F2 News | January 2025

Message From The Team

2025 is off to a strong start. The AI platform shift is accelerating and opportunities are multiplying. To share insights on scaling, we hosted our annual founders gathering with top executives from NASDAQ listed companies. We also held a cybersecurity showcase in New York, connecting CISOs from Fortune 500 companies—including Verizon, BNY, Uber, and Broadcom—with six of our cyber startups. As our companies make headlines, it’s an exciting time to be building.

Sector Spotlight

DeepSeek, an under-the-radar Chinese AI startup, made headlines after its assistant app briefly surpassed ChatGPT on the U.S. App Store. But what really moved markets was its claim of training a GPT-4-level model for just $5.6M, a fraction of the usual $100M+ cost. This triggered a $1 trillion selloff on NASDAQ as investors questioned whether AI training was about to get much cheaper, casting doubts on the revenue expectations for chip giants like Nvidia.Notably, DeepSeek’s claims about training a model on par with GPT-4 are fascinating but far from proven.

‍Analysts have flagged serious doubts, noting that such breakthroughs would likely still require advanced GPUs, which DeepSeek wouldn’t have access to due to U.S. sanctions. The lack of independent replication also raises questions.That said, if DeepSeek does become the benchmark for training models, then we will likely see more demand in the other AI workloads and in related segments like Cloud Storage. In other words, if DeepSeek’s technology reduces the cost of AI, then the inference phase where AI is utilized in real world applications would be accelerated and vertical application businesses – where F2 invests – would see higher margins.

What’s clear to us is that breakthroughs like DeepSeek’s highlight the increasing penetrarion and accessibility of AI, which underscores our core thesis. The real opportunity isn’t in competing with foundational models or chipmakers but in leveraging AI where it delivers tangible value that startups can actually capture. As AI costs drop and capabilities improve, industry-wide transformation inevitably follows.

Portfolio Updates

• Doti announced $7M seed round led by F2 to transform enterprise knowledge management with AI.
• 4M Analytics expanded U.S. utility mapping to cover all of Utah and Oregon, inked deals with Departments of Transportation.
• Dataloop announced new partnership with MongoDB to power multimodal AI for smarter customer service.
• Faye expanded travel care product offering to include new eSIM service.
• Justt announced record results for 2024, recovering over $100M in chargebacks for merchants and expanding to 200 enterprise clients.
• eToro [F2 GP previously backed company] filed for US IPO, targeting $5 billion valuation.

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