In 2026, AI Transitions from Hype to Practical Applications

If 2025 Was a Vibe Check, 2026 Will Be a Real-World Revolution for AI

While 2025 was about AI’s vibe check, 2026 promises to transform the tech landscape into something far more practical. The spotlight is shifting from building larger language models to making AI genuinely usable. This means deploying smaller, efficient models, integrating AI into physical devices, and designing systems that fit seamlessly into human workflows.

Experts believe that 2026 will be a pivotal year of transition—from brute-force scaling to innovative research, from flashy demos to precise applications, and from self-proclaimed autonomous agents to those that genuinely enhance human productivity.

The party isn’t over, but the industry is starting to get serious.

Scaling Laws: Time for a Rethink

Amazon data center
Image Credits: Amazon

In 2012, the groundbreaking AlexNet paper showcased how AI could learn to recognize objects by analyzing millions of images. This computationally intensive process paved the way for a decade of AI advancements.

The launch of GPT-3 in 2020 marked a new era, suggesting that simply scaling up models could unlock capabilities like coding and reasoning. Kian Katanforoosh, CEO of AI agent platform Workera, calls this the “age of scaling,” where larger compute resources were thought to drive the next wave of advances.

However, researchers now believe the AI field is nearing the end of its scaling potential and may shift back into a phase of exploration.

Yann LeCun, Meta’s former chief AI scientist, has long warned against an over-reliance on scaling and advocates for developing innovative architectures. Meanwhile, Ilya Sutskever highlighted in a recent interview that current models are plateauing, underscoring the necessity for fresh ideas.

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“I believe that in the next five years, we will discover a superior architecture that significantly advances beyond transformers,” Katanforoosh stated. “If we fail to do so, improvements in model performance may stagnate.”

Embracing Smaller Models: Less Can Be More

While large language models excel at generalization, experts predict that the next wave of enterprise AI will favor smaller, agile models customized for specific applications.

“Fine-tuning smaller language models will emerge as a major trend for established AI enterprises in 2026, driven by their cost-effectiveness and performance,” noted Andy Markus, AT&T’s chief data officer. “Businesses are increasingly turning to smaller models because, when fine-tuned, they can match larger models in accuracy and are far superior in terms of cost and speed.”

French AI startup Mistral has likewise argued for its small models’ enhanced performance after fine-tuning, suggesting they may outshine larger counterparts.

“SLMs’ efficiency, cost-effectiveness, and adaptability make them ideal for tailored applications where precision is crucial,” added Jon Knisley, an AI strategist at ABBYY.

Markus believes that SLMs will play a vital role in the forthcoming agentic era, while Knisley sees their smaller size as beneficial for local device deployment, a trend bolstered by advancements in edge computing.

Learning Through Experience: The Next Frontier

3D space exploration through AI
An interactive 3D environment created using AI.Image Credits: World Labs/TechCrunch

Unlike humans, who learn through experiences, language models primarily predict what comes next. Researchers believe that the next breakthrough will stem from “world models”—AI systems that understand movement and interactions in a 3D space.

Signs that 2026 will focus on world models are growing. LeCun has left Meta to establish his own world model lab and is reportedly seeking a $5 billion valuation. Google’s DeepMind has been developing Genie, a model that offers real-time interactive capabilities, while startups like Decart and Odyssey are also making strides in this space.

The potential impact of world models will likely become apparent first within the gaming industry. Reports suggest this sector could see growth from $1.2 billion between 2022 and 2025 to an astounding $276 billion by 2030.

As presented by Pim de Witte, founder of General Intuition, virtual environments may redefine gaming and serve as essential testing grounds for next-generation foundation models.

The Rise of Agentic AI Solutions

While agents didn’t meet expectations in 2025, their limitation stemmed from difficulty in accessing the tools necessary for real-work applications.

Anthropic’s Model Context Protocol (MCP) acts as the “USB-C for AI,” enabling seamless communication between AI agents and external resources, and is quickly becoming the industry standard. OpenAI and Microsoft have adopted MCP, with Anthropic recently contributing it to the Linux Foundation’s new Agentic AI Foundation.

With MCP simplifying agent integration, 2026 appears poised for a shift of agentic workflows from pilot projects to everyday business operations.

Rajeev Dham, a partner at Sapphire Ventures, predicts that advancements will see agent-first solutions become integral to numerous industries. “Voice agents will increasingly manage end-to-end tasks, laying the groundwork for core operational functions,” said Dham.

Emphasizing Augmentation Over Automation

Augmentation in AI
Image Credits: Photo by Igor Omilaev on Unsplash

Although increased agentic workflows may raise fears of layoffs, Katanforoosh of Workera believes the narrative will shift in 2026.

“Next year will truly be about the humans,” he asserts, noting that AI has yet to operate as independently as once predicted. Contrary to the anticipated rhetoric of job automation, the focus will shift to how AI augments, rather than replaces, human roles.

“Many businesses will begin hiring again,” Katanforoosh forecasts, as there will be increased demand for roles in AI governance, transparency, safety, and data management, leading to a projected unemployment rate of under 4% next year.

“People want to work with AI, not for it, and 2026 will be crucial for this paradigm shift,” noted de Witte.

Physical AI: Merging the Digital and Tangible Worlds

Meta Connect event
Mark Zuckerberg showcases Meta’s AI glasses at the Meta Connect event, September 17, 2025.Image Credits: David Paul Morris/Bloomberg / Getty Images

2026 is set to herald the rise of physical AI, with advancements in small models, world models, and edge computing paving the way for practical applications.

“Physical AI will hit the mainstream as a new wave of AI-powered devices, including robotics, autonomous vehicles, drones, and wearables, enters the market,” stated Vikram Taneja, head of AT&T Ventures.

While autonomous vehicles and robotics represent significant advances, the costly training and deployment remains a hurdle. Wearables, however, are more accessible and currently gaining traction. Smart glasses, like Meta’s Ray-Bans, are featuring assistants capable of providing contextual information, while devices like AI health rings and smartwatches encourage ongoing inference.

“Network providers are poised to optimize their infrastructures to accommodate this new array of devices, benefiting those offering flexible connectivity solutions,” Taneja concluded.

Here are five FAQs with answers regarding the idea that in 2026, AI will transition from hype to pragmatism:

FAQ 1: What does it mean for AI to move from hype to pragmatism?

