There are two opposing forces in the world of data: an overall consolidation within the modern data stack & a massive expansion driven by AI capabilities. AI is rewriting every rule about what’s possible with data in 2025.

Here are Theory’s Top Themes in Data in 2025 with the full presentation at the bottom.

1. The Great Consolidation. After a decade of expanding complexity in the modern data stack, companies are looking to dramatically simplify their architectures to drive better results. Buyers we speak to say, “Do not sell me another tool.”

Slide 1

Clearing: While data world consolidates, capabilities have exploded with AI.

Content:

• AI is rewriting every rule about what’s possible with data
• Those two forces in tension will make for an exciting 2025

Slide 2

Clearing: My name is Tomasz Tunguz, founder and general partner at Theory.

Content:

• I’ve been investing in data for the last 17 years and have worked with companies like Looker, Monte Carlo, Hex, Omni, Tobiko Data and Mother Duck
• I founded Theory, a venture firm managing $700M with the idea that all modern software companies will be underpinned by data and AI
• We run a research-oriented firm, formed by 200 buyers of data and AI software

Transition:

Over the weekend, a small Chinese hedge fund turned star AI research outfit launched DeepSeek R1, a new massive open-weights model with state-of-the-art performance, trained on a shoestring budget.

Just how much interest is there in this advance?

I analyzed R1 downloads on Ollama, and I recorded my steps to perform this analysis with AI using speech, an AI model, & a developer environment. See the video below if you’re curious how I did it.

A few days before the deadline, I’d find myself in that familiar pool of anxiety : staring at a blank digital canvas, clock ticking, knowing the next 20 hours would dissolve into a blur of bullet points, chart creation, & late-night pixel-alignment.

Time to make a presentation.

With AI, I’ve slashed the time it takes to build a presentation from a full day down to just a few hours

I start with the essence - three key ideas or stories that will resonate with my audience.

The most successful AI startups of 2024 shared an unlikely secret: they didn't rely on proprietary datasets. Instead, they leveraged synthetic data to outmaneuver competitors who were still chasing exclusive data partnerships and expensive labeling operations.

The numbers tell a compelling story. Synthesis AI grew 410.6% last year while Datagen raised $72M – the largest funding round in the synthetic data space. Meanwhile, companies burning millions on human data labeling watched their unit economics deteriorate as synthetic alternatives delivered 500-1000x cost reductions.

On Thursday January 30th :at 5:30 Pacific time, Office Hours will host Maggie Hott, GTM Leader at OpenAI.

This Office Hours session will be held in person at SHACK15 in San Francisco & is for early-stage founders.

Maggie will dive into mistakes founders make building GTM for AI companies — ranging from hiring practices to pipeline building & pricing strategies—and provide actionable insights on how to avoid them.

Despite holding a staggering $370b war chest in 2025, tech giants aren’t racing to acquire companies – they’re too busy building their AI empires, one data center at a time.

Microsoft hasn’t acquired a company since January 2023. Two of Google’s reported acquisition overtures, Wiz & Hubspot, were scuttled.

This focus elsewhere creates an opportunity for mid-market players to lead the M&A wave of 2025.

As of January 2nd, these major acquirers hold $370b in cash & short-term equivalents. These levels represent near-historic highs over the past 15 years.¹

AI saved me from cookie banners, travel insurance popups, car rental quotes, & the special frustration of comparing flight options across tabs.

I downloaded an open-source agent, tweaked it & watched it find the cheapest flights for my trip from San Francisco to Newark.

One-Way Trip (12 Jan 2025)

Return Trip (18 Jan 2025)

In the video, the robot “sees” the page, determines the next step, errs by clicking on an SEO optimized link, backtracks, & then ultimately extracts the answer from the chaff.

Every year I make a list of predictions & score last year’s predictions.

Here are my predictions for 2025.

