Weekly writing about how technology and people intersect. By day, I’m building Daybreak to partner with early-stage founders. By night, I’m writing Digital Native about market trends and startup opportunities.
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25 Predictions for 2025 (Part II)
Last week in Part I, we covered 13 predictions for 2025—from the TikTok ban to Waymo, from humanoid robots to digital clones:
This week, in Part II, we’ll tackle the final 12 predictions.
Let’s dive in 👇
13) We get our first generative, interactive, never-ending role-playing game.
That was a mouthful. And MMORPG is already a mouthful—that’s Massively Multiplayer Online Role-Playing Game. Think World of Warcraft.
Maybe we have a new acronym coming—something like MMOGIIG, Massively Multiplayer Online Generative Interactive Infinite Game. Someone more clever than me will think of better acronym, but the point is: gen AI is coming for gaming, and with good timing. Gaming has fallen out of favor after its COVID run-up. Here are two charts from PitchBook that show the gaming winter:
I expect that in 2025, gaming comes roaring back.
Gaming is underinvested in relative to its size ($250B+ market, growing to ~$700B by 2030) or reach (3B+ gamers worldwide). In recent years, we saw gaming cement itself more deeply in culture: The Super Mario Bros Movie was one of the highest-grossing movies ever, for instance, while TV saw big-budget adaptations of The Last of Us and Fallout. Microsoft bought Activision Blizzard for $75B, and even The New York Times is becoming, in some ways, more of a gaming company than a news organization.
Gaming has been waiting for its next era, and that era is now arriving. We’ll see AI gaming companies start to generate buzz this year. At Daybreak, we have one such company—Sound Games, still in Stealth. Sound is hiring, so if you’re looking to build the future of games with AI, send them a note at jobs@sound.games 📬 🎮
A year ago in January 2024’s Crazy Things, we wrote:
Why should a story end when production costs are cheap and when participants in the story can steer the story? Imagine playing a video game that doesn’t render, but generates; it adapts to your gameplay, with new levels rapidly created as you go. You can’t “beat” the game like you’d beat an old console game you picked up at GameStop. It just keeps going as long as you keep playing.
2025 will see the first mainstream “infinite” generative game, a never-ending game that adapts to player decisions in real-time. This prediction is a reach—I wouldn’t be surprised if in December, I’m carrying this one over to 2026—but it’s inevitable. The future of gaming is coming, fast.
14) Pixar releases a short film that’s AI-generated.
Let’s continue with media for a minute. Pixar has long been at the forefront of innovation. Toy Story was the first full-length CGI film, and Pixar has been central to 3D content creation since its origins. Last year we even titled a Digital Native piece The Future of Technology Looks a Lot Like Pixar. That piece dug into USD—Universal Scene Depiction technology. From last year’s piece:
Essentially, USD is open-source software that lets developers move their work across various 3D creation tools, unlocking use cases ranging from animation (where it began) to visual effects to gaming. Creating 3D content involves a lot of intricacies: modeling, shading, lighting, rendering. It also involves a lot of data, but that data is difficult to port across applications. Last year Apple spearheaded an alliance with Pixar and Nvidia to effectively solve this problem, creating a shared language around packaging, assembling, and editing 3D data. In Nvidia’s words: “USD should serve as the HTML of the metaverse: the declarative specification of the contents of a website.”
So Pixar knows what it’s doing when it comes to cutting-edge storytelling technologies. It’s only natural that Pixar plays a key role in gen AI.
I’ve seen some people predict that 2025 will bring a Pixar AI movie. Fred Wilson predicted an AI animated film gets an Oscar nomination. I think that’s a tad too soon. Rather, Pixar could release an AI short film. Pixar has pioneered most of its technologies with short films—think, the old man playing chess with himself in “Geri’s Game,” which played before Toy Story. Cue the nostalgia.
It’s become a tradition for Pixar to share short films ahead of its features. The best short is obviously Lava, but nearly all are excellent.
AI will dramatically lower Pixar production costs and shorten timelines. Most Pixar movies take $200M+ and years to make—could AI drop that by an order of magnitude? We’ll see. Maybe 2025’s Pixar feature-length, Elio, incorporates AI into production. But I think we see Pixar dabble with shorts first.
The AI revolution in film will start in animation, and Pixar will be at the forefront as usual.
15) Google will launch an AI tutor for K-12.
This is a straightforward one. Google has shown an interest in education for a long, long time. But education has always been a tricky category—we went over the reasons why in last fall’s How AI Will Change Education. In short: bureaucracy, red tape, thin budgets.
AI will (hopefully) be the inflection point for a lethargic, but massive industry—a $2T market in the US, $5T globally.
The Holy Grail of education is personalized learning, and it turns out that AI models are pretty damn good at personalization. Expect an education reckoning. Google will be at the forefront of this sea change, announcing a free AI tutoring product for millions of learners.
16) Betting on everything goes mainstream. We see a new unicorn minted around the financialization of everything.
