Q1 was a quarter of sharp contrasts: public market weakness, strong private market activity, and AI scaling at unprecedented speed.
Here’s a preview of the Q1 2025 market memo:
- Software stocks slide: Public markets declined, S&P 500 (-5%), Nasdaq (-10%), with software following suit. Sapphire’s Broad Software Index dropped 10%, and multiples hit 4.4x NTM revenue, down from 5.6x to start the year.
- VC stays strong, but concentrated: VC investment reached ~$97B globally. AI dominated funding, and deal volume fell again. Just a few mega-deals captured the majority of capital.
- AI-native scale-ups surge: AI-native companies are scaling faster than any previous software cohort. More startups are reaching meaningful ARR milestones, reinforcing AI’s staying power.
- Exit momentum pauses: Q1 opened with optimism, Google’s $32B Wiz acquisition, CoreWeave’s IPO filing, but “Liberation Day” and tariff tensions have since slowed activity.
While macro volatility has taken center stage, the fundamentals across enterprise software remain strong. AI-native companies continue to scale, venture capital is flowing to the right themes, and exit conditions, though temporarily paused, are beginning to reopen. We remain confident in the long-term outlook for software innovation, even if the near-term ride stays bumpy.