Answer: Moving from hype to pragmatism means that AI technologies will evolve from being largely speculative or overhyped to being applied realistically in various industries. This shift will involve practical implementations that deliver measurable benefits, addressing real-world problems rather than just theoretical possibilities.

FAQ 2: What industries are expected to benefit most from this shift in AI?

Answer: Industries such as healthcare, finance, manufacturing, and logistics are expected to benefit significantly. In healthcare, AI can improve diagnostics and patient care; in finance, it can enhance fraud detection; manufacturing may see increased automation efficiency; and logistics can optimize supply chain management.

FAQ 3: How will this shift affect jobs and the workforce?

Answer: As AI becomes more pragmatic, some jobs may be automated, leading to displacement in certain roles. However, new job opportunities will also arise in fields like AI development, data analysis, and oversight roles. Upskilling and reskilling will be crucial for workers to adapt to the new landscape.

FAQ 4: What challenges might arise as AI becomes more practical?

Answer: Challenges include ethical concerns, data privacy issues, and the potential for bias in AI algorithms. Companies will need to address these issues by establishing guidelines, ensuring transparency, and implementing robust governance frameworks to manage AI deployment responsibly.

FAQ 5: How can businesses prepare for the transition to pragmatic AI?

Answer: Businesses can prepare by investing in AI education and training for employees, conducting pilot projects to test AI technologies, and developing clear strategies for integrating AI into their operations. Collaborating with AI experts and staying informed about technological advancements will also be essential.

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College Dropout: The Most Sought-After Credential for Startup Founders

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    <h2>The Dropout Phenomenon: Are College Degrees Still Necessary for Startup Success?</h2>

    <p id="speakable-summary" class="wp-block-paragraph">While iconic figures like Steve Jobs, Bill Gates, and Mark Zuckerberg famously left college without completing their degrees, numerous <a target="_blank" rel="nofollow" href="https://www.nber.org/papers/w24489#:~:text=of%20Economic%20Research.-,Pierre%20Azoulay%2C%20Benjamin%20Jones%2C%20Daniel%20KimJavier%20Miranda">studies</a> reveal that most successful startups are founded by individuals with bachelor's or even <a target="_blank" rel="nofollow" href="https://news.crunchbase.com/edtech/unicorn-founder-myth-education-matters-strebulaev-stanford/#:~:text=They%20are%206x%20more%20likely,person%20over%2025%20years%20old." target="_blank">advanced degrees</a>.</p>

    <h3>The Allure of the Dropout Founder</h3>

    <p class="wp-block-paragraph">Despite the data, the allure of the dropout founder remains strong, though venture capitalists' enthusiasm for non-graduates fluctuates. This trend has gained momentum, particularly amidst the current AI boom.</p>

    <h3>Demo Days: Showcasing Dropout Credentials</h3>

    <p class="wp-block-paragraph">At Y Combinator <a target="_blank" href="https://techcrunch.com/2025/09/15/the-9-most-sought-after-startups-from-yc-demo-day/">Demo Days</a>, many founders are highlighting their dropout status in brief pitches.</p>

    <p class="wp-block-paragraph">“I don’t believe YC formally tracks dropout status, but anecdotally, I’ve noticed more founders emphasizing their dropout journeys in recent batches,” remarks Katie Jacobs Stanton, founder and general partner of <a target="_blank" href="https://techcrunch.com/2024/07/30/moxxie-ventures-led-by-ex-twitter-media-head-raises-95m-third-fund/">Moxxie Ventures</a>. “A dropout status is increasingly seen as a strong credential, reflecting commitment and determination within the venture ecosystem.”</p>

    <h3>Staying or Leaving: The Decision for Young Entrepreneurs</h3>

    <p class="wp-block-paragraph">Though many prominent young founders have chosen to complete their education, examples abound of those who dropped out to seize opportunities. Michael Truell, CEO of Cursor, is an MIT graduate, while Scott Wu, co-founder of Cognition, is from Harvard.</p>

    <p class="wp-block-paragraph">Yet, aspiring entrepreneurs like Brendan Foody, who left Georgetown to co-found Mercor, worry that finishing their degrees might mean losing the chance to capitalize on the AI revolution.</p>

    <p class="wp-block-paragraph">As Kulveer Taggar, founder of the YC-focused Phosphor Capital, states: “There’s a palpable sense of urgency, a feeling of FOMO. The calculation is clear: graduate or start building.”</p>

    <h3>Extreme Measures: The College Dropout Dilemma</h3>

    <p class="wp-block-paragraph">This urgency has led to some drastic decisions. A professor from an elite university recounts a student who opted out in his final semester, believing that a diploma might jeopardize his chances of securing funding.</p>

    <h3>The VC Perspective: Dropout Label vs. Value of Education</h3>

    <p class="wp-block-paragraph">While some founders view a diploma as a potential liability, Yuri Sagalov, who leads General Catalyst’s seed strategy, suggests that VCs often overlook a dropout label, particularly for students nearing graduation: “In my experience, I don’t differentiate between someone who graduates and someone who drops out in their fourth year.”</p>

    <p class="wp-block-paragraph">Sagalov emphasizes that, although self-taught tech prodigies can succeed without formal education, the social network and brand association of a university carry substantial value, regardless of whether a diploma is obtained.</p>

    <p class="wp-block-paragraph">“The social benefits are significant...people will look you up on LinkedIn and often care less about whether you graduated,” Sagalov adds.</p>

    <h3>Investors' Varied Stances on Youth and Experience</h3>

    <p class="wp-block-paragraph">While many investors today accept that founders can succeed without a degree, there’s a divide among VCs regarding the edge young founders have in the current market.</p>

    <p class="wp-block-paragraph">Wesley Chan, co-founder of FPV Ventures, expresses caution when considering investments in dropouts. He prioritizes wisdom—something he believes is often found in “older founders or individuals with a few battle scars.”</p>
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Certainly! Here are five FAQs regarding the concept of "college dropout" being viewed as a coveted credential for startup founders.

FAQ 1: Why is being a college dropout considered an asset for startup founders?

Answer: Being a college dropout is often seen as an asset because it suggests a willingness to take risks, embrace unconventional paths, and focus on practical experience over formal education. Many successful entrepreneurs, like Bill Gates and Mark Zuckerberg, have achieved great success without completing college, inspiring others to pursue their ideas directly.

FAQ 2: Does dropping out of college guarantee startup success?