A common theme that we write about in Digital Native is “the financialization of everything.” See: r/WallStreetBets, GameStop saga, Bored ApeYacht Club, and so on.
The most recent phenomenon here is prediction markets, which we covered in last months 10 Charts installment. During the U.S. election, prediction markets proved more accurate than polls in forecasting the winner.
On betting sites like Kalshi, you can bet on almost anything.
When will Bitcoin hit $200K?
Will TikTok be banned?
Who will win the Grammy for Album of the Year?
In December, I asked Kalshi’s co-founder and CEO, Tarek, to share some charts that show how prediction markets are taking off. Here’s what he and Philip on his team shared:
Impressive stuff.
In 2025, everything gets financialized. Sports betting is on a tear, particularly with new sweepstakes models that circumvent regulations in states like California. Crypto is also having a comeback. And event contracts in prediction markets are going mainstream. I’m “long” the financialization of everything—the trend combines new Gen Z behaviors with enabling technologies, and it’s here to stay.
Of course, there’s a dark side. Barron’s ran a piece last month about how kids were betting on virtual items like skins in Counter-Strike, and losing tons of money. In the words of one kid: “It ruined a lot of years of my life.”
![Vídeo] Vê todas as skins reveladas do Counter-Strike 2 - Fraglíder](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff2069bfb-83d3-4624-8fac-962cdf1709ed_1200x675.jpeg "Vídeo] Vê todas as skins reveladas do Counter-Strike 2 - Fraglíder")
Alongside the rise of new betting platforms, we’ll see increased controversy and attempts at regulation.
17) A major climate disaster forces “climate tech” back into the spotlight.
I wrote this prediction before last week’s LA wildfires broke out. With any luck, we won’t get another climate disaster of this magnitude this year. But I’m not sure we’ll be so lucky.
I think the U.S. will get another climate disaster—maybe a hurricane, a flood, another fire—and the event forces a much-needed conversation about climate change. More young people will build in climate, and we’ll see VC dollars flow into the space. These charts, which were on a downward trajectory, begin to change course:
18) Healthcare faces a reckoning after the murder of UnitedHealthcare CEO, Brian Thompson.
This is another broad prediction for another broken segment of the economy: healthcare. And it’s not exactly groundbreaking. You mean, America’s largest industry, with the lowest NPS of any industry, will change? Duh. But bear with me.
I’ve written in the past about the “why now” for healthcare, particularly in the appropriately-titled October piece, The “Why Now” for Healthcare.
That piece was before Luigi Mangione shot UnitedHealthcare’s Brian Thompson in midtown Manhattan. It argued about a “perfect storm” of catalysts driving change in healthcare. Mangione highlighted the “cultural shift” we talked about.
It stuns me that ~50% of people under 30 say that Mangione was justified in that murder. (The best take on this: An Astonishing Level of Dehumanization, from Peter Wehner in the The Atlantic.) Clearly, people are fed up with the healthcare system. And the problem is bad. Check out these charts:
Those charts give you a sense of why people are so angry. So what’s gonna happen? More founders will pour into healthcare, looking at old problems with fresh eyes. How can we measure progress here? We’ll see a meaningful increase in early-stage venture dollars flowing to healthcare.
19) We’ll see a breakthrough consumer health AI company. One in hardware, multiple in software.
More specifically, we’ll see a consumer AI company break through in healthcare. Our health runs on a lot of data, and AI is pretty good at ingesting data and drawing out insights and recommendations. The time is ripe for a $5B+ consumer health company.
On the hardware side, we’ve seen Oura and Whoop and Eight Sleep take off. Apple Watch, of course, has gone from under-whelming to a major business line for Apple. So what comes next? I think we start to see implantable microchips go mainstream. In 2025, you’ll have a friend get a chip implanted to monitor key health data, connected to their smartphone. This will seem Black Mirror-y in the near-term, but commonplace in a few years.
And outside of hardware, we’re going to spend more time talking to AI doctors than real-life doctors. Sure, human doctors shouldn’t be replaced—but many low-acuity conditions can be addressed with well-trained models. We’ll see consumer-facing healthcare companies innovate here. Two of them in the Daybreak portfolio are hiring. Honeydew is building the future of dermatology and skincare (including an AI dermatologist!)—check out David’s post here for open roles. And Marble Health is combatting the mental health crisis for teens—check out roles on their job board here.
20) AI therapists actually…improve mental health.
Last one on health. America is undergoing a full-on mental health crisis, and a lot of people are turning to AI therapists. It’s now common to criticize AI therapists—shouldn’t we be helping people see actual humans, people argue? Well, yes. But the thing is: healthcare is pretty broken, and access to care is gated.
In the meantime, AI therapists can actually be pretty helpful. Here’s what Character’s “Therapist” bot says to me when I mention stress and anxiety:
For a lot of people, this might help—a lot. In 2025, AI therapists will face backlash, but they’ll actually move the metrics that matter on mental health.
