cuts through every sector.”
Fewer deals, higher valuations in AI: The average AI deal size in 2024 increased to $28.9 million, up 55% from $18.6 million in 2023. If investors want you, they’ll pay, but they’re funding fewer startups overall.
SF still dominates AI venture capital: The Bay Area pulls in 50% of early-stage AI funding and 75% of late-stage AI capital. If you’re raising in AI, this is still the place to be.
Reduced hiring in startups: Seed-funded startups averaged 5.3 employees in H1 2024, down from 6.9 three years prior. Startups are delaying making that first hire as AI tools are now doing what used to require full teams.
🌱 How Are Startups Built Today?
Teams are leaner across the board: In 2022, Series A startups had around 22 employees. In 2024, it’s down to 15. For AI startups, just 12. Small, fast, and capital-efficient is the new standard.
ARR per FTE is the new investor metric: Know it! It is revenue generated per full-time employee (FTE). Efficiency now, more than ever, is how well you leverage both capital and AI.
Option pools are shrinking: Founders are reserving less equity for hiring, with 6-8% instead of the typical 10-20%, because they don’t need as many people. Or any yet.
Fewer startup winners are raising, but they’re raising bigger as valuations are way up. But only a narrow slice of startups are getting funded. If you get into that group, the upside seems way larger.
🧠 Major AI Drops: Perplexity Labs & Claude 4
🧪 Perplexity Labs: Your AI Project Partner
Perplexity AI has launched Perplexity Labs, a powerful tool for Pro subscribers that takes ideas and turns them into comprehensive reports, dashboards, and even mini web apps. It can do in-depth research and analysis in about 10 minutes!
✅ Try it out to rapidly prototype investor pitch decks, automate market research reports, or develop interactive dashboards for your startup!
🤖 Claude 4: Your Full-Time Coding Teammate
Anthropic’s Claude Opus 4 has set a new benchmark by autonomously coding for over 7 hours, achieving a 72.5% score on the SWE-bench, surpassing GPT-4.1’s 54.6%. They also introduced Claude Code to give you AI across the entire product development cycle.
✅ Use Sonnet 4 for everyday work, such as emails and summarizing, while deploying Opus 4 for deep work, such as code refactoring or in-depth analysis.
🌉 California at the Crossroads: AI, Jobs, and Real Estate
⚠️ Anthropic CEO Warns of AI-Driven Job Displacement
Dario Amodei, CEO of Anthropic, stated that AI could eliminate up to 50% of entry-level white-collar jobs within the next five years, potentially leading to unemployment rates exceeding 10%. Already in 2025, over 62,000 employees have been laid off across tech, including at Google, Microsoft, and Intel.
🏢 AI Startups Revitalize San Francisco’s Office Market
Previously struggling with high vacancy rates, SF’s office market is experiencing a resurgence driven by AI. In the past five years, AI tech companies have leased more than 5M square feet of office space in the city. They are projected to occupy up to 16M square feet by 2030, which would drop the city’s vacancy rate from 35.8% to 16%.
🕵️ California Reports No High-Risk AI Use in Government Agencies
A recent report from the California DoT states that nearly 200 state agencies reported no use of high-risk AI and algorithms in their systems. This finding is a little suspect and probably underestimates the use of AI in the state gov, given the state’s history of using it in unemployment and criminal justice.
💸 What Other Startups are Popping Off
Here’s a roundup of trending startup activity this week:
🧠 AI Productivity & Collaboration
Den: Slack meets Notion to create an AI agent workspace merging chat, docs, and agents to streamline team collaboration.
Wispr Flow for iOS: Get this voice-powered dictation app to write 3x faster.
Tyce: Think Cursor meets Google Docs to get an AI agent that writes and edits.
Amie: Oh no, not another AI note-taker, but it claims to help you get better at your job.
🚀 App Deployment
Appwrite Sites: This open-source, all-in-one development platform is entering a crowded space to challenge Vercel for the throne.
Macaly: Use AI to turn your spoken or written ideas into working apps.
🗣️ People & Company Insights
🧢 AI Ads & Shopping
Lookverse.ai: Need personalized shopping recs or new items for your wardrobe? There’s an app for that.
JoggAI: This AI ad platform helps you create ads quickly from images.
💭 Closing Thoughts
That’s a wrap for this Thursday! Whether you're building, investing, or just exploring the AI space, we hope these stories sparked new ideas. Catch you next week with more updates from the Bay Area's fast-moving startup scene.
Till next time,
Dev Chandra
CEO @ Startup Intros
Associate @ Context VC
LinkedIn: /in/devchandra
Tim Hsia
Investor @ Context VC
Co-Founder @ Startup Intros
LinkedIn: /in/timhsia
P.S. Join us in two weeks at Caffeine & Capital. It'll be a chill gathering, so stop in for coffee, croissants, or to chat about funding. Sign up here!
P.S.S. Raised this week, and we missed you? Want to be featured? Have tips or funding questions? Reply or DM us as we’re here to help.
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