2025 VC Survey“2025 is going to continue the trend of building great new revolutionary AI infrastructure”
2025 VC Survey
“2025 is going to continue the trend of building great new revolutionary AI infrastructure”
Tal Slobodkin from StageOne Ventures is the latest investor to share insights for CTech’s 2025 VC Survey.
“We're in the period of AI and there are many different ways to look at it. 2025 is going to continue the trend of building great new revolutionary AI infrastructure,” explained Tal Slobodkin, Managing Parter at StageOne Ventures. “We see tons of new AI applications coming in as different pieces of the businesses of those enterprises. And we think these could be very meaningful.”
StageOne Ventures invests in Seed-stage companies where they help scout, write the first checks, and scale promising startups. Slobodkin has joined CTech to share insights on what he thinks next year will look like.
Also, cyber just keeps knocking it out of the park because we have such a great talent pool and infrastructure here to create meaningful companies. In that regard, we think that's going to be another area which continues to trend positively.
Fund ID
Name of fund/funds: 5
Total sum of the fund: $500M
Partners: Tal Slobodkin, Yuval Cohen and Nate Meir
Notable/select portfolio companies (active): 29
Notable exits: 20
2024 is almost over. How can you summarize it in terms of the Israeli high-tech industry?
I believe we can divide 2024 into two parts; the first half of the year, and the second half of the year. The first half was a continuation of the end of 2023, the October 7th war, a meaningful slowdown in new company creation, significantly fewer companies coming in, and many people in reserve duty within our portfolio.
I think this flipped around during summertime when we started seeing people going back to their companies and going back to creating companies. Although there are still many people in reserve within the hi-tech industry, we've seen the rate of company creation going up as well as MNCs back to acquiring companies here in Israel and investing in others… the second half of the year is where things started picking up meaningfully, showing the resilience of Israel, where no matter what we continue to both protect the country and drive forward the startup nation what the ecosystem that has been built all these years
Looking ahead to 2025 - What challenges and opportunities await the Israeli high-tech sector in the coming year, and how are you, as investors, preparing for them?
We witnessed a big reset in 2023, and 2024 globally as an aftermath of the big hype and bubble of 2021 and 2022. We’re reaching a point where this sense of reset has fully taken its effect in the markets.
We believe this is generally a positive trend, and have seen a meaningful slowdown in the A and B rounds over those two years, however, we believe that these are going to start picking up again next year. We are already witnessing meaningful growth with the series seed and pre-seed companies coming in, and believe that's going to continue toward 2025. On a positive note, I think seed funding has continued to progress well. Hopefully, we're going to see later stages catching up and starting to pick up activities as well.
From the perspective of the challenges we’re facing, we need to get things sorted out in Israel. High-tech has been a real driver for the Israeli economy. But at the end of the day, we need to see the war ending and the economy picking up again. That's going to have a meaningful impact when it happens.
But until we solve this, there are challenges, even if some of them are very basic. As an example, fewer airlines flying to Israel right now creates an issue for global CEOs who are traveling and need to be out there.
From a tech perspective, we haven't seen the bounce in Series A and B rounds yet. We're hoping to see this soon, and we're starting to see positive signs both in our portfolio and in general. Hopefully, this will happen in early 2025 and we can get the train back on track and moving fast.
How will new American leadership affect the global high-tech industry or economy? And where does this place Israel and its entrepreneurs?
The new administration has been talking about relaxing some of the anti-trust issues, and making M&A easier in order to help companies grow and become successful. When this environment kicks in, it should be positive for Israeli companies as these are traditionally on the acquired side.
Helping the big acquirers spend more money globally usually drives M&A initially, and trickles down to almost everywhere in the ecosystem. At the very top level, that's probably a positive, but time will tell.
What are the three most important things the Israeli government should do today to accelerate the high-tech engine in the coming year?
I believe that first and foremost the economy needs to be a very easy environment for the tech industry, and for tech companies to strive, thrive, and do well, both on the operations side and employee side.
That includes reducing some of the barriers around flying in and out of Israel. We're seeing a lot of uncertainty around where the judicial system is going in the next few years. Foreign inquirers are afraid of a situation where there is a lot of uncertainty around the judicial system.
I also believe that people are very worried about the budget and where the local Israel deficit is going to be. In that sense, if we foresee a situation where there's going to be a meaningful budget deficit that will result in higher taxation, this would likely have negative impact on the tech ecosystem. And usually, that’s not a very positive trend for these companies.
Are there new sectors you see as relevant? Are there any fields you anticipate will weaken significantly in the coming year?
We're in the period of AI and there are many different ways to look at it. 2025 is going to continue the trend of building great new revolutionary AI infrastructure. We see tons of new AI applications coming in as different pieces of the businesses of those enterprises. And we think these could be very meaningful.
People talk about agentic AI, creating those AI agents to drive processes forward, but we already have a few companies that are doing this, even before the term “agentic AI” was coined.
Also, cyber just keeps knocking it out of the park because we have such a great talent pool and infrastructure here to create meaningful companies. In that regard, we think that's going to be another area which continues to trend positively.
Regarding areas that may slow down, that’s always a tough question because it's a surprise.
I believe consumer would continue to be a slow segment in Israel. Another segment is hospitality, where people believed it could pick up after COVID but that has not been the case. Lastly, people were talking about physical IoT, and real-world startups, but we haven't seen them becoming as successful as we hoped.
Quantum computing is also worth mentioning. We have one quantum computing investment, a company called “Quantum Art” and believe that it’s going to be very meaningful as this market shapes. This is a longer horizon path for us… if AI is a year or two years out, quantum computing is three to five years out.
