Dear Partners of 500 Global,

2024 was the beginning of a new era of venture capital. As I have touched upon in previous letters, we saw a number of macro-trends converge - most notably the impact of the AI platform shift and the increase of technology’s influence on government both as policy writer and infrastructure builder. Entering 2025, we believe that nothing showcases the convergence more than the conversation around DeepSeek.

Like many years before, 2025 has arrived with relentless change. As 500 Global embarks on its 15th year, we’re more excited than ever to partner with talented founders as they shape the future in this new AI era and dive into the opportunities sparked by these rapid shifts in technology and innovation. Here are a few areas we’re talking about:

DeepSeek’s recent open-source reasoning model release has cemented 2025 as the "Year of the Agent,” but what are the spaces to keep an eye on?

• Industry-Specific Agents: Vertical-focused solution that promises immediate value creation by addressing complex industry challenges across healthcare, financial and legal services with autonomous, domain-specific agents.
• Human-AI Interfaces: Intuitive interfaces that make AI agents accessible and effective for enterprise users, especially those focusing on natural language and visual interaction paradigms.
• Infrastructure & Orchestration: Agent orchestration tools, security frameworks, and enterprise integration solutions for managing multiple AI agents. 
   

Technical Trend to Watch: Test-Time Compute

A breakthrough development in AI scaling is the emergence of test-time compute optimization. This approach improves model performance without massive training costs, enabling more sophisticated reasoning capabilities. 

The devastating Los Angeles fires have put a spotlight on cutting edge applications of technology for wildfire prevention and mitigation. Major tech companies like Nvidia and Lockheed Martin are developing digital fire modeling systems to help firefighters better understand and combat fire spread patterns.

Government technology (also known as “Govtech”) is on the rise as it is fueled by the need for governments to respond to the public’s expectations around efficiency, accountability and sustainability. The GovTech market is expected to expand, creating a $9.8T opportunity to generate public value in 2034. Looking specifically at the increase in frequency and intensity of wildfires in urban areas, there are several key areas of opportunity for improved efficiency:

• Autonomous firefighting drone systems, particularly those capable of operating in low visibility conditions; 
• Advanced fire-resistant building materials with focus on cost-effective scaling; 
• Smart urban forest management platforms that integrate AI and satellite technology; 
• Innovative power line monitoring systems to prevent electrical fire triggers.

We believe that successful startups within GovTech will focus on building scalable solutions that can integrate into existing government infrastructure - for wildfires and other disasters it will be tapping into emergency response systems - while also addressing the critical resource gaps that exist.

Ahead of Innovaccer’s announcement of their $275M Series F, they released The State of AI During the Great Burnout in Healthcare. With the healthcare industry generating approximately 30% of the world's data volume, the report highlights both the burden and opportunity these large data sets have created. They found that a “whopping 82% of insiders are betting big on Healthcare AI to streamline workflows and reduce burnout issues;” with Gen AI able to automate operational work, clinical staff are relieved of administrative strain and empowered with more dependable diagnoses. McKinsey has suggested that this transformation has a collective potential opportunity of up to $1.5 trillion through 2027 - not just disrupting how patients receive care, but improving the system and quality of care as a whole. 

• Innovaccer raised a $275 million Series F from investors including B Capital Group, Banner Health, Danaher Ventures, Generation IM, Kaiser Permanente, and M12.
• MyHealthTeam announced that it has been acquired by Swoop, an industry leader in AI-driven, data-powered omnichannel healthcare marketing.
• Shiprocket has converted to a public entity in the lead up to its much anticipated IPO.
• Little Umbrella announced a $2 million seed round with a16z speedrun, Breakpoint Ventures, Workplay Ventures, and Flexport founder Ryan Peterson. They will launch their new party game, tentatively titled “The Last Show by A”, during GDC 2025.
• Sakana AI CEO David Ha was featured on Bloomberg where he discussed his outlook on AI development, DeepSeek, and the emergence of small-scale models like Sakana’s recently released TinySwallow-1.5B.

• We announced the launch of 500 MENA, L.P., a new fund led by Managing Partner, MENA, Amjad Ahmad, dedicated to investing in high-growth technology startups across the Middle East and North Africa region both from outside and inside the current 500 Global portfolio.
• Vishal Harnal, Global Managing Partner, shared his insights on investment trends that are expected to drive the market in the new year, and how AI will influence startups and economies at The Economist’s AI Innovation Summit in Singapore. 
• Amal Dokhan, Managing Partner, MENA was named as one of the Top Venture Capitalists in the Middle East, and spoke at Milken Middle East and Forbes Middle East Women’s Summit. 
• Iris Sun of our Global Investment team was named as one of Business Insider’s Rising Stars of 2024.

Throughout February and March, the 500 Global team will be at a number of events around the world. Please drop us a line if you’ll be at any of these events stated below:

• February 14-16, Munich, GE: Munich Security Conference 
• February 18-19, Abu Dhabi, UAE: FT: Future of Asset Management 
• February 18-19, Dead Sea, Jordan: Digital Cooperation Organization General Assembly
• February 23-26, Doha, Qatar: Web Summit Qatar
• February 26-27, Los Angeles, USA: Upfront Summit
• March 8-12, Austin, USA: SXSW
• March 10-13, Las Vegas, USA: HumanX

Questions or thoughts to share? We’d love to hear them. Please reach us at ir@500.co.

Thank you,
Christine Tsai
CEO and Founding Partner, 500 Global