21) The number of VC firms drops by 1,000.
Check out this chart from The FT and PitchBook—active VC firms dropped from ~7,000 to ~6,000 in 2024.
We’re going to see another drop of ~1,000 this year.
Yet despite fewer firms, fundraising hauls will go up in 2025. This dovetails with last week’s prediction of LP distributions coming back, as the IPO and acquisition windows open. Here’s how funding has dropped in recent years:
This chart will tick up ever-so-slightly in 2025. But with fewer active VCs, this means the rich get richer—another prediction: fewer than five VC “mega-funds” will comprise >50% of VC fundraising in 2025.
Expect to also see major GP turnover at the top firms. Some of this has been public, but a lot is happening behind the scenes. We’ll see some VCs leave to start their own firms, breathing new life into the emerging manager world, but LPs will want a sharp, differentiated sourcing edge and a real raison d'être.
22) The rebirth of “the lean startup”: a company hits $25M ARR with <10 employees and <$10M in venture capital.
A few people have made predictions like this, with varying numbers. Maybe it’s $10M ARR, not $25M; maybe it’s 5 employees, not 10. Time will tell. But the basic prediction is the same: less is becoming more.
This is because with new technologies, workers can do more with less. I’ve shared this chart in the past, but it paints a good portrait of a decades-long trend:
This is good timing for startups. The capital availability ratio—the ratio of capital demand to capital supply—remains high. PitchBook came out with its NVCA Monitor on Monday, and here’s the latest data:
Early-stage is hovering above 2x still, double where we were a couple years back.
So with capital tighter, it’s good for companies that they can do more with less. We’ll see more startups opt for a small Pre-Seed or Seed to get off the ground, before pursuing more capital efficient growth thereafter.
23) 2025 brings a Zuckerberg backlash.
Zuck has had a glow-up. Physically, of course, he’s transformed—he’s become a trained Mixed Martial Arts athlete; he wears a chain; he’s grown out his hair. That makeover hasn’t gone unnoticed online:
But Zuck has also been playing the PR game, hard. He’s been working to rehabilitate his image, and I think he’s overplayed his hand. 2025 brings the backlash.
Lulu Cheng Meservey had a good take on X: the Zuck glow-up is now so overdone that it seems artificial, manufactured, inauthentic. Going on Joe Rogan last week may have been the final straw.
We can already see a backlash brewing on TikTok, accelerating by Meta rolling back moderation and by the TikTok ban being viewed as Zuckerberg puppeteering. TikTok is looking like it will most likely be banned—making my prediction last week already wrong!—but I still think there’s a chance it’s saved. Maybe Trump plays savior, or maybe Musk swoops in as Bloomberg reported on Monday.
But even if TikTok is banned, I’m not sure Meta will be the beneficiary that it hopes to be. The Zuck backlash is real. I’ll leave you with this quote from one angry TikTok user, courtesy of MG Siegler’s Spyglass:
24) We’ll have our first AI Super Bowl ad.
Of all the content formats for AI to invade, I think advertising comes first. We covered this a bit in last year’s Barbie and the AI-Generated Internet, but 2025 will take us to a new level. AI will bring down advertising production costs meaningfully.
Now, I’m not sure we’ll see a fully AI-generated Super Bowl ad. But some elements of ads will be generated; it might be tough to tell which. Perennial Super Bowl advertisers have actually been using AI for years. This isn’t always gen AI—sometimes this is old-fashioned personalization. Coke, for instance, used data insights in its “Share a Coke” campaign to localize their ads, changing names, phrases, and emojis by geography.
We’re a few years away from ads in which you see yourself in the ad—say, seeing yourself drinking a coke on your television or on your laptop. But that future will come eventually. In the meantime, we’ll see companies like Icon build tools for marketers to generate and test ads at scale.
In my mind, ads will progress something like this:
Using AI to personalize and localize ads (already happening)
Incorporating generated elements into ads to bring down production costs (starting to happen)
Fully-generated ads using a celebrity’s likeness, licensed of course, and eventually featuring you, the consumer (the Holy Grail—a little ways away)
25) Out: Automation. In: Augmentation.
Okay, this one is a little broad—but I think this will be the encompassing theme of early-stage tech in 2025. Last year saw agent mania, but I think in 2025, we see a decided shift from all-out automation to augmentation.
One of our more popular pieces last year was The Egg Theory of AI Agents, which made the argument that users should be involved in AI tools. I stand by that. Technology moves a lot faster than social norms. It will be uncomfortable for people to have AI coworkers running all over the place unchecked. We’ll see more extensions of existing jobs than outright replacement. We’ve seen this a bit with Cursor vs. Devin in coding.
In this case, Cursor is the augmenter while Devin is building AI coworkers. My guess is that we see a lot more of the former in 2025; the latter is still a little ways off.
Let me know what I missed—or what I’m probably wrong about.
See you next week 👋
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