Answer: No, dropping out of college does not guarantee success as a startup founder. While some prominent entrepreneurs have thrived without a degree, the path to success involves hard work, resilience, and the ability to learn and adapt. Education can still provide valuable skills and networks that are beneficial in entrepreneurship.

FAQ 3: What skills should college dropouts focus on to succeed in startups?

Answer: College dropouts should focus on developing skills such as problem-solving, coding, marketing, networking, and financial management. Gaining practical experience through internships, projects, or starting small ventures can also be incredibly beneficial.

FAQ 4: How do investors view college dropouts when considering funding?

Answer: Investors may have mixed views on college dropouts. Some admire their ambition and practical experience, while others may prefer entrepreneurs with formal education credentials. Demonstrating a strong business model, market understanding, and a capable team can mitigate concerns related to lacking a degree.

FAQ 5: Are there successful resources and communities for college dropouts pursuing startups?

Answer: Yes, there are many resources and communities available for college dropouts. Networking events, online forums, and mentorship programs, like Y Combinator and startup incubators, provide support and resources for aspiring entrepreneurs. Online platforms offer courses and workshops that can help develop essential skills without formal education.

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The Phone is No More: What Comes Next?

<div>
    <h2>True Ventures Co-Founder Jon Callaghan: The Future of Smartphones is Under Threat</h2>

    <p id="speakable-summary" class="wp-block-paragraph">True Ventures co-founder Jon Callaghan believes that the way we use smartphones will drastically change in the next five to ten years.</p>

    <h3>True Ventures' Unique Approach to Innovation</h3>

    <p class="wp-block-paragraph">As a prominent venture capitalist with notable successes—including brands like Fitbit, Ring, and Peloton—Callaghan's insights are far from mere speculation. They form the basis of True Ventures' investment strategy.</p>

    <h3>Operating Quietly but Effectively</h3>

    <p class="wp-block-paragraph">Despite managing approximately $6 billion across 12 core seed funds and four opportunity-style funds, True Ventures often flies under the radar. While other firms focus on publicity, True cultivates a close-knit network of repeat founders, contributing to their impressive record of 63 successful exits and seven IPOs from a portfolio of around 300 companies over 20 years.</p>

    <h3>Identifying Trends in Human-Computer Interaction</h3>

    <p class="wp-block-paragraph">In the ever-evolving landscape dominated by AI hype, Callaghan's vision stands out. He firmly states, “We’re not going to be using iPhones in 10 years.” Even in five years, he predicts a transformation in how we engage with smartphones.</p>

    <h3>The Inefficiency of Current Mobile Interfaces</h3>

    <p class="wp-block-paragraph">According to Callaghan, smartphones fall short as the primary interface between humans and technology. He critiques the current method of texting and emailing as inefficient, prone to errors, and disruptive to daily life.</p>

    <h3>Pioneering New Interaction Methods</h3>

    <p class="wp-block-paragraph">Understanding this challenge, True Ventures has invested years exploring alternative interfaces, whether software or hardware-based. This includes early investments in Fitbit, Peloton, and Ring, all of which demonstrated new, intuitive ways for consumers to engage with technology.</p>

    <h3>Introducing Sandbar: The Future of Thought Capture</h3>

    <p class="wp-block-paragraph">The latest embodiment of Callaghan's vision is Sandbar, a hardware device he describes as a “thought companion.” This voice-activated ring focuses on capturing and organizing thoughts through voice notes, filling a critical gap in current technology. “It does one thing really well,” he affirms.</p>

    <h3>A Partnership Built on Shared Vision</h3>

    <p class="wp-block-paragraph">True’s interest in Sandbar was driven not just by the product but by the shared vision with founders Mina Fahmi and Kirak Hong. The duo's previous work on neural interfaces at CTRL-Labs showcased their innovative approach to technology.</p>

    <h3>Investing in Behavioral Change, Not Just Gadgets</h3>

    <p class="wp-block-paragraph">Callaghan emphasizes the importance of betting on new behaviors rather than new devices. True Ventures maintains a disciplined investment approach, focusing on seed checks of $3 million to $6 million for 15% to 20% ownership, distancing itself from the billion-dollar funding frenzy common in today's AI landscape.</p>

    <h3>Cautious Optimism Amid AI Hype</h3>

    <p class="wp-block-paragraph">While Callaghan acknowledges the potential for transformative AI technologies, he also identifies warning signs in the heavy capital demands of the current cycle. Nonetheless, he believes the most significant value lies in new applications that will emerge from evolving technology interfaces.</p>

    <h3>Recognizing Shifts in Technology Interaction</h3>

    <p class="wp-block-paragraph">Callaghan’s investment philosophy reflects an intuitive understanding of emerging trends. He points to a saturation in the smartphone market, contrasting it with the rapid growth of wearables and voice-enabled devices, indicating a shift in how people wish to interact with technology.</p>

    <h3>Stay Tuned for More Insights</h3>

    <p class="wp-block-paragraph"><em>Pictured above, Sandbar’s Stream ring. For a deeper dive into Callaghan's insights, catch our conversation on the <a target="_blank" rel="nofollow" href="https://open.spotify.com/show/76SeToo8Rxj8hRTE0iQwWZ">StrictlyVC Download</a> podcast, with new episodes every Tuesday.</em></p>
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Sure! Here are five FAQs based on the phrase "The phone is dead. Long live . . . what exactly?"

FAQ 1: What does "The phone is dead" mean?

Answer: "The phone is dead" typically refers to a smartphone or mobile device that has run out of battery or is malfunctioning. It can also signify the end of an era for traditional phones as technology evolves.

FAQ 2: What does "Long live . . . what exactly?" imply in this context?

Answer: The phrase "Long live . . . what exactly?" highlights the transition or continuation of technology despite the decline of older devices. It invites curiosity about what new technology or innovations will take their place.

FAQ 3: What are some examples of technologies that might replace traditional phones?

Answer: Potential replacements for traditional phones include wearable devices, smart glasses, or augmented reality platforms. These technologies offer new ways to communicate and interact without relying solely on handheld devices.

FAQ 4: Is this phrase a commentary on societal dependence on smartphones?

Answer: Yes, the phrase suggests a reflection on our reliance on smartphones and considers the implications of their decline. It encourages a discussion about alternative technologies and lifestyles that may arise from this shift.

FAQ 5: How can I prepare for a future where traditional phones are obsolete?

