The other midterm winners
1. Key Themes
Theme: Prediction markets proved their utility but haven't diversified beyond sports
Election accuracy strengthens the legitimacy case
Kalshi and Polymarket outperformed traditional forecasters in the most competitive midterm races, which supports the industry's regulatory and legal position.
"Kalshi and Polymarket had a better batting average than polls and other forecasters in predicting the outcome of the most competitive US midterm races, boosting the case that these platforms have real utility beyond sports betting."
"The midterm election performance proves this utility, strengthening the industry's public-interest argument in court as it prepares for a possible Supreme Court case next year."
Commercial traction lags the utility narrative
Election volume growth looks strong in isolation but is small relative to forecast overall growth, and sports still dominates.
"Kalshi's election contract trading volume nearly doubled from the 2024 cycle. This sounds impressive, but not if you consider that the platform's overall volume could be ~280x larger by the end of 2026 compared to two years ago, based on our forecasts."
"Most contracts on these platforms are still sports-related—86% in October for Kalshi and 89% for Polymarket's US business—and the share of sports keeps expanding."
Theme: US VCs are consolidating at home while still investing in Europe
Sequoia, a16z, and Coatue retreat from London offices
The pattern shows top US firms deciding that local presence isn't required to source European deals.
"'We simply don't see the need for a local presence. We believe that Europe will continue to produce outlier founders and companies, and that we can continue to provide world class support from our home base in the Bay Area,' the firm said."
"Sequoia's decision follows a similar move made by rival Andreessen Horowitz last year. A year before, Coatue pulled out of its London location."
US investors are taking a bigger share of European deals anyway
"Despite high-profile names withdrawing from Europe, US investors are increasing their share of the region's deals. But some European investors and founders have doubts that US VCs' commitment to Europe's startup ecosystem is long-lasting."
Theme: Political and macro risk is hitting the AI trade
Nasdaq correction and AI IPO doubts
The midterm outcome is feeding into AI valuation skepticism, with Anthropic's planned IPO in the spotlight.
"The Nasdaq fell into correction territory Thursday, plunging 5.5% as investors fretted over what a Democrat-controlled Congress means for the AI trade. The selloff puts a spotlight on Anthropic's planned IPO, with investors doubting that a $1.5 trillion valuation goal is realistic, The Wall Street Journal reported."
Tech's political spending
"Silicon Valley's biggest investors donated hundreds of millions to election campaigns. From Andreessen and Horowitz to Musk and the Winklevoss twins, big tech poured big money into the midterms to fight Democrats and support AI and crypto."
Theme: Mega-rounds and defense/industrial tech continue to attract capital
Large rounds across AI bio, drones, space, and defense
"London-based AI drug discovery startup Isomorphic Labs is in talks to raise around $5 billion at a roughly $50 billion valuation, Bloomberg reported."
"Zipline, which is developing a drone delivery network in the US, raised a $1.5 billion round led by Paradigm, WCM Investment Management, and Layer Global at a $21.5 billion valuation."
"Space and defense communications startup CesiumAstro, which develops satellites, raised a $730 million Series D led by Janus Henderson at a valuation over $4.5 billion."
Defense consolidation
"Defense tech startup Shield AI agreed to acquire Hyundai-backed radar company Echodyne in a $5.3 billion deal. To support the acquisition, Shield is raising a $1 billion Series H, a $1 billion investment from Blackstone, and $500 million in debt financing from JPMorgan Chase Bank."
2. Contrarian Perspectives
Prediction markets' election win may be less commercially meaningful than it looks. The consensus reads accuracy as a growth catalyst, but the analyst points to disappointing trading activity and heavy sports dependence.
- Evidence: "Despite this success, the uptick in trading activity was lower than we had anticipated given the tremendous growth over the past year."
- Evidence: "We're still awaiting further evidence that the platforms can diversify beyond sports."
- Evidence: "The midterms were a win for the platforms' utility case. Now, they need to turn that attention into sustained trading activity beyond sports."
US VCs leaving Europe physically may not mean leaving Europe financially. The headline retreat contrasts with rising US participation, though local skepticism about the durability of that commitment remains.
- Evidence: "Despite high-profile names withdrawing from Europe, US investors are increasing their share of the region's deals."
- Evidence: "Luciana Lixandru, who was the firm's first partner in Europe, is staying put. She'll remain a partner, supporting portfolio companies, and investing personally."
