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A Note From the Redbud VC Team

DeepSeek launched, causing US stocks to take a hit until everyone realized the security risks. DeepSeek has given US LLM companies a reality check after building a model nearly as good as OpenAI in two months and $6M (even though they may have stolen data and AI chips). Many are swapping their thesis that LLMs have the moat vs. AI wrappers, but it’s really about the customers and data you can quickly acquire with vertical solutions. Regardless, AI agents are about to eat the world. As agents replace jobs, the debate is now whether unemployment goes up or (as history usually repeats itself) humans will be forced to become more efficient, increasing society's output with new jobs. Some engineers may be replaced, but everyone can build software now, which is why platforms like Lovable scaled to $10M ARR in 8 weeks. One of the most overlooked opportunities is how the Midwest is primed for AI adoption due to the high number of big blue-collar businesses.

Notes from Greg Isenberg on what companies YC is looking for in 2025

Cover Image Illustration: Aida Amer/Axios

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🥂

Missouri Startup Weekend is back for 2025 ! 🚀 

Join us April 11th - 13th at the EquipmentShare HQ for a weekend of building the next $B company in Columbia, MO.

What | Missouri Startup Weekend is a weekend-long event that brings together aspiring entrepreneurs, developers, designers, and operators to build a startup in one weekend. MOSW has been the genesis point of billion-dollar startup companies like EquipmentShare and Zapier. Participants will have access to a diverse talent pool (100 participants/ 10 teams) and hands-on support from world-class mentors (10 / 1 per team) who have founded companies like DevStride, Zapier, and Balto and investors from great funds like Lightbank, Flyover Capital, and slightly biased by Redbud VC

Who | This is for the weekend hustler, the builder, the tinkerer, and the intellectually curious. Bring your new idea or something that you’ve been working on! Have an existing company? Apply for a spot on our new Sprint Track!

When | April 11th -13th

Where | EquipmentShare HQ

Prize | $35k for first place including: 💻 $15k in development services to launch MVP, 💰 $10k cash for startup expenses, 🎨 $5k branding and design work, ⚖️ $5k legal services to set up your company + 6 months of support from the Redbud VC team and potential for up to a $150k investment.

There’s more, but we feel like this is enough of a reason to get a ticket ⤵️

While cold fronts plague the entire US, and it’s somehow snowing in Destin, FL - some founders are taking advantage of the chilly weather ❄️ ⤵️

🔥 Burning question of the month 🔥

📈 Macro Trend Report

• HOUSING | The U.S. housing market is proving to be as stubborn as ever, with home prices continuing their upward climb despite sky-high mortgage rates and affordability challenges. In December, the median home price jumped 6.3% year over year, marking the first time since May 2022 that prices have risen across all 50 of the most populous metros. Supply shortages remain a key driver, new construction still isn’t keeping pace, and mortgage rates are hovering above 7% and have kept many would-be sellers locked into their existing homes. Affordability remains a challenge nationwide, pushing more Americans toward renting rather than buying. Interestingly, this year’s hottest housing markets are no longer in New York or LA; it turns out the real action is in the Midwest. Cleveland led the pack with a 15% year-over-year price surge, followed by Milwaukee (+14.5%) and Chicago (+11.1%), as these historically affordable metros see home values soar. Once considered “safe havens” for budget-conscious buyers, Midwestern cities are now experiencing their own affordability squeeze, with many locals getting priced out of the neighborhoods they once aspired to live in. The dream of a spacious home in an affordable Midwest city is quickly fading, forcing many buyers to adjust their expectations…or their budgets.

• AI | AI was the #1 topic at Davos 2024, but the sentiment was anything but unanimous. Some leaders, like Salesforce’s Marc Benioff, predicted that AI agents will soon be making real-world decisions, while others lamented the slow rollout of meaningful AI-driven business value. OpenAI’s Kevin Weil was bullish on ChatGPT evolving from a smart assistant to an action-taking agent by 2025, and SAP’s CEO promised AI-fueled productivity gains. But not everyone is feeling the magic, many businesses still struggle to integrate AI beyond marketing and customer service, leading Microsoft and Google to cut chatbot prices due to weak corporate demand. The core problem? AI is advancing at a breakneck pace, but companies aren’t always sure how to turn that into profits. Meanwhile, OpenAI is playing a high-stakes game with its ChatGPT Pro subscription and losing. Sam Altman admitted on X that OpenAI is currently bleeding money on its latest subscription tier, as users are consuming far more resources than expected. “personally chose the price” because he thought “we would make some money.” While the company is valued at $157B, its projected $5B annual loss has investors watching closely, especially as it looks to raise more capital and restructure. On the flip side, OpenAI’s new o3-mini model is cutting costs by offering different levels of reasoning, and it’s the first time the company has brought free reasoning capabilities to ChatGPT users. 💸