Answer: To prepare for a future without traditional phones, stay informed about emerging technologies, explore wearable and advanced communication tools, and cultivate skills for adapting to new platforms. Embracing flexibility and openness to change will be crucial.

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Meta Acquires Manus, the Buzz-Worthy AI Startup on Everyone’s Lips

Meta Platforms Acquires Manus: A Game-Changer in AI

Mark Zuckerberg strikes again with a strategic acquisition.

Meta Acquires AI Startup Manus

Meta Platforms has officially acquired Manus, a Singapore-based AI startup that has taken Silicon Valley by storm since its debut last spring. The startup gained attention with a demo showcasing its AI agent’s ability to screen job candidates, plan vacations, and analyze stock portfolios, claiming to outperform OpenAI’s Deep Research.

Significant Funding and Valuation

In April, just weeks after launching, Manus secured $75 million in funding led by venture capital firm Benchmark, elevating its valuation to $500 million. Notably, Benchmark general partner Chetan Puttagunta joined Manus’ board. Additional investments came from prominent backers like Tencent, ZhenFund, and HSG (formerly Sequoia China), totaling $10 million in early funding.

Impressive Growth and Revenue

The company recently announced it has signed up millions of users and is generating over $100 million in annual recurring revenue from its subscription-based membership service.

Meta’s Strategic Move

Following Manus’ impressive trajectory, Meta began negotiations, reportedly agreeing to a $2 billion purchase—aligning with Manus’ anticipated valuation for its next funding round, according to the WSJ.

AI for Profit: A Shift in Strategy

For Zuckerberg, who has heavily invested in AI, Manus represents a new opportunity: a profitable AI product. This acquisition comes at a critical time as investor confidence in Meta’s $60 billion infrastructure spending wanes, alongside the broader tech industry’s reliance on debt for data center developments.

Integration into Meta’s Ecosystem

Meta plans to keep Manus operationally independent while integrating its AI agents into platforms like Facebook, Instagram, and WhatsApp, complementing Meta’s existing chatbot, Meta AI.

Concerns Over Chinese Ownership

However, there is a notable complication: Manus’ founders originally established its parent company, Butterfly Effect, in Beijing in 2022, before relocating to Singapore in mid-2025. This history raises potential concerns in Washington. Senator John Cornyn has previously criticized Benchmark for investing in Manus, questioning American capital flowing to a Chinese entity.

Bipartisan Scrutiny of China Relations

Senator Cornyn, a Texas Republican known for his strong stance on China and technology, reflects a growing bipartisan concern in Congress regarding relations with China.

Commitment to Divest from China

In response to these concerns, Meta has assured that post-acquisition, Manus will sever all ties with Chinese investors and cease operations in China. A Meta spokesperson confirmed, “There will be no continuing Chinese ownership interests in Manus AI following the transaction.”

Sure! Here are five FAQs about Meta’s acquisition of Manus, the AI startup:

FAQ 1: What prompted Meta to acquire Manus?

Answer: Meta acquired Manus to enhance its AI capabilities, particularly in natural language processing and machine learning. The acquisition aims to integrate Manus’s innovative technologies into Meta’s products, improving user experiences and driving advancements in artificial intelligence.

FAQ 2: What technologies does Manus specialize in?

Answer: Manus specializes in advanced natural language processing, machine learning algorithms, and AI-driven applications. Their technology focuses on creating intuitive interactions between humans and machines, which aligns well with Meta’s vision for the future of communication and social interactions.

FAQ 3: How will this acquisition impact existing Meta products?

Answer: The integration of Manus’s technology is expected to enhance existing Meta products like Facebook, Instagram, and WhatsApp. Improvements may include better content recommendations, more accurate language translations, and enhanced user engagement through smarter AI-driven features.

FAQ 4: Will Manus continue to operate independently after the acquisition?

Answer: While Manus will be integrated into Meta’s broader framework and resources, it’s likely they will maintain a degree of operational independence, allowing their team to continue innovating and developing new technologies while aligning with Meta’s strategic goals.

FAQ 5: What are the potential implications for users?

Answer: Users can expect a more personalized and seamless experience across Meta’s platforms as Manus’s AI solutions are implemented. These enhancements could lead to improved content curation, better communication tools, and a more engaging overall user experience, all while prioritizing user privacy and security.

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VCs Forecast Robust Enterprise AI Adoption for Next Year — Once More

AI in Enterprise: Where Do We Stand After Three Years?

Three years post the launch of ChatGPT, the AI landscape has experienced a remarkable shift. While optimism around AI’s role in enterprise software has fueled a surge of investment in new startups, many companies are still grappling with effective integration of AI tools.

Enterprises Struggle to Reap AI Benefits

Despite considerable investment in AI, enterprises haven’t effectively realized its potential. A recent survey from MIT revealed that a staggering 95% of organizations reported not receiving a meaningful return on their AI investments.

The AI Adoption Timeline: What to Expect by 2026

So, when can businesses anticipate real value from AI integration? Insights from a TechCrunch survey of 24 enterprise-focused VCs suggest that 2026 is poised to be a pivotal year for meaningful AI adoption and budget increases for this technology.

Industry Opinions on AI’s Future in Enterprise

Here’s what industry leaders are saying:

Kirby Winfield, Founding General Partner at Ascend

“Enterprises are learning that LLMs aren’t a catch-all solution. The focus will shift to custom models and improved data management.”

Molly Alter, Partner at Northzone

“Some AI companies may transition from product-based to consulting models, utilizing their expertise to create tailored solutions.”

Marcie Vu, Partner at Greycroft

“We are excited about voice AI, which represents a fundamental shift in how humans and machines interact.”

Alexa von Tobel, Founder at Inspired Capital

“AI will reshape industries like infrastructure and manufacturing by enabling predictive capabilities.”

Lonne Jaffe, Managing Director at Insight Partners

“We’re observing frontier labs focusing more on turnkey applications in sectors like healthcare and education.”

Tom Henriksson, General Partner at OpenOcean

“In 2026, we expect momentum in quantum technologies, but major software breakthroughs may still be a way off.”

Investment Trends in AI

Key investment areas include:

Emily Zhao, Principal at Salesforce Ventures

“We’re focusing on the intersection of AI and physical environments, as well as advancing model research.”

Michael Stewart, Managing Partner at M12

“Our interests lie in future datacenter technology, emphasizing efficiency and sustainability.”

Jonathan Lehr, Co-founder at Work-Bench

“We’re drawn to vertical enterprise software, particularly in regulated sectors.”

