Recent regulatory developments in the crypto asset and financial technology space suggest that US regulators may be shifting toward a more balanced approach — one that prioritizes clearer regulations while fostering innovation over a more enforcement-driven strategy. President Trump’s recent executive order on this topic reshapes the Biden administration’s approach to crypto assets by eliminating many of the prior administration’s policies on crypto and establishing the President’s Working Group on Digital Asset Markets (Working Group).

Artificial intelligence (AI) has emerged as an influential technology, driving notable investments across various industries in recent years. In 2024, venture capital (VC) funding for AI companies reached record levels, signaling ongoing interest and optimism in the sector’s potential. Looking ahead, 2025 is anticipated to bring continued innovation, with promising funding opportunities and a growing IPO market for AI-driven businesses.

One of the challenges facing venture capital firms is how to handle investments in portfolio companies prior to the initial close (“Initial Close”) of a new fund (“New Fund”). Typically, the investment advisor (“VC Advisor”), or a person wholly owned or controlled by the VC Advisor, will make such investment, “warehouse” it, and then transfer such investment to the New Fund promptly after the Initial Close.  This strategy has been very effective for many fund managers as it enables them to commence the creation of a diversified portfolio of interesting companies for its future limited partners prior to the time of the Initial Close.  While this is an effective strategy for fund raising purposes, VC Advisors should be aware of some of the pitfalls with warehousing investments.

The number of venture capital dollars flowing to Greater San Diego technology companies is becoming less frequent in 2024, a trend mirroring national investment activity that appears to favor bigger bets at the expense of more frequent ones.