  • DEEPSEEK | Silicon Valley just got a reality check from across the Pacific. DeepSeek, a little-known AI lab out of China, has thrown a wrench into the industry’s high-stakes race by launching an open-source model that outperforms Meta’s Llama 3.1, OpenAI’s GPT-4o, and Anthropic’s Claude Sonnet 3.5 - all while being built in just two months for under $6 million. The model runs on Nvidia’s H800s, a less-powerful (and more readily available) chip, making Big Tech’s relentless spending (>$24B in 2024) on AI models and data centers look a little excessive. DeepSeek’s R1 model is particularly good at math, beating OpenAI’s latest on three key tests, and while its coding and language results are a bit more mixed, the performance gap is narrow enough to set off a $969B bomb of value by U.S. technology stocks in the S&P 500. With Meta alone set to pour over $60B into AI infrastructure this year, DeepSeek’s scrappy, cost-efficient approach has sparked concerns over whether Silicon Valley’s AI race is more about deep pockets than innovation and whether America’s lead in the space is quietly slipping away. 📉

  • STARGATE PROJECT | While China seems to be doing more with less, the newly announced Stargate Project is aiming to supercharge AI infrastructure in the U.S. over the next 4 years. The $500B project is starting with a $100B deployment to boost OpenAI’s compute power. Backed by SoftBank, OpenAI, Oracle, and MGX, with Masayoshi Son as chairman, the initiative is already laying the groundwork in Texas and scouting for more sites nationwide. Meanwhile, Elon Musk isn’t buying it, claiming “they don’t have the money.” SoftBank has “well under $10B secured” on X, and Microsoft CEO Satya Nadella publically commented, “All I know is, I’m good for my $80 billion.” 😂

• VENTURE CAPITAL | Venture capital is in the middle of a reset (New Year, New Me, right?) For the first time in a decade, experienced VCs closed more funds than emerging managers, as institutional LPs, spooked by inflated portfolio valuations and liquidity concerns, pulled back on commitments. Beta Boom’s Sergio Paluch saw his oversubscribed fund nearly collapse overnight, a story playing out across many emerging managers as LPs prioritize larger, more established funds that can deploy capital at scale. With exits slow and valuations adjusting downward, LPs are becoming more discerning about where their money goes, forcing newer funds to work even harder to prove their differentiation. Some are managing to scrape by, but others are facing the harsh reality that capital is consolidating at the top. At the same time, venture debt has emerged as a lifeline and a potential landmine. Debt issuance hit a 10-year high of $53.3B in 2024, with AI giants like CoreWeave ($7.5B) and OpenAI ($4B) securing massive credit lines to fuel their growth. But the rise in debt financing also means lenders are increasingly calling the shots and not always in ways that favor VCs. Struggling startups are being forced into fire sales or outright shutdowns, with equity investors often walking away with nothing while lenders recoup their capital first. Companies like Bench and Convoy collapsed after lenders pulled the plug, while Divvy Homes' $1B sale (prev. $2B valuation) left many shareholders with zero returns. With many unicorns running out of cash and unable to justify their lofty 2021 valuations, lenders are tightening their grip, pressuring startups to sell or restructure before things worsen. While VCs may have written the first checks, it seems like the debt holders are deciding how the story ends.

  • GENERAL CATALYST | General Catalyst is playing in the private equity world. The $32B AUM firm known for backing giants like Airbnb, Anduril, and Stripe is reportedly shopping a stake in its holding company to large organizations, shifting beyond its VC roots. Over the past few years, GC has reorganized into three business lines: traditional asset management (bolstered by an $8 billion fundraise last year), HATCo, its health-care transformation platform that literally bought an entire hospital system, and a new tech modernization unit aimed at helping legacy companies get smarter about AI. In a full-circle moment, GC is also buying back its own GP stake from Petershill Partners, which first invested in 2018 and recently flipped its position for $726 million. The firm’s latest moves mirror big private equity’s expansion playbook, as the firm seeks to be more than just a VC.