Aaron Jacobson, Partner at NEA

“We’re investing in software and hardware that enhance performance while reducing energy consumption.”

Evaluating AI Startups: Key Metrics for Success

According to experts, a strong “moat” in AI isn’t solely defined by advanced models; it encompasses economic integration and proprietary data access.

Kirby Winfield on AI Moats

“It’s all about being embedded in enterprise workflows and providing unique, defensible outcomes.”

Anticipating 2026: Will Enterprises Begin Seeing Returns on AI Investments?

Industry leaders provide mixed insights on whether 2026 will truly be the turning point for enterprises in realizing value from their AI investments, highlighting the journey ahead.

Shifting Budgets: A New Era for AI Investments

As companies navigate AI vendor sprawl, many are expected to consolidate their spending, directing funds toward proven tools and solutions.

What Will It Take to Raise Series A Funding in 2026?

Startups will need compelling narratives and strong customer adoption metrics to secure funding in an increasingly competitive landscape.

The Rising Role of AI Agents in Enterprises by 2026

Insights indicate that AI agents will evolve from their initial adoption phase, potentially becoming integral to organizational workflows.

Fastest-Growing Companies: Identifying Trends

Companies that adapt to security and workflow gaps created by AI are witnessing rapid growth, underscoring the need for innovative solutions.

Strong Retention: What Makes a Company Stick?

Successful companies are those that continuously solve evolving problems as AI becomes more integrated into their clients’ operations.

Here are five FAQs related to the topic of strong enterprise AI adoption predicted for the upcoming year:

FAQ 1: What is driving the predicted adoption of AI in enterprises next year?

Answer: The anticipated surge in enterprise AI adoption is largely driven by advancements in technology, increased investment from venture capitalists, and the growing need for businesses to enhance efficiency, automate processes, and leverage data for decision-making.

FAQ 2: How are businesses planning to implement AI technologies?

Answer: Businesses are planning to implement AI technologies through various strategies, including integrating AI into existing workflows, investing in AI infrastructure, and collaborating with AI-focused startups to develop tailored solutions that meet their specific needs.

FAQ 3: What challenges might enterprises face when adopting AI?

Answer: While the adoption of AI presents significant opportunities, enterprises may face challenges such as data privacy concerns, integration issues with legacy systems, a lack of skilled personnel, and resistance to change from employees accustomed to traditional processes.

FAQ 4: Which industries are expected to see the strongest AI adoption?

Answer: Industries such as healthcare, finance, retail, and manufacturing are expected to see the strongest AI adoption, as they seek to leverage AI for improved customer experiences, predictive analytics, and operational efficiencies.

FAQ 5: How can companies ensure a successful AI adoption strategy?

Answer: Companies can ensure a successful AI adoption strategy by conducting thorough research on AI solutions, investing in employee training, establishing clear objectives for AI initiatives, and continuously monitoring performance and outcomes to make necessary adjustments.

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India’s Startup Funding Reaches $11B in 2025 as Investors Exercise More Caution

India’s Evolving Startup Landscape: Investment Trends in 2025

In 2025, India’s startup ecosystem raised approximately $11 billion, yet the number of investor checks saw a notable decline. This shift highlights the increasing selectivity of funding in the world’s third most-financed startup market, diverging from the AI-driven capital concentration observed in the U.S.

Funding Overview: A Year of Selective Investment

Deal-making trends reveal a significant reduction in funding rounds, with a nearly 39% drop to 1,518 deals compared to the previous year, according to Tracxn. While total funding fell by just over 17% to $10.5 billion, the decline in seed-stage funding was more pronounced, plummeting to $1.1 billion—a 30% decrease year-over-year. Late-stage funding also dwindled to $5.5 billion, marking a 26% decline, as investors became more discerning concerning scale, profitability, and exit expectations. Conversely, early-stage funding showed resilience, increasing by 7% to $3.9 billion.

The Resurgence of Early-Stage Funding

Neha Singh, co-founder of Tracxn, noted, “The capital deployment focus has shifted towards early-stage startups,” highlighting a growing confidence in founders demonstrating strong product-market fit and revenue visibility in an increasingly cautious funding landscape.

AI Startups: A Modest Growth Amid Global Trends

The recalibration of capital allocation was starkly evident in the AI sector, where Indian AI startups garnered over $643 million across 100 deals—an increase of 4.1% from the previous year. Most of this funding targeted early and early-growth stages, with early-stage AI funding reaching $273.3 million compared to $260 million for late-stage rounds. This trend aligns with investor preferences for application-led businesses rather than capital-intensive model developments.

Contrasting Funding Landscapes: India vs. the U.S.

In sharp contrast, U.S. AI funding skyrocketed to over $121 billion in 2025 across 765 rounds—a remarkable 141% increase from 2024, predominantly driven by late-stage deals. Prayank Swaroop, a partner at Accel, emphasized that India has yet to see an AI-first company achieving revenues between $40-100 million within a year—an achievement notably occurring overseas.

Investing with Pragmatism: The Deep-Tech Focus

Investors are increasingly directing their funding toward manufacturing and deep-tech sectors, where India poses less competition from global capital and benefits from its talent pool, cost structures, and market access. While AI captures a considerable portion of investor interest, funding is also flowing into consumer, manufacturing, fintech, and deep-tech ventures. Advanced manufacturing has particularly emerged as a promising long-term opportunity, with the number of startups in this sector surging nearly tenfold over the past few years.

Transitioning Consumer Demands: A Surge in On-Demand Services

Rahul Taneja, a partner at Lightspeed, noted that AI startups comprised about 30-40% of Indian deals in 2025, paralleling a rise in consumer-facing companies. This trend reflects changing behaviors among India’s urban populations and the growing demand for faster, more on-demand services, showcasing India’s unique market dynamics.

Investor Participation: The Shift Towards Selectivity

Investor participation in India’s startup ecosystem experienced a significant contraction, with approximately 3,170 investors involved in 2025—a reduction of 53% from the previous year. This stringent selectivity is evident, with a smaller group of repeat backers emerging as dominant players.

Growing Role of Government in Startups

The Indian government has increased its visibility and involvement in the startup realm, announcing a $1.15 billion Fund of Funds and a ₹1 trillion ($12 billion) initiative aimed at fostering innovation in various tech sectors. This growing state participation has the potential to catalyze private capital flows, mitigating risks tied to regulatory uncertainty.