Is Israel missing out on the AI revolution in the global arms race? If not, what should the local industry focus on to join the global race?
If I could be slightly controversial, I would disagree with this statement. I think Israel is not missing out, and that we have great companies in this space.
We have companies building real presence, and one of the areas we're not focused on is perhaps building large foundational models. Frankly, they are just very expensive, very hard to execute, and not necessarily the right place for us to bet.
If you take us back 20 years, we weren't building any Nokia's or Cisco's because it didn't make sense to go and build large companies building big boxes that are very expensive. In this case, it's the big models that are very expensive.
With that, however, in the entire ecosystem, both from the infrastructure perspective as well as from the application perspective, we're doing really well. We see great talent, and we see the universities collaborating in this area… so, I'm actually very positive.
Could the global IPO drought end in the coming year?
I believe it will, and that there are a few companies that are in the pipeline that are eager to go out, and 2025 would be a good year for them. If I had to bet, my guess would be in Q3. (The best will be Q2 and others will be Q3, and I think the market is just waiting for this.)
I speak with colleagues in later-stage growth and crossover funds and they're all on the sidelines with tons of fresh powder to invest, looking for those companies. You just need this momentum to flip to where companies start going out, so I believe we'll see the beginning of this in 2025 and then we'll see this maturing to be more pervasive in 2026. At StageOne specifically, we have a few companies entering this pipeline, hopefully going public in 2026 and 2027.
From an investor's perspective: will the coming year be better for early-stage startups or more mature companies?
It's very hard to compare those two markets because many times they trend differently. We’ve already started the recovery in the earlier stages, and next year I envision this recovery continuing and gaining more momentum and acceleration. For the later stages, we haven't seen this recovery happening yet, so, I'd love to see this picking up.
It is ripe for this market to pick up again as well. What's going to be better? Maybe on a per dollar, maybe on a relative scale, growth will take a bigger leap just because they're in a lower spot right now. But regarding both markets, I'm actually very positive about 2025.
Did you raise fund money in 2024 for an existing fund or a new one? What are your expectations regarding this matter for 2025?
We operate on a four-year fundraising cycle without latest fund launched in 2022. It ended up being an overly subscribed fund, with additional fresh capital designated for our Opportunity fund (launched side-by-side).
How many investments did you make in 2024, and how does it compare to previous years?
In 2024 we did four investments already, and we think we might do a fifth as well. This is slightly higher than our average, but also, significantly higher than 2023, which for us was just a little bit of a recovery year from 2022. I'll be very honest and state that at StageOne, we try to be very focused, disciplined, and committed to our strategy.
That strategy means stretching our investment period to about four years, and making four to five investments per year. I do not see us diverting from this significantly, as making four to five investments per year is exactly where we want to be.
Provide an example of an intriguing investment you made in 2024. What sets this company apart, or what is distinctive about its sector?
One of our new investments for the year is Siit, our first investment ever in Europe. Siit empowers IT, HR, and Operations with the ability to handle and resolve internal requests effectively. By introducing the first dedicated internal help desk, they’ve made it possible to optimize internal processes and boost productivity.
This startup allows its customers to receive and manage employee requests and communications through their existing channels such as Slack, Teams, emails, etc. With the ability to automate manual tasks and analyze their actions, Siit gives their customers the ability to shape their employee support experience.
We were also lucky enough to invest in a repeat team, a company called Backline. It’s built by the founders of a company called Apolicy which we invested in one of our previous funds. They were acquired by Sysdig, spent a few years in retention over there, left, and just started Backline. They're focusing on AI-driven automatic remediation.
They’re just a great team, it’s the third company for these guys who are also spread across multiple geographies. The CEO is in Palo Alto, the Chief Product Officer is in New York, and the R&D is here in Israel. They are really set up well for success in a high-growth market, so we're excited about them as well.
Two notable companies that you think will thrive in 2025.
Company Name: Second Nature
Sector + description of the product/service: Second Nature’s sales training software provides a “virtual pitch partner” that uses conversational AI to have actual discussions with sales reps, scores them, and helps them improve on their own so that they can ace every sales call.
Investment amount + total: 15.5M
Founding Year: 2018
Reasoning why this is their year: With Second Nature, 2024 has been such an incredible year for them. They're probably going to end up almost 3X from what they did in 2023. A part of it is because their technology is an AI-based agent that helps you practice your sales pitch and helps salespeople improve as well. It also provides the organization with a little more understanding of how their salespeople work.
It's not only that the technology has reached the right maturity and the right enterprise-level readiness, it’s also the year organizations are starting to adapt this AI-based technology on a big scale. Also, the customers that they have been bringing on 2024 are just phenomenal and they include multiple Fortune 50 companies deploying this on a very big scale. We believe that this momentum is going to continue through 2025.
Company Name: Entro Security
Sector + description of the product/service: Entro Security provides holistic secret management and protection, offering visibility, control, and protection for secrets. With the Entro Security platform, CISOs and cybersecurity professionals can ensure uncompromised security and compliance. Benefits include reduced risk, improved compliance, and increased efficiency.
Investment amount + total: 24M
Founding Year: 2022
Reasoning why this is their year: Entro Security is a bit younger and focused on security. We think it's their breakout year because they're hitting the point where they're moving away from pre-market fit to post-market fit. They're building this great technology around non-human identity security. This market is really booming right now with tons of interest from customers suffering from these issues, but also different players trying to build their solutions. And Entro is just very well positioned for this. So, we think 2025 is going to be the breakout year for them as they're bringing tons of value to that space.