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

💰 Micro Trends

• TikTok BAN | TikTok went dark for less than 24 hours after a Supreme Court ruling upheld the congressional bill requiring ByteDance to divest TikTok’s U.S. operations or face a ban. The app went dark and returned on January 20th, thanking Donald Trump for “saving the app” despite him not being the President at the time. While a Presidential executive order has delayed real enforcement of the ban, buying TikTok some extra time to find a buyer. The legal standing of the order remains murky, but that hasn’t stopped TikTok users from freaking out, protesting, and, in some cases, defecting to Xiaohongshu (aka RedNote), a Chinese social media platform that saw a 200% surge in U.S. downloads in just two days. Some TikTokers have even started learning Mandarin out of spite, causing a 216% spike in Chinese language learners on Duolingo. But the bigger question looms: Will ByteDance actually sell? The Chinese government hasn’t signaled any willingness to approve a sale, and even if it did, selling TikTok without the algorithm could make it far less valuable both to buyers and to its user base. Regardless, the bidding war for TikTok has begun. Microsoft is reportedly in talks, Oracle wants a controlling stake, and former LA Clippers owner Frank McCourt is pitching a deal that would put TikTok on “decentralized” tech. There’s also Employer.com founder Jesse Tinsley, whose group claims to have $20B+ in funding, and AI startup Perplexity, which is proposing a TikTok merger and IPO plan that could hand the U.S. government up to 50% ownership. ByteDance hasn’t responded to any of these offersmeaning all of this could still end in an outright ban.

• 5 BIG BOOMS | We’re giving Boom Supersonic 5 BIG BOOMS (like the Costco Guys) for thier historic moment this month. Boom’s XB-1 test jet became the first civil aircraft to break the sound barrier in over two decades, soaring past Mach 1.1 over California’s Mojave Desert. The supersonic flight, which lasted around four minutes, comes eight years after Boom first unveiled the XB-1 as a testbed for its ambitious 64-passenger commercial airliner, Overture. CEO Blake Scholl called the moment supersonic flight’s “Falcon 1” moment, likening it to SpaceX’s first successful orbit in 2008. But much work remains; Boom still has to fire up the Overture’s engines for the first time later this year before proving it can scale up to commercial operations. That said, airlines are already lining up: American and Japan Airlines have placed orders, betting that Boom can bring supersonic travel back to the masses (or at least, those willing to pay a premium). While the defense industry is charging full speed ahead on hypersonic tech, Boom is sticking to its commercial vision. Unlike startups chasing military contracts, Scholl insists that Boom is about passenger connectivity, American aviation leadership, and making supersonic travel a reality again. That doesn’t mean the company is avoiding defense work altogether - the U.S. Air Force has partnered with Boom on some projects, but Scholl remains focused on building something the everyday traveler could (eventually) fly on. ✈️

📰 Middle America Headline of the Month

The U.S. is pumping another $210 million into its tech hubs program, spreading the cash across six sites focused on everything from aerospace to biotech—including a critical minerals hub in Missouri that’s set to receive $29 million. With total funding now topping $700 million, it's full steam ahead.

💰 Flyover Deals

Less deals, but some big deals 🚀

• Check out the 129 flyover deals for over $5B in funding we tracked here, funding up over 225% with Infinite Realty’s $3B raise

• St. Louis-based Geneoscopy closed a $105M Series C

• Redrover Health, based in Des Monies, wrapped on a $4M Seed Round

• Qumis closed a $2.2M funding round led by Armory Square Ventures

• Chicago-based Umity closed a $10M Series A Round

• Columbus-based Niche Fire closed a $2.6M Seed Round

• Exotic Snack Guys finished a $3M Seed Round

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri stayed steady this month to 3.7%, while the National Average slipped to 4.1% ✅

• The Midwest Consumer Price Index rose slightly this month at 3.7%, while the national rate is up 3% on the year ✅ 

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🧠 This Month's Recommendations

📚 What We’re Reading

• China’s Deep Seek Suprise 💥

• The Re-Skilling of America 🛠️

• How OpenAI’s Sam Altman Is Thinking About AGI and Superintelligence in 2025 🧠

🎧 What We’re Listening To

• Dropbox - How the cloud pioneer re-invented itself [50 min]

• $6M to $120M ARR in just three years, the story of monday.com [55 min]

• How to build the future with 2x Unicorn founder Parker Conrad [43 min]

📆 What We’re Doing

• Joining our friends at Bluestien Ventures and Chai Ventures for breakfast in Chicago this week! 🍳 

• Prepping for Missouri Startup Weekend, which will be held at EquipmentShare’s (2014 startup weekend winner) new $100M facility in Columbia, MO, built over the last year.

🪝Outside Main Hubs: Picks of the Month

🚀 Redbud Highlights

Congrats to HoundDog for becoming the insurance verification and tracking partner for JobTread’s thousands of general contractors. They crushed it a JobTread connect as a sponsor and speaker. 👷‍♂️ 

🛠️ Resources

• Early Stage Financial Template 💰

• 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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