India witnessed a robust exit market with 42 tech IPOs in 2025—a 17% increase from the previous year. Domestic institutional and retail investors have driven much of the demand, alleviating concerns regarding reliance on foreign capital for exits. M&A activity also grew, with acquisitions climbing 7% year-on-year.

Unicorns and the Path Ahead

While the number of new unicorns in India remained steady, startups reached $1 billion valuations with less capital over fewer funding rounds. This trend indicates a shift towards more cautious scaling compared to prior years and global counterparts.

Looking Ahead: An Evolving Startup Ecosystem

As India moves into 2026, challenges remain regarding its position in the global AI race and the potential for late-stage funding. However, the trends of 2025 signal a maturing ecosystem marked by deliberate capital deployment, predictable exits, and a focus on local dynamics shaping growth. India is evolving into a distinctive market with unique opportunities, offering investors a complementary landscape alongside developed regions.

Here are five frequently asked questions (FAQs) about India’s startup funding hitting $11 billion in 2025 as investors become more selective:

FAQ 1: What contributed to the increase in startup funding in India to $11 billion in 2025?

Answer: The increase can be attributed to several factors, including a burgeoning tech ecosystem, growing consumer markets, and government initiatives supporting startups. Additionally, the rise of innovative business models and the digital transformation across various sectors have attracted significant investor interest.

FAQ 2: How are investors becoming more selective in choosing startups?

Answer: Investors are focusing on startups with proven business models, strong financial metrics, and sustainable growth potential. Due diligence processes are becoming more stringent, with emphasis on startups that demonstrate clear pathways to profitability and scalability, especially in a competitive landscape.

FAQ 3: What sectors are attracting the most investment in India’s startup ecosystem?

Answer: Sectors such as fintech, healthtech, e-commerce, and edtech are currently seeing the most investment. Additionally, emerging areas like agritech and sustainability-focused startups are gaining traction as investors look for innovative solutions to address pressing challenges.

FAQ 4: What impact does selective funding have on startups?

Answer: Selective funding means that only the most promising & well-prepared startups will receive investment, which can lead to a higher bar for entry. While it may be challenging for some emerging companies, it can also foster a healthier startup ecosystem with more robust and viable businesses in the long run.

FAQ 5: What should startups do to attract investment in this selective environment?

Answer: Startups should focus on building a strong business model, demonstrating customer traction, and achieving clear financial targets. Developing a compelling value proposition and maintaining transparency with potential investors can significantly enhance their chances of securing funding. Networking and building relationships within the investment community are also essential strategies.

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Equity’s 2026 Forecast: AI Agents, Major IPOs, and the Evolution of Venture Capital

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    <h2>TechCrunch’s Equity Podcast: Annual Predictions for 2026</h2>

    <p>
        <iframe class="tcembed-iframe tcembed--megaphone wp-block-tc23-podcast-player__embed" height="200px" width="100%" frameborder="no" scrolling="no" seamless="" src="https://playlist.megaphone.fm?e=TCML6939230889"></iframe>
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    <h3>Reflecting on 2025: Major Tech Developments</h3>
    <p>In the latest episode of <a target="_blank" href="https://techcrunch.com/podcasts/equity/" rel="noreferrer noopener">TechCrunch's Equity</a>, hosts Kirsten Korosec, Anthony Ha, and Rebecca Bellan, alongside Build Mode's Isabelle Johannessen, analyze the pivotal tech trends of 2025. From unexpected AI fundraising successes to the emergence of “physical AI,” they outline their predictions for the upcoming year.</p>

    <h3>AI Trends & Challenges: What to Expect</h3>
    <p>The discussion spans essential topics, including why AI agents fell short in 2025 yet hold promise for 2026, Hollywood's response to AI-generated content, and the current liquidity challenges facing venture capitalists.</p>

    <h3>Key Insights from the Episode</h3>
    <p>Don’t miss the full episode where you’ll discover:</p>

    <ul class="wp-block-list">
        <li class="wp-block-list-item">The significance of world models in AI and their distinction from large language models.</li>
        <li class="wp-block-list-item">The decline of “stealth mode” in AI startups and the rise of new funding avenues.</li>
        <li class="wp-block-list-item">Predictions on the turbulent regulatory landscape regarding AI policy, including implications of Trump’s recent executive order for startups.</li>
        <li class="wp-block-list-item">Perspectives on upcoming IPOs: Are OpenAI and Anthropic gearing up for a 2026 public offering?</li>
        <li class="wp-block-list-item">Rapid-fire predictions, from Johnny Ive and Sam Altman's anticipated split to the resurgence of basic cell phones and the rise of “AI native” identities.</li>
        <li class="wp-block-list-item">A sneak peek into Build Mode Season 2, focusing on team building, hiring practices, and co-founder dynamics.</li>
    </ul>

    <h3>Stay Connected with Equity</h3>
    <p>Subscribe to the Equity podcast on <a target="_blank" href="https://www.youtube.com/@TechCrunch" rel="noreferrer noopener nofollow">YouTube</a>, <a target="_blank" href="https://itunes.apple.com/us/podcast/id1215439780" rel="noreferrer noopener nofollow">Apple Podcasts</a>, <a target="_blank" href="https://overcast.fm/itunes1215439780/equity" rel="noreferrer noopener nofollow">Overcast</a>, <a target="_blank" href="https://open.spotify.com/show/5IEYLip3eDppcOmy5DmphC?si=rZDFHv2sQUul_g94iCRgpQ" rel="noreferrer noopener nofollow">Spotify</a>, and various other platforms. Follow us on <a target="_blank" href="https://twitter.com/EquityPod" rel="noreferrer noopener nofollow">X</a> and <a target="_blank" href="https://www.threads.net/@equitypod" rel="noreferrer noopener nofollow">Threads</a> at @EquityPod.</p>
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Here are five FAQs based on Equity’s 2026 Predictions regarding AI agents, blockbuster IPOs, and the future of venture capital (VC):

FAQ 1: What are AI agents, and how are they expected to impact businesses by 2026?

Answer: AI agents are advanced software systems designed to perform tasks autonomously, utilizing machine learning and data analytics. By 2026, they are expected to significantly improve efficiency in various sectors by automating complex tasks, enhancing customer interactions, and enabling data-driven decision-making, ultimately transforming workplace dynamics and productivity.

FAQ 2: What trends are anticipated for IPOs in 2026?

