AI-Native is redrawing the innovation map. Where is your ecosystem?

New year, new beginnings.

Over the years, this newsletter has grown to a readership of more than 200,000 people. We appreciate the interest, feedback, and support around our reports, analyses, and insights.

Going forward, we want to use this newsletter in a more focused way — to better serve our readers with rich, relevant information. So this marks a new approach for us. We’re calling it The Ecosystem Edge.

As we all know, collaborative startup ecosystems are a source of real competitive advantage for everyone involved. Through this newsletter, we’ll share our perspective on the trends shaping the global innovation ecosystem, and how those trends should inform what local leaders are thinking about and acting on.

That context is especially important right now because the shifts we’re seeing in AI-Native innovation are already reshaping how startup ecosystems grow, compete, and compound value.

We’re seeing this unfold in every country we work in. AI-Native ecosystems are growing on a different curve. From 2020-2025, AI-Native Startup Ecosystem Value grew 12X faster than the rest of tech, now worth $1 trillion globally.

What’s powering that surge is a structural shift in how startups are built. AI-Native startups’ products and business models are built on AI from day one, enabling scaling through intelligence-driven workflows.

That changes the operating logic of entrepreneurship and pushes the boundaries of what’s possible. On a macroeconomic level, AI-Native innovation has the potential to redefine regional competitiveness in a fundamental way.

Silicon Valley still dominates across the board, but interestingly, Beijing is the far more AI-intense ecosystem by means of early-stage funding. Beyond the global tech powerhouses, there’s an opportunity to compress the gap for smaller innovation ecosystems with strong capabilities in AI-Native innovation.

To quantify trends beyond the activities of Large Language Model providers such as OpenAI, X, Anthropic and other model builders, we map the AI-Native economy into three broad categories:

Funding globally has surged across all three — but in 2024, VC investment in Model Builders jumped far ahead. Capital is signaling that the models themselves are seen as the next mega-value companies, with winner-takes-all dynamics emerging. Model Users still matter, but VCs are pricing Model Builders as the core value layer.

Now the obvious question: does the 2024 data – and the extreme valuation of some companies – show that we are in a bubble? Maybe. But even if last year’s funding proves overheated, the technology shift doesn’t disappear.

What sits underneath this shift is speed. AI-Native startups are getting funded in less than half the time of other tech. In Beijing, an aggressive state strategy and deep pools of capital are compressing the path to seed to seven months on average. That pace is new, exciting — and should be concerning for everyone else.

If Beijing can move that fast with state-backed velocity, the question for the rest of the world is clear: how do we make early-stage capital move at AI speed without state-scale funding? We’re already seeing clients experiment with levers like Fund-of-Funds injections to pull experienced VCs earlier into the market, and reforms aimed at cutting decision cycles. But the bigger bottleneck is still behavioral and institutional: rapid decision-making, and early-stage funders who actually know how to value AI companies.

So here’s the open question ecosystems need to answer: what does it take for angels and seed VCs to be twice as fast? How much of the drag is investor learning curve (which one could potentially compress with training and experienced hires) — and how much is bureaucracy that governments can slim down?

For policymakers and ecosystem leaders, this isn’t a passive trend to watch. It’s an active race to run because the rules of innovation are changing in real time. The question isn’t whether AI-Native will reshape your startup economy. It’s whether your ecosystem is set up to stay ahead of that curve.

Questions you need to answer now:

If you can’t answer these clearly, the risk is simple: AI-Native value will compound somewhere else.