🏰 Developer-First #140 - Why AI Startups Are Raising at 40% Higher Valuations
The case for higher valuations and why investors are expecting more than just "AI-driven" in pitch decks
Hello friend,
In 2024, AI startups dominated 25% of all funding rounds in Europe, leading the market in venture-backed transactions. According to Tomasz Tunguz from Theory Ventures, these AI startups are raising money at valuations 40% higher than their non-AI counterparts.
This valuation premium isn’t just a private market trend—public AI software companies trade at nearly double the multiples of non-AI software companies.
Why is AI commanding such high valuations?
1️⃣ Higher Growth Rates – AI companies are scaling revenue faster than traditional software businesses.
2️⃣ IT Buyers Under Pressure – Many enterprise buyers feel the urgency to adopt AI, which is often pushed by executive teams.
3️⃣ Clear ROI Impact – AI solutions are already proving their business value, from automation to decision-making.
One of the biggest bets investors are making? The automation of back-office functions. A significant portion of Europe’s €1.3 trillion in annual IT spending goes toward labour costs—60% in France alone. If AI can replace even a fraction of this spending, today’s high valuations could still be justified.
That said, simply adding “AI” to your pitch deck won’t convince investors. They’re looking for real competitive moats—either deep technological advantages (models, infrastructure, dev tools) or high-value applications that drive real-world impact.
AI or not AI—that is the question. But one thing is clear: the market is rewarding those who are building real, defensible AI businesses.
P.S.: I had fun talking to Adam Horner on his CTO Playbook podcast about my favourite topic: How to Scale a Developer-First Startup. If you’re interested, you can listen to it here.
Last week, I also organised an Ask Me Anything session with Dust co-founder Stanislas Polu on AI Agents (watch the replay here).
Last, my talk on 2024 Commercial Open-Source Startup fundraising and M&A transactions is now online (in French; watch it here).
P.P.S.: if you're a CTO or tech leader, consider joining the free Unicorn CTO Slack community. We're a small group of international CTOs and tech leaders, and we often meet for virtual (or not) coffees.
Now, let's dive into last week's developer-first transactions.
💰 Market Summary - Week of February 3rd, 2025
5 companies raised $127.7 million across 4 product categories in 4 countries.
Europe-based companies attracted 4.7% of the total funding vs 2.1% for Asia-based companies and 93.2% for North America-based companies.
Security is the category that attracted the highest funding.
0 company provides or contributes to an open-source product.
5 companies were acquired this week.
🧩 Funding by Product Category
🌎 Funding by Region
🏢 Funding By Company
Semgrep, based in San Francisco 🇺🇸, raised $100 million in Series D+ funding led by Menlo Ventures. Semgrep enhances software security and reliability with its tool that lets developers find bugs and vulnerabilities directly in the codebase, helping maintain high standards with every commit. (more)
TrueFoundry, also from San Francisco 🇺🇸, raised $19 million in Series A funding led by Intel Capital. TrueFoundry is a Cloud-native Platform as a Service for machine learning teams, enabling them to deploy ML/LLM applications efficiently with proper governance controls. (more)
LogicStar, located in Zurich🇨🇭, raised $3 million in Pre-Seed funding led by Northzone. LogicStar’s AI agent autonomously manages bug fixes, freeing engineering teams to innovate without the overhead of maintenance. (more)
Fern Labs, based in London 🇬🇧, raised $3 million in Pre-Seed funding from Air Street Capital. Fern Labs is deploying AI agents to tackle real-world scale problems, enhancing the deployment of complex solutions. (more)
Astra Security, from New Delhi 🇮🇳, raised $2.7 million in Seed funding led by Emergent Ventures. Astra Security offers a Pentest Platform that identifies vulnerabilities, helping organisations save on potential losses and developer hours. (more)
🤝 Mergers & Acquisitions
Accel-PPP, from Poway 🇺🇸, was acquired by VyOS Networks. Accel-PPP is an open-source solution providing flexible BNG/BRAS capabilities suitable for ISPs and corporations. (more)
api.video, based in Bordeaux 🇫🇷, was acquired by OVH. api.video is an API-first video platform that simplifies integrating video into apps and platforms, managing everything from video ingestion to global delivery. (more)
BladeBridge, located in New York 🇺🇸, was acquired by Databricks. BladeBridge offers tools that accelerate data projects, leveraging a common metadata layer to support ETL tools and databases for project acceleration and legacy conversions. (more)
PerfectScale, based in Raleigh 🇺🇸, was acquired by DoiT. PerfectScale provides solutions that enhance Kubernetes performance and cost efficiency, enabling teams to make data-driven decisions for continuous improvement. (more)
Xeol, also from New York 🇺🇸, was acquired by HeroDevs. Xeol focuses on securing applications by managing end-of-life, outdated, and unmaintained open-source software, aiding compliance with major security standards. (more)
⭐️ Trending GitHub Repositories
open-webui / open-webui (✩ 5,606 stars this week) - User-friendly AI Interface (Supports Ollama, OpenAI API, ...).
oumi-ai / oumi (✩ 5,522 stars this week) - Everything you need to build state-of-the-art foundation models, end-to-end.
Mintplex-Labs / anything-llm (✩ 2,928 stars this week) - The all-in-one Desktop & Docker AI application with built-in RAG, AI agents, and more.
👍 Trending Developer-First Products on ProductHunt
Airtop Auth (👍 716) - Airtop is revolutionising web automation with AI-powered cloud browsers that seamlessly handle authentication. Whether you're building AI agents, automation tools, or web scrapers, Airtop lets you control browsers in the cloud without getting stuck on logins.
Digma Preemptive Observability (👍 710) - Digma is a Preemptive Observability product that identifies performance and scaling issues in pre-production environments and provides a code-level root cause and the severity of the issues, all done automatically and continuously.
a0.dev (👍 477) - a0.dev (YC W25) helps developers build native mobile apps in days instead of weeks by generating full react native apps and custom components with AI. Enter your app idea and we'll build a custom react native app for you!