AI Founders Can’t Raise Like They Used To — What’s Changed in 2025?
In 2023 and 2024, AI startups were the belle of the ball. Founders raised massive rounds with little more than a flashy demo and a Stanford pedigree. But in 2025, the vibe has changed. Investors are no longer chasing “the next OpenAI” — they’re demanding business models, defensibility, and differentiation.
In today’s edition, we break down what’s behind the AI investment cool-down, highlight a couple of breakout rounds in unexpected categories, and analyze a quiet shift in VC behavior: firm concentration is increasing as top-tier funds double down on their winners.
Plus, we go deep on the trend of VCs taking board seats again — after years of “founder friendliness,” why are investors stepping back in with more control?
📰 Trends & Headlines
📉 AI Funding: The Plateau Is Real
CB Insights reports that AI startup funding dropped 23% QoQ in Q1 2025 — the first consecutive decline since 2022. Investors are getting pickier, especially around LLM-adjacent startups. Vertical AI (e.g., AI for radiology or compliance) is still hot, but generalist plays are struggling to stand out.
📈 Vertical SaaS Is Having a Moment Again
Two years ago, everyone said vertical SaaS was boring. Now, it's back in style. This week, Cultivate, a CRM for farm operators, raised a $40M Series B led by Index Ventures. It’s not sexy, but it’s profitable — and that’s what VCs want in 2025.
🧠 The Return of “Stealth” is Real
More early-stage startups are staying under the radar for longer, avoiding the LinkedIn launch parade. Why? Competition in AI and infrastructure is brutal, and teams want time to refine before the noise starts. Expect more startups to go from zero to Series A before you even hear about them.
💬 Spotted on Twitter
1. Sarah Guo (@saranormous):
"Product defensibility matters more than ever. 2025 is the year we stop funding demos and start funding businesses."
— Guo, founder of Conviction VC, echoes what we’re hearing across the board: the bar for seed rounds has risen dramatically. Investors are scrutinizing traction, not just tech.
2. Gokul Rajaram (@gokulr):
"The best vertical SaaS companies start as workflow tools, then become financial infrastructure."
— This take is spot on. The new generation of vertical SaaS is monetizing not just software, but embedded fintech. Think Toast, but for freight, farms, and funeral homes.
3. Jason Lemkin (@jasonlk):
"Founders: stop being scared of 'control provisions' from VCs. The best investors already influence the outcome — whether on paper or not."
— Jason is hinting at a deeper shift: investors are becoming more hands-on again. Board seats, veto rights, and performance clauses are back in vogue.
🔎 Deep Dive / Analysis
Why VCs Are Taking Back Control — And What It Means for Founders.
The days of "founder-first" everything might be behind us. In 2021–2023, it was common to see seed and Series A deals without board seats, with minimal governance, and with VCs competing on how hands-off they could be.
But something's shifting in 2025. The top-tier firms — think Benchmark, Sequoia, and a16z — are tightening their grip. They're not just writing checks; they’re taking board seats earlier, demanding clearer KPIs, and actively influencing hiring decisions. What’s driving this renewed appetite for control? And what does it mean for how founders should approach their next fundraise?