“2024 was just a transitional episode, just getting us to ‘25,” Adrian Mendoza, founder and general partner at Mendoza Ventures, said. “People were waiting for elections, waiting for the other shoe to drop. … Post-election this year, things picked up out of the blue.”
While December is typically a quiet month for startups and venture capital, Mendoza’s firm was approached by three large investors in the past two weeks wanting to invest. VC funds typically raise money from pension funds, endowments, and wealthy individuals. “My second week of January is already full, and I’m just like, wow, that’s not normal in this industry,” he said.
Sarah Hodges, managing Partner at Pillar VC, said she is also seeing increased activity from established tech companies wanting to buy AI startups, a trend the incoming Trump administration is expected to favor far more than the outgoing administration.
“We’re feeling quite optimistic heading into 2025,” she said. “A movement is emerging at the intersection of AI and science that will power the next wave of innovation.”
Most of the backing for AI startups in 2024 went to companies developing their own large language models and based on the West Coast, led by ChatGPT developer OpenAI, which raised almost $7 billion in October. Massachusetts AI startups, even including Liquid AI’s $250 million deal in December, trailed far behind in the money race.
Still, the situation should improve in 2025 as AI applications come to the fore. Massachusetts has a long history of developing business software firms, from Lotus Development in the 1980s to HubSpot and Toast more recently.
Businesses from life sciences to finance and insurance are starting to see more promise in putting AI to work, Lily Lyman, an investing partner at Underscore VC, said. “Last year we saw a lot of pilots and a lot of [companies] recognizing that they need to adopt AI and have an AI strategy,” Lyman said. “I think 2025 will see a lot more widespread adoption.”
Massachusetts legislators approved an economic development bill in November that included $100 million for a new “AI hub” that will be based at the existing quasi-public agency the Massachusetts Technology Collaborative, headquartered in Boston. And the incoming Trump administration has plans to take a more free market approach to AI, cutting back some of the Biden administration’s efforts to regulate the new technology.
Lyman called the $100 million “a great first step,” which she compared to the $1 billion state funding for life sciences adopted in 2008 that helped make Boston a leader in that area. “There’s a lot more that we can do, but the good news is we have a good blueprint of how it was done for biotech,” she said.
Amid the expected pickup in activity, one Boston AI entrepreneur wants to remind everyone in the startup ecosystem to maintain a healthy state of mind. Rana el Kaliouby, the cofounder of AI firm Affectiva who started VC firm Blue Tulip Ventures this year, wrote a LinkedIn post on Monday that she headlined “Choosing Aliveness Over Adrenaline.”
“In a world where AI innovations are accelerating, it’s easy to have FOMO all the time and feel the pressure to do more, be more, achieve more,” el Kaliouby said in an email to me. She wrote the post as a reminder “that we don’t have to live in that constant state of chasing,” she said. “Slowing down, listening to our intuition, and focusing on what fuels us rather than depletes us is a way to reclaim our aliveness.”
Aaron Pressman can be reached at [email protected]. Follow him @ampressman.