A Note From the Redbud VC Team

It may be the start of “let’s loop back after the holidays,” but us and our VC friends are still investing. That said, what may be cringier than a routine holiday email to punt a meeting eight weeks is a VC website that says founder first or not like other VCs. OpenAI’s flagship product, ChatGPT, celebrated its 2nd birthday this month, entering with a series of copyright lawsuits and controversies. Coupled with Elon Musk’s critiques, OpenAI has faced a turbulent two years since ChatGPT’s release -maybe year 3 will be better? Outside of OpenAI, AI remains the lifeblood of venture markets, with investors pouring over $40B into startups in Q3, most of which are going into AI. While that’s a 10% decline from Q2, it marks a 14% increase year-over-year, largely thanks to late-stage AI startups shouldering the funding momentum. Americans broke online shopping records this Black Friday, and Bitcoin enthusiasts are holding their breath as the cryptocurrency inches closer to the $100K milestone. As we enter the year's final month, we’re still looking to make a few more investments. If you’re ready, pitch us here!

Redbud VC invests monetary ($50k-$150k) and social capital in early-stage tech founders. We bring monthly Redbud VC, tech, and economics updates. - We've filtered thousands of sources for our 14k+ readers, so you don't have to. Enjoy🥂

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What VC doesn’t have a cringe website? If you have “founder first,” a podcast, hobbies listed, “the best way to predict the future is to invent it,” specialized in about every industry, “your investment partner regardless of age,” and/or “not like other VCs,” you might get triggered by Redpoint’s satire. 🤡 

🔥 Burning question of the month 🔥

📈 Macro Trend Report

• IPOs |  Buy-now-pay-later behemoth Klarna filed confidentially for their US IPO. The company is based in Sweden and looked at several public markets before privately filing its prospectus with the SEC. At its peak, Klarna was valued at $46B, but its most recent raise was priced at $6.7B, an 85% haircut.😬 The company is looking to go public at a $15B valuation. ServiceTitan also filed for their IPO this month. In 2022, the company agreed to a deal term with a deadline to go public by May 2024. As ZIRP companies start to move toward going public, many of them aren’t moving on their own; they’re being pushed. The “compounding IPO ratchet structure” that was exposed in Service Titan’s S1 filing is likely to be seen in other S1s in the future. Below are the expected 2025 IPOs by RepVue:

• AI | ChatGPT had its 2nd birthday, marking its public launch, and as a birthday present, OpenAI received yet another lawsuit.🎁 In Canada, a coalition of news and media organizations filed a lawsuit against OpenAI, accusing the company of copyright infringement and “unjust enrichment” at the expense of writers. Add that lawsuit to the pile of other suits from major entities, including The New York Times, New York Daily News, YouTube creators, and, of course, Sarah Silverman. OpenAI has consistently defended its practices, saying that its models are "trained on publicly available data, grounded in fair use and international copyright principles that are fair to creators and support innovation." Beyond copyright disputes, Elon Musk has filed for a preliminary injunction against OpenAI, several of its co-founders, and Microsoft. Musk’s legal team alleges anticompetitive behavior, claiming that OpenAI and Microsoft are unlawfully sharing proprietary information and resources. Sharing is caring right? Musk is also accusing OpenAI CEO Sam Altman of engaging in self-dealing practices. For example, OpenAI uses Stripe as its payment processor. Altman is a significant investor in Stripe and has made billions from his investments… Outside of legal battles, a secondary sale of OpenAI shares is in the works. he company will allow employees to sell $1.5 billion worth of shares to SoftBank. SoftBank, which previously invested $500 million in OpenAI’s most recent funding round, is seeking to acquire some employee shares to snag a larger stake in the company.

• VENTURE CAPITAL | This past quarter was a quirky one for North American startup funding. While some areas slowed down, the hype around AI kept the funding alive. Investors poured $40.5B into startups across all stages, down 10% from the prior quarter but up 14% compared to last year. The action was most notable at the late-stage level, which saw $23.8 billion in deals - a 28% jump from Q2. Early-stage funding, on the other hand, dipped 39% quarter-over-quarter, landing at $13.5 billion, though it’s still up 16% from a year ago. Big checks made big waves in Q3: Alphabet’s $5 billion investment in Waymo and Anduril’s $1.5 billion Series F helped boost numbers. Clio, a legal tools platform from Vancouver, also closed a $900 million Series F at a $3 billion valuation. Meanwhile, valuations for hot sectors like AI are soaring, leaving venture funds scrambling for dry powder and circling back to LPs as distributions remain elusive. Even Sequoia Capital got in on the action, marking up its 2020 US flagship venture fund by nearly 25% over the past year. It’s a mixed bag for startups and investors alike, with growth in some corners and belt-tightening in others.

