A Note From the Redbud VC Team

Lots happened this month in all critical areas: AI, trade policy, venture markets, and, of course, outer space. AI keeps tightening its grip on tech big and small. Meta has launched a standalone assistant powered by your social breadcrumbs, aiming to compete with OpenAI. Duolingo rolled out 148 AI-generated courses amid backlash over job cuts, and Shopify and Klarna now ask teams to prove a human outperforms a bot before adding headcount. As AI augments human jobs, economic uncertainty is at the forefront of the public and private markets. Tariffs shaved 0.3 percentage points off Q1 GDP, sparking numerous opinions about the state of the economy. At the same time, VC funding hit $91.5B in Q1, though OpenAI’s $40B round did most of the heavy lifting. Oh, and Bezos just turned space tourism into a celebrity cameo while Alphabet quietly booked a quarter of its profit from SpaceX. We’re also always looking for the next moonshot, so pitch us here (p.s. we’ve already invested in four companies this year)🚀

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🥂

Politics aside, this is a hilarious depiction of this month’s dialogue on tariffs. That said, at least Temu won’t be infiltrating US consumers for a while…

🔥 Burning question of the month 🔥

📈 Macro Trend Report  

• AI | Less launches for the big LLMs this month as big tech looks to augment thier workforce more and more. Meta is looking to compete more directly with OpenAI, launching a stand-alone app that lets users access its AI assistant directly. The app was unveiled at Meta’s LlamaCon event. The app differentiates itself by leveraging the vast amounts of data Meta has accumulated through its social platforms. Meta promises more personalized, intuitive AI responses by drawing on user profiles, interests, and interactions across Facebook, Instagram, and Messenger. Duolingo is riding the AI wave too, but it’s not all smooth sailing. The language-learning platform has launched 148 new courses powered by generative AI, a move it claims will “accelerate content creation at an unprecedented pace.” Duolingo says it can now create courses in a year that would have taken over a decade to develop manually. Duo is facing a backlash from users who are unhappy with the company’s plan to replace contractors with AI and deepen the use of automation. Critics argue that AI-generated content has led to declining quality and accuracy, with some users even deleting the app. Duolingo’s co-founder, Luis von Ahn, defended the shift, claiming that AI is essential for scaling and reaching more learners. Shopify CEO Tobi Lütke is also pushing for AI adoption, with a recent memo to employees mandating that teams demonstrate why AI can’t perform a job before requesting more headcount or resources. Lütke’s policy is trying to keep the workforce lean by integrating AI into operations, even though such moves are stirring controversy amid concerns over job displacement. Similarly, Klarna’s CEO, Sebastian Siemiatkowski, has pointed to AI’s ability to replace hundreds of customer service agents, and with this shift, Klarna’s headcount could be slashed by half. 🔪

• TARIFFS |  The U.S. economy looks shaky, and the latest GDP numbers are proof. The Commerce Department reported a 0.3% contraction in Q1 2025, down from a solid 2.4% growth at the end of 2024. The blame? A surge in imports. In the months leading up to the Trump-era tariffs, businesses and consumers rushed to stock up, driving up imports, which can drag down GDP. Trump's trade war with China, which slapped a 145% tariff on many Chinese goods and a 10% baseline tariff on imports from everywhere else, is clearly leaving its mark, and Amazon is caught in the crossfire. News circulated that Amazon was planning to display the impact of these tariffs directly on product pages, breaking down how much of an item’s price was due to tariffs. The move would have made it clear to shoppers exactly how much these tariffs are pushing prices up (Spoiler: didn't sit well with the White House). Officials slammed the idea as a "hostile" and "political" act, accusing Amazon of weaponizing prices for political gain. Amazon released a statement saying, “The team that runs our ultra-low-cost Amazon Haul store considered the idea of listing import charges on certain products. This was never approved and is not going to happen.“ Even though the Amazon tariff pricing UX will never be rolled out, the message was clear: Trump’s tariffs are reshaping the cost of goods in ways consumers are increasingly aware of, even if they’re not always sure who to blame for the higher prices.