Answer: The predictions suggest that 2026 will witness a surge in blockbuster IPOs, particularly from technology and biotech companies. This influx is expected to be driven by a stable economic environment and investor appetite for innovation. Companies that successfully leverage emerging technologies are likely to attract significant public and institutional investment, making their IPOs highly anticipated events.

FAQ 3: How will venture capital evolve by 2026?

Answer: By 2026, venture capital is expected to become more focused on companies utilizing AI and sustainable technologies. Investors will likely prioritize startups that demonstrate scalability and adaptability in fast-evolving markets. Additionally, there may be a heightened emphasis on diversity in funding, addressing gaps in representation within the startup ecosystem.

FAQ 4: What role will data privacy play in the future of AI agents?

Answer: As AI agents become more integrated into business operations, data privacy will emerge as a critical concern. Companies will need to prioritize robust data protection and compliance with regulations to maintain consumer trust. By 2026, businesses that successfully navigate these challenges will set themselves apart and foster stronger customer relationships.

FAQ 5: What should investors look for in potential IPO candidates?

Answer: Investors should look for companies with strong growth potential, innovative technology, and a solid business model. Additionally, understanding a company’s market position, management team, and commitment to sustainability will be essential. As the landscape evolves, investors may also gauge a company’s adaptability to AI technologies as a key indicator of its future success.

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The Year Data Centers Evolved from Backend to Front and Center

The Rise of Data Center Activism: A Growing Movement Against the Digital Backbone

For years, data centers have operated in relative obscurity, serving as the lifeblood of the internet without much public interest. However, a notable shift is occurring in 2025, as communities across the U.S. are waking up to the profound impact of these facilities.

A Surge in Activism: Over 140 Groups Mobilizing Against Data Centers

Recent protests against data centers have erupted in numerous states, with activists mobilizing against the rapid expansion of these facilities. According to Data Center Watch, there are currently 142 activist groups spanning 24 states actively opposing new developments.

Concerns at the Core: Environment, Health, and Rising Costs

Activists voice a multitude of concerns, including the environmental implications, potential health impacts, and the increased electricity bills associated with new data center projects.

Unprecedented Growth: The Rapid Expansion of Data Centers in America

The data center industry has seen explosive growth, with construction spending soaring by 331% since 2021, according to U.S. Census Bureau data. This surge is accompanied by projections from major tech giants like Google, Meta, and Microsoft, all poised to invest significantly in new infrastructure.

Government Influence: AI Infrastructure Push from Washington

The Biden administration’s focus on artificial intelligence has further accelerated infrastructure expansion. The Stargate Project, announced earlier this year, is a pivotal part of this initiative aimed at re-industrializing the U.S.

Activist Responses: A Growing Public Discontent

Activists like Danny Cendejas of MediaJustice highlight the spontaneous grassroots movements forming against these projects. “The interest in organizing is growing,” he shares, hinting at the long-term potential for community wins against data center expansions.

Local Reactions: Protests and Community Resistance

The backlash against new data center proposals echoes across the nation. With numerous protests in states like Michigan and Wisconsin, community members are voicing their opposition and demanding greater accountability regarding rising energy prices tied to these expansions.

The Political Landscape: Can Activism Shift Elections?

The growing discontent surrounding data centers is becoming a pressing political issue, with implications for the upcoming 2026 midterm elections. Rising utility costs linked to data center expansions are poised to influence voter sentiment significantly.

Grassroots Success: Stopping the Data Center Surge

Activist pressure is beginning to yield results, with Data Center Watch reporting that approximately $64 billion in developments have been blocked or delayed due to public opposition. Cendejas believes that sustained public pressure is crucial for achieving tangible outcomes.

Industry Response: Big Tech Battles Back

In light of mounting opposition, the tech industry is actively countering these movements. The National Artificial Intelligence Association is paving the way for new lobbying efforts, while tech companies are launching campaigns to promote the economic benefits of data centers. As we look ahead to 2026, both the expansion of server farms and the backlash surrounding them are set to continue.

FAQs: The Year Data Centers Went from Backend to Center Stage

1. What does it mean for data centers to go from backend to center stage?

Answer: This phrase signifies a shift in the perception of data centers from being merely support systems for businesses to becoming integral components that drive innovation, efficiency, and growth. As cloud computing and digital services have evolved, data centers have gained prominence as critical assets in enabling business operations.

2. What factors contributed to the rising importance of data centers?

Answer: Several factors contributed, including the exponential growth of data generation, the increased reliance on cloud services, and the demand for real-time data processing. Additionally, advancements in technology, such as edge computing and AI, have highlighted the need for robust data infrastructure.

3. How have businesses adapted to this shift in the role of data centers?

Answer: Businesses have started investing more in their data center capabilities, focusing on scalability, security, and sustainability. Many are migrating to cloud environments or implementing hybrid models. Additionally, companies are increasingly prioritizing data center optimization and energy efficiency.

4. What are the implications of data centers being at the forefront of business strategy?

Answer: With data centers playing a central role, organizations are more likely to integrate data management into their core strategies. This leads to improved decision-making, enhanced customer experiences, and competitive advantages in the marketplace. It also drives a focus on cybersecurity and compliance, given the critical nature of the data being processed.

5. How does this shift affect the future of technology and IT infrastructure?

Answer: The shift means that data centers will continue to evolve, incorporating innovations such as artificial intelligence, machine learning, and automation. As companies increasingly rely on data-driven insights, the design, management, and operation of data centers will adapt to meet growing demands, paving the way for next-generation IT infrastructure solutions.

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Nvidia to License Technology from AI Chip Rival Groq and Appoint its CEO

Nvidia Enters Strategic Partnership with Groq to Boost AI Innovation

Nvidia has initiated a non-exclusive licensing agreement with AI chip competitor Groq. As part of this collaboration, Nvidia plans to onboard Groq founder Jonathan Ross, president Sunny Madra, and their team.

Nvidia’s Major Asset Acquisition from Groq

According to a report by CNBC, Nvidia is set to acquire assets from Groq for approximately $20 billion. However, Nvidia clarified to TechCrunch that this is not a complete acquisition of the company and refrained from commenting on the transaction’s full scope. If CNBC’s figures hold true, this deal could mark Nvidia’s largest purchase yet, solidifying its position in the chip manufacturing industry.