Check out The VC List to search over 18k investors by 🪜 stage, 🔮 thesis, and 🌎️ geo

💰 Micro Trends

• BITCOIN IS BACK? | Bitcoin is making a comeback (for real this time). The coin surged in value this month following the results of the US presidential election and is now flirting with the $100k per Bitcoin threshold. This is the 1st “real” resurgence of Bitcoin since March of 2021, a period that preceded the blow-up of FTX and a market crash. Bitcoin has had its highs and lows this year, but over the past 2 months, Bitcoin’s market cap has skyrocketed to $2T, arbitrarily rivaling that of Google. Those bullish on Bitcoin predict it to surpass the $100k mark and double by the end of 2025. Skeptics say another crash is bound to happen. We’ll be watching 👀
  

  

• BLACK FRIDAY | While we may no longer see lines snaking outside stores at 3 a.m. or chaotic Walmart brawls over flat screens, Black Friday weekend still managed to hit a record $74.4B in online sales, a 5% increase from last year. Adobe and Salesforce reported differing figures for Friday alone, with total online spending estimated at $10.5 billion and $17.5 billion, respectively. 🎁Adobe highlighted that 55% of all online purchases were made on mobile devices, totaling $5.9 billion - a 12.1% year-over-year increase. From 10 a.m. to 2 p.m. on Friday, $11.3 million was spent online every minute. The record-breaking consumer spending is a positive economic signal as we wrap up 2024.

• SPOTIFY WRAPPED | 18 years in the making…Spotify is on track to record its 1st year of profitability, just in time for Spotify Wrapped screenshots to be posted to all of your friend’s Instagram stories. Behind the big year was Spotify increasing their margins from just 15.7% in 2017 to 31.1% in 2024. Despite other big names in the market like Apple, Youtube, etc. Spotify has accelerated thier monthly active users, growing 11% year-over-year to 640 million, and its paid subscriber count hit 252 million this year. While the profitability can’t all be attributed to user growth, as Spotify still had a mass layoff, a sharp cut in marketing budget, and a price hike of its paid premium plan, the ship is headed in the right direction (profitable). 

📰 Middle America Headline of the Month

Chicago Ventures announced the closing of $80M across CV Fund IV and CV Opportunity Fund to continue investing in early-stage startups.

The firm has backed 117 companies across four funds thus far. 🚀

💰 Flyover Deals

A good mix of round sizes, geographies, and industries across funding rounds this month 🚀

• Check out the 145 flyover deals for over $1.6B in funding we tracked here, down 24% MoM

• Kansas City-based Raven Space Systems closed a $2M Pre-Seed round

• Des Moines-based Roboflow closed a $40M Series B round led by Google Ventures

• Cold, a Minneapolis-based sustainability compliance platform, raised a $2.7M Seed Round

• Dayton-based UNLISTED closed a $3M Seed Round

• Small business marketplace SMB raised a $1M Pre-Seed round based in Cincinnati

• Indiana-based Quantum Corridor raised a $10M Series A

• AI and Health were the themes of Chicago-based funding rounds

  • Synapticure closed a $25M Series A

  • Cofactor raised a $4M Seed Round

  • Zarminali Health raised a $40M Seed led by General Catalyst

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri fell this month to 3.8%, still well below the National Average of 4.1% ✅

• The Midwest Consumer Price Index rose slightly this month at 3.6%, below the national rate of 3.8% ✅ 

🧠 This Month's Recommendations

📚 What We’re Reading

• The Story of Looker: 216-Word Pitch Email into a $2.6 Billion Acquisition

• Time Magazine’s 200 Best Inventions of 2024

• Constraints on artificial intelligence in 2025

🎧 What We’re Listening To

• Jensen Huang on how to use First Principals thinking to drive decisions [58 min]

• From growth to hyper-growth ➡️ how DataDog’s CRO, Dan Fougere, grew revenue from $60M ARR to $1B ARR [1hr 10 min]

• Why inception investing beats Seed investing with Ed Sim of Boldstart [55 min]

📆 What We’re Doing

• Spent a few wonderful days in Kansas City at MidxMidwest hosted by our friends at Flyover Capital. It's always great to see the companies and founders in our backyard. ✈️

• Made it out to San Fransisco for Sierra Venture’s Emerging Managers Summit.

• We hosted our 2nd Annual Redbud VC Friends & Founders Tailgate this weekend as Mizzou took on Arkansas. We braved the snow to grill up some burgers and watch a tiger win! 🐅
  

🪝Outside Main Hubs: Picks of the Month

🚀 Redbud Highlights

We dug into the differences between generalists and specialist funds this quarter.

Check out our thoughts, the data, and our analysis below.

🛠️ Resources

• Need some examples? Check out these 50 pitch deck examples from successful fintech startups

• ➡️ +200 Non-VC Funding Sources for SaaS Founders

• Thinking of rasing some capital? Here’s the Due Diligence Checklist every founder should see  👀

• YC's essential startup advice

• Brian Chesky on when to hire 🧍🏼‍♀️

• Metrics 101: What VCs look at while evaluating startups

• Get started to build an outbound sales motion with these 130 SaaS Cold Email Templates

• 🤖 Why code is no longer a moat

• A list of low/no code tools to get your company off the ground 🚀

• Marc Andreessen on how to hire the best people

• The complete guide on How to Interview and Hire ML/AI Engineers (one of our favorite reads on hiring out there)

• One of the largest VC lists with over 18k investors 🫰 

• Founder who 120 VCs—he closed $2.7M in 5 weeks with demand for $5M+. Here's his step-by-step guide to close a round. 💰

• 📊 All-In-One Startup Metrics Guide - What to track, when and why

• Resource page for founders we made here 📒

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The information provided in this newsletter is intended for general understanding and educational purposes only, not as a guide to investment decisions. The authors, publishers, and distributors of this newsletter are not licensed financial advisors and are not providing financial advice or investment advisory services.s