AI Surge Fuels $40B OpenAI Deal, 20 Unicorns, Pentagon Microreactor Push, and Software Firm Squeeze

Venture capital investment in startups reached a multi-year high in the first quarter of 2025, with artificial intelligence (AI) fueling deal activity. The busiest venture backers, including Y Combinator, SoftBank, Lightspeed Venture Partners, Andreessen Horowitz, and General Catalyst, increased their post-seed investments compared to the previous year. SoftBank's $40 billion investment in OpenAI was the largest venture investment on record, while Y Combinator led both seed and post-seed rounds, including Flock Safety's $275 million Series F and Stoke Space's $260 million Series C. In total, 20 new tech unicorns were created in 2025 so far, with several AI companies, such as Celestial AI and Assured, among those reaching billion-dollar valuations. More than 100 public software companies are experiencing financial pressure due to rapid advancements in AI technology, according to a study by AlixPartners. These companies face competition from both AI-native startups and large technology firms investing heavily in AI, such as Microsoft and Salesforce. Klarna recently dropped Salesforce and Workday in favor of smaller AI-powered vendors and in-house agents. The study found that the percentage of high-growth companies among 122 mid-market software vendors fell from 57% in 2023 to 39% in 2024, with only 27% expected to remain high-growth this year. The median net dollar retention rate dropped from 120% in 2021 to 108% in the third quarter of 2024. Compute costs for AI agents are rising, and some companies are experimenting with outcome-based pricing. The U.S. Department of Defense is advancing small modular and microreactor nuclear power projects to address surging electricity demand from AI data centers. The Defense Innovation Unit (DIU) has selected companies such as General Atomics Electromagnetic Systems, Kairos Power, and X-Energy as eligible to build microreactors at military installations. DIU's involvement is intended to help companies scale production and navigate regulatory challenges. The reactors, ranging from one to ten megawatts, are intended to provide reliable power for bases and may support a future commercial microreactor industry. Project Pele, a previous mobile microreactor initiative, is being reconsidered in favor of fixed installations.