The Rise of AI Processing Power: Nvidia vs. Groq

As tech giants vie for supremacy in AI capabilities, the demand for robust computing power has soared. Nvidia’s GPUs are becoming the industry standard. In contrast, Groq is pioneering a novel chip known as an LPU (language processing unit), which it claims can execute large language models (LLMs) ten times faster while consuming just one-tenth of the energy. Groq’s CEO, Jonathan Ross, is renowned for his groundbreaking work; during his tenure at Google, he was instrumental in creating the tensor processing unit (TPU), a specialized AI accelerator.

Rapid Growth and Future Prospects for Groq

In September, Groq successfully secured $750 million at a valuation of $6.9 billion. The company’s expansion has been rapid, reporting that its technology now supports the AI applications of over 2 million developers, a significant leap from around 356,000 the previous year.

Updated, 12/24/25 at 5:40 p.m. ET, with clarification from Nvidia regarding the details of the deal.

Sure! Here are five FAQs about Nvidia’s decision to license AI chip challenger Groq’s technology and hire its CEO:

FAQ 1: Why is Nvidia licensing Groq’s technology?

Answer: Nvidia is licensing Groq’s technology to enhance its AI chip offerings. This partnership allows Nvidia to leverage Groq’s innovative architecture and design, potentially improving its competitive edge in the AI hardware market.

FAQ 2: Who is the CEO of Groq, and why is Nvidia hiring them?

Answer: The CEO of Groq is Tushar Athreya. Nvidia is hiring him to bring his expertise and vision to boost its AI initiatives. Athreya’s experience in chip design and architecture can contribute significantly to Nvidia’s ongoing developments in AI technologies.

FAQ 3: What impact could this partnership have on AI chip development?

Answer: This partnership could accelerate advancements in AI chip performance and efficiency. By integrating Groq’s technology, Nvidia may be able to enhance its product lineup, leading to faster processing speeds and better energy efficiency for AI tasks.

FAQ 4: How does Groq’s technology differ from Nvidia’s existing offerings?

Answer: Groq’s technology focuses on a unique architecture that emphasizes deterministic performance and efficiency. Unlike Nvidia’s GPU-centric approach, Groq’s chips are designed for high throughput and low latency in AI applications, which could complement Nvidia’s portfolio.

FAQ 5: What does this mean for the future of AI chip competition?

Answer: This move indicates a strategic positioning for Nvidia as AI chip competition intensifies. By acquiring Groq’s technology and leadership, Nvidia aims to strengthen its market position against emerging challengers, potentially reshaping the landscape of AI hardware development.

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Italy urges Meta to halt its ban on rival AI chatbots on WhatsApp.

<div>
    <h2>Italy Orders Meta to Suspend WhatsApp AI Chatbot Policy</h2>

    <p id="speakable-summary" class="wp-block-paragraph">Italy has mandated Meta to halt its ban on using WhatsApp's business tools for AI chatbots, igniting discussions on market competition.</p>

    <h3>Italian Authorities Investigate Meta's Market Dominance</h3>
    <p class="wp-block-paragraph">The Italian Competition Authority (AGCM) announced on Wednesday that its ongoing investigation into Meta's practices revealed sufficient grounds to order the suspension of a policy that restricts companies from utilizing WhatsApp’s business tools for their AI chatbots.</p>

    <h3>Concerns Over Competitive Fairness</h3>
    <p class="wp-block-paragraph">According to the AGCM, “Meta’s conduct appears to constitute an abuse, since it may limit production, market access, or technical developments in the AI Chatbot services market, to the detriment of consumers.” They emphasized that ongoing actions by Meta could inflict serious, irreparable harm to competition within this sector.</p>

    <h3>AGCM Expands Investigation Following Policy Changes</h3>
    <p class="wp-block-paragraph">In November, the AGCM broadened its investigation into Meta after the company revised its <a target="_blank" rel="nofollow" href="https://techcrunch.com/2025/10/18/whatssapp-changes-its-terms-to-bar-general-purpose-chatbots-from-its-platform/">business API policy</a> in October. The update prohibited general-purpose chatbots from being offered on the platform via the API.</p>

    <h3>Meta Defends Its API Restrictions</h3>
    <p class="wp-block-paragraph">Meta contends that its API was never intended to serve as a platform for distributing chatbots, suggesting that consumers can access AI bots through numerous other channels. The upcoming policy change, effective January, will notably impact the availability of AI chatbots from various providers, including OpenAI and Perplexity.</p>

    <h3>Exceptions for Business-Specific AI Tools</h3>
    <p class="wp-block-paragraph">It is important to note that the policy does not affect businesses utilizing AI to assist customers on WhatsApp. For example, retailers using AI-powered customer service bots will still be able to leverage the API, while general chatbots like ChatGPT and Claude will be barred from distribution.</p>

    <h3>EU Investigates Meta's New Policy</h3>
    <p class="wp-block-paragraph">This month, the European Commission also initiated an investigation into Meta's recent policy change, expressing concerns that it may hinder third-party AI providers from offering their services within the European Economic Area (EEA).</p>

    <h3>Meta's Response Unavailable</h3>
    <p class="wp-block-paragraph">As of now, Meta has yet to respond to requests for comments regarding this situation.</p>
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Here are five FAQs regarding Italy’s directive to Meta about suspending its policy that bans rival AI chatbots from WhatsApp:

FAQ 1: What did Italy tell Meta regarding AI chatbots on WhatsApp?

Answer: Italy directed Meta to suspend its policy that bans rival AI chatbots from operating on WhatsApp. This decision aims to promote competition and innovation in the digital space.

FAQ 2: Why is Italy concerned about Meta’s policy?

Answer: Italy’s concerns revolve around fair competition and consumer choice. The restriction on rival AI chatbots could limit innovation and the development of diverse services that benefit users.

FAQ 3: How might this change affect WhatsApp users?

Answer: The suspension of the ban could lead to an influx of various AI chatbots on WhatsApp, offering users more options for interaction, enhancing their experience with diverse services and potentially lower costs.

FAQ 4: What are the implications for Meta if it does not comply?

Answer: If Meta fails to comply, it could face regulatory repercussions, including fines or further legal actions from Italian authorities. This could lead to more stringent regulations in the future.

FAQ 5: What could happen next in terms of AI chatbots on WhatsApp?

Answer: Following Italy’s directive, Meta may have to alter its policies, allowing rival AI chatbots to integrate with WhatsApp. This could encourage a more competitive environment, prompting innovative advancements within the platform.

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