• VENTURE CAPITAL | VC in the U.S. is off to a strong start in 2025, with startups raising a total of $91.5 billion in Q1, marking an 18.5% increase over the previous quarter and the second-highest quarterly investment in the past decade. However, big AI rounds are helping to bump the numbers. OpenAI’s $40 billion raise accounted for a staggering 44% of the total amount raised across Q1 👀While the big-ticket deals may look promising, they mask the underlying challenges facing many other startups. With IPOs, significant acquisitions, and traditional exit strategies for venture-backed companies becoming increasingly unlikely due to stock market volatility and broader economic uncertainty, liquidity is becoming much harder. Despite strong funding numbers, the real picture of investor enthusiasm is less rosy. Many startups are facing down rounds or considering acquisition deals at steep discounts, as the economic climate has shifted dramatically from the boom years of low interest rates. With the looming possibility of a recession, startups could face further revenue declines and slow growth, pushing some companies toward failure or forcing them to sell for far less than their prior valuations. Investors and founders, once hopeful for a market rebound in 2025, are now preparing for a much more challenging year ahead.

  • THE DEAL ACT | The DEAL Act, introduced in 2023, is at the center of a push to relax long-standing adviser rules they argue were designed for Wall Street, not startups. The National Venture Capital Association (NVCA) and other industry groups are rallying behind the DEAL Act, which would give venture funds more flexibility by easing the rules around registration as investment advisers (RIAs). This push comes as venture capital firms, particularly those working with funds-of-funds and newer strategies like crypto, feel the current rules stifle innovation and lead to unnecessary compliance headaches. According to Bobby Franklin, president of the NVCA, these regulations make little sense when applied to venture firms, which aren’t dealing with the kinds of complex public market assets the RIA rules were designed to regulate. However, not everyone is on board with this regulatory shift. The SEC argues that the RIA provisions provide much-needed transparency for private fund investors, helping track complex investments. Critics of the current system argue that it ramps up costs and complicates the investment process for firms that aren't involved in public markets.

Build your investor pipeline with the comprehensive VC List we crafted for all founders

💰 Micro Trends

• VIBE CODING | “Vibe coding” is quickly becoming one of the most used words on Twitter/X, but like, what does that mean? Rather than manually writing every line of code, developers can now describe their problem in a few sentences, and AI-powered tools can generate the code for them. A handful of companies are building in the space, but Supabase seems to be leading the charge. The open-source database startup, founded in 2020, just raised a $200M Series D funding, pushing its valuation to $2B. Supabase has become the go-to platform for developers looking to build AI-powered apps without the hassle. And it's not just startups taking notice. Microsoft's CEO, Satya Nadella, revealed that 30% of the company’s code is now AI-generated. Meta’s Mark Zuckerberg predicts AI will handle half of their development within the next year. With Big Tech leaning heavily into AI, companies like Shopify and Duolingo pushing thier employees to augment portions of their jobs.

• BNPL FOR BASICS | BNPL usage is on the rise (like a lot). A new LendingTree survey reveals that 41% of BNPL users paid late in the past year, up from 34% the year before. Surprisingly, high-income earners, as young adults, men, and parents of young kids, are among the most likely to miss payments. And it doesn’t stop there; 23% of BNPL users report juggling three or more active loans simultaneously, with Gen Z and millennials leading the pack. The usage of BNPL for groceries has also surged, with 25% of users saying they've used it for food shopping, up from 14% just a year ago. As rising grocery prices fuel this trend, some BNPL users have even turned to delivery services like DoorDash. Klarna now partners with BNPL to let users pay for food delivery. Sadly, ease of use and accessibility aren’t always a good thing. 62% of users incorrectly believe that on-time BNPL payments can boost their credit score. BNPL is becoming a go-to financial tool for many, payment integrations are growing, and it’s clear that BNPL is for everyday checkout versus big-time purchases.