1. The IPO market rips. ServiceTitan’s success has revealed the retail & instititutional demand for high growth software. Stripe, Databricks & many others generate huge liquidity for VC funds. The pull from the public market & desire for AI drive M&A to 5 year highs, enabled by a laxer FTC M&A policy.
2. Google continues their surge in AI. They lept from no placement to top 1 or 2 on the OpenRouter rankings. They further advance their market share. Grok benefits from Elon’s position in government to become a viable contender with OpenAI & Anthropic.
3. Voice becomes a dominant interface for humans with AI as speech models are pushed on device & the accuracy/latency astounds. Voice produces text, image, & video. Why type? It’s the start of a generation of people who will never learn to type on a keyboard. (This one will be hard to grade!)
4. US VC investment remains roughly around $210-$230b, but VC fundraising increases by 20% as LPs invest some distributions into the asset class, in pursuit of AI growth.
5. Consolidation is the theme for the Modern Data Stack. Buyers look to standardize on single platforms as cost-pressures persist. More than $3b of M&A in the category is announced. Software & data engineering teams continue to fuse.
6. The first $100m ARR company with 30 or fewer employees is created. An AI native product coupled to an AI native team produces incredible market cap creation efficiency.
7. After years of declines, the US web3 engineering populations grows by 25% as the government embraces crypto & web3. This opens to the door to 30% more token listings & a successful consumer app built on a web3 stack.
8. Data center spending by hyperscalers eclipses $125b for the year as the AI race fuels demand for GPUs. Broadcom is the hottest semiconductor stock of the year.
9. Stablecoin supply increases 50% to $300b as more businesses adopt this payment mechanism for B2B payments. Stablecoin volume is greater than 3x Visa’s transaction volume.
10. Observability, SIEM, & Business Intelligence begin to use the same data lake. Usage-based pricing for many software companies creates a need for a single data lake. The data lake becomes the dominant data architecture across all workloads.

Here are my predictions from last year.

From the pit lanes of Formula One to the secretive world of commodities trading, from the championship poker tables to storytelling competitions, I enjoyed a wide range of different books this year. Here are my favorites :

1. Every Hand Revealed by Gus Hansen: A hand-by-hand narrative of Professional poker player Gus Hansen winning the 2007 Aussie Millions tournament. Hansen had a unique style at the time, aggressively defending his blinds.
2. The New Map by Daniel Yergin: Pulitzer Prize-winning author Daniel Yergin explores the changing landscape of energy, geopolitics, & climate change. He presages the Ukrainian conflict in 2019.
3. The World for Sale by Javier Blas & Jack Farchy: This book delves into the secretive world of commodity traders, the individuals who buy & sell raw materials like oil, metals, & grains. It exposes the immense power & influence these traders wield in shaping global markets & how they supported some failing countries, like Cuba & South Africa, during energy crises.
4. Seven Brief Lessons on Physics by Carlo Rovelli: I love to read books about theoretical physics because it’s at the limit of what I can grasp. Rovelli describes quantum concepts in an approachable way.
5. The Seventh Floor by Richard D. McCloskey: Spy fiction is my way of relaxing. I’ve read every John le Carre book & discovered the Golden Dagger award, given to the best spy fiction each year & have started looking for new ones . “The Seventh Floor” is one in a series about the CIA’s efforts to subvert Russian spies.
6. How to Build a Car by Adrian Newey: Adrian Newey revolutionized Formula One car design with a background in aerodynamics. He is the single most successful car designer in the history of Formula One, having won many championships. This is his autobiography.
7. The City & Its Uncertain Walls by Haruki Murakami: Norwegian Wood was my first Murakami novel, & since then, his magical realism has echoed Gabriel García Marquez. I’ve read every one of his books, & this is the most recent, which ties back to some themes he wrote about when he was just starting as an author.
8. Storyworthy: How to Use Stories to Sell, Stand Out, & Win by Matthew Dicks: Matthew Dicks is an award-winning storyteller. He won several awards, including one for a story about a magic fork captured by one of his students. It’s worth listening to if you have 15 minutes. He shared some tactical techniques for creating a story, including developing an elephant & using a backpack - some great mnemonics for improving your stories.
9. Chronicles of a Liquid Society by Umberto Eco: One of the most learned men & broadest vocabulary, Eco is also famous for amassing a library of over 10,000 books. This collection of his essays laments progress. In other words, a curmudgeon’s foil to the techno-optimism I love.
10. The Dawn of Everything by David Graeber & David Wengrow: Graeber & Wengrow challenge conventional narratives about human history, arguing that early societies were far more diverse & complex than previously thought. It shares stories of Native American diplomats during the 17th & 18th centuries who traveled to Paris & may have influenced political thought.
11. Active Measures by Thomas Rid: The history of information warfare. Not a beach read, but fascinating.

Send me your recommendations for 2024!