• SPACE STUFF | Jeff Bezos launched his fiancée in space (never thought we’d say that) this month alongside an all-female celebrity crew, including singer Katy Perry and GMA anchor Gayle King. The New Shepard rocket took them on a quick, fully automated trip into the fringes of space, just about 65 miles up. Space tourism is quickly shifting from a novelty for billionaires to a new kind of luxury experience, with high-profile figures making space travel their next exclusive playground. Meanwhile, over at SpaceX, the company is making waves in more ways than one. A recent earnings report from Alphabet revealed that nearly 25% of its Q1 net income came from its investment in SpaceX. SpaceX’s valuation has soared to $350 billion, partly thanks to strategic moves like the recent round of employee share purchases. Google’s early $1 billion investment in SpaceX in 2015, when the company was focused on connecting the world through internet access, is clearly paying off in a big way. The stars are aligning for SpaceX and more so Alphabet.

📰 Heartland Headline of the Month

Chicago-based 11 Tribes Ventures closed a $46M Fund II to deploy capital into founders focused on sustainable growth.

💰 Flyover Deals

Many strong early rounds closed across the heartland this month! 🚀

Check out the 178 flyover deals for over $3B in funding we tracked here, deals were up by 35% but total funding was down by 3%

• Cincinnati-based Luma Financial Technologies secured a $63M Series C led by Sixth Street Growth

• Cargado, based in Chicago, secured a $12M Series A

• Vinyl Equity wrapped up an $11.5M Seed round co-led by Index Ventures and Spark Capital

• Certiverse announced an $11M Series A

• Orthobrain, headquartered in Cleveland, closed a $7.5M round

• St. Paul-based SecondWave Systems raised $7M in Series A funding

• Ambient brought in $7.2M in Seed capital

• ClearCOGS completed a $3.8M Seed in Chicago

• Chicago-based Sizl locked in a $3.5M Seed round

• Ideem, from Kansas City, raised a $2.4M Seed

• Spendr, based in Cincinnati, landed $2.7M

• Omaha-based Alpaca completed a $1.8M Seed round

• Louisville’s Mandos closed a $1M raise led by Render Capital

• KC-based Pineapple Academy brought in $1M

• Three Ann Arbor-based companies closed big rounds!!

  • MemryX brought in $44M in Series B funding

  • Optilogic raised a $40M Series B

  • SkySpecs completed a $20M raise led by Goldman Sachs Alternatives

  • BetterFleet closed a $15M round

🐄 Middle America vs. National Macro Trends

• Unemployment in Missouri fell slightly this month at 3.6%, while the National Average slipped to 4.0% ✅

• The Midwest Consumer Price Index fell slightly this month at 3.3%, while the national rate is up 3.1% on the year ✅ 

🧠 This Month's Recommendations

📚 What We’re Reading

• Always run an auction 🏃🏼‍♀️

• Nvidia, Oracle Race to Get AI Chips Out of U.S. Ahead of New Export Rule

• The war of “Apptrition”

🎧 What We’re Listening To

• Bridget Mendler on the future of space and Kevin Systrom on Facebook throwing Instagram to the side on TBPN Live [2 hrs 56 mins] 🪐

• How a16z is thinking about the future of AI voice on the Turpentine Podcast [59 mins]

• From video dating site to powering video on the internet - the story of Youtube [56 mins]

📆 What We’re Doing

• We’re off to Bentonville in May for NWA’s VC Emersion Series!

• We traveled to Nashville last week for Lightning. A big thanks to Zap for hosting at the Lighthouse and the Fontanel!!

🪝Heartland Picks of the Month

🚀 Redbud Highlights

Congrats to the team at Transend for a killer first year in market.

Proud to be early backers of this team. Check out some of their highlights from the past 12 months below ⤵️

🛠️ Resources

• If Morning Brew’s CEO Alex Lieberman was planning a 12-month, weekly entrepreneurship class, here's how it'd go...

• Actually good fundraising advice straight from a founder

• The only market sizing guide founders will ever need

• What to include in a data room 🗄️ 

• 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 raising 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 📒

Follow our Medium and Latest 🔖

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