3. Companies Identified
Kalshi
- Description: Prediction market platform
- Why mentioned: Case study of election accuracy versus commercial diversification
- Quotes: "Kalshi's election contract trading volume nearly doubled from the 2024 cycle." / "86% in October for Kalshi"
Polymarket
- Description: Prediction market platform
- Why mentioned: Co-leader in election forecasting accuracy; US business is heavily sports-focused
- Quotes: "89% for Polymarket's US business"
- Description: Menlo Park-based VC giant
- Why mentioned: Closing London office, six years after establishing European HQ
- Quotes: "The Menlo Park-based VC giant announced on Wednesday that it would be closing its London office, six years after establishing a European headquarters."
Andreessen Horowitz
- Description: US VC firm
- Why mentioned: Earlier London pullback; also a major political donor
- Quotes: "Sequoia's decision follows a similar move made by rival Andreessen Horowitz last year."
- Description: Investment firm
- Why mentioned: Exited its London location
- Quotes: "A year before, Coatue pulled out of its London location."
Anthropic
- Description: AI developer
- Why mentioned: Planned IPO with an aggressive valuation target under investor doubt
- Quotes: "investors doubting that a $1.5 trillion valuation goal is realistic"
- Description: London-based AI drug discovery startup
- Why mentioned: In talks for ~$5B raise at ~$50B valuation
- Quotes: "is in talks to raise around $5 billion at a roughly $50 billion valuation, Bloomberg reported."
- Description: US drone delivery network developer
- Why mentioned: $1.5B round at $21.5B valuation
- Quotes: "raised a $1.5 billion round led by Paradigm, WCM Investment Management, and Layer Global at a $21.5 billion valuation."
- Description: London-based fintech / digital bank operator
- Why mentioned: Pursuing VC funding at £7.5B after PE talks stalled
- Quotes: "would value the digital bank operator at £7.5 billion after talks with PE investors stalled, the Financial Times reported."
- Description: Space and defense communications satellite developer
- Why mentioned: $730M Series D led by Janus Henderson
- Quotes: "raised a $730 million Series D led by Janus Henderson at a valuation over $4.5 billion."
T-Therapeutics
- Description: Biotech focused on cancer and autoimmune medicines
- Why mentioned: $133M Series B
- Quotes: "secured a $133 million Series B led by Advent Life Sciences and British Business Bank."
Ocient
- Description: Chicago-based software for deploying and operating AI agents
- Why mentioned: $100M Series C
- Quotes: "secured a $100 million Series C led by Boka Capital and OCA Ventures."
Kalepa
- Description: AI platform for insurance workflows
- Why mentioned: $75M Series B at $470M valuation
- Quotes: "raised a $75 million Series B led by Updata Partners at a $470 million valuation."
Humble Robotics
- Description: Freight-focused robotics startup
- Why mentioned: $51M Series A
- Quotes: "raised a $51 million Series A led by Obvious Ventures."
Tenspresso
- Description: AI chip startup
- Why mentioned: In talks for ≥$50M at $500M valuation
- Quotes: "is in talks to raise at least $50 million in a new round at a $500 million valuation, Bloomberg reported."
Beacon Holdings
- Description: Acquirer that buys software companies and integrates AI into them
- Why mentioned: Raised $50M from CPP Investments
- Quotes: "raised $50 million from CPP Investments to upsize its Series C."
Numica
- Description: Acquires US accounting firms and runs them on its own AI accounting software
- Why mentioned: $21M raise, an example of the AI roll-up model
- Quotes: "which acquires US accounting firms and runs them on its own AI accounting software, raised a $21 million round from Roosh and Flashpoint Capital."
Uranium Digital
- Description: On-chain trading platform for uranium used in nuclear reactors
- Why mentioned: Crypto and nuclear convergence, $16.5M Series A
- Quotes: "raised a $16.5 million Series A led by Blockchain Capital."
Firmly
- Description: Agentic commerce platform developer
- Why mentioned: $15M Series A
- Quotes: "secured a $15 million Series A led by Squarepoint Capital."
Shield AI
- Description: Defense tech startup
- Why mentioned: $5.3B acquisition of Echodyne, financed by Series H, Blackstone, and JPMorgan
- Quotes: "agreed to acquire Hyundai-backed radar company Echodyne in a $5.3 billion deal."
Wonder Group
- Description: Accel-backed restaurant and food delivery startup that owns Grubhub and Blue Apron
- Why mentioned: Confidential S-1 filing for IPO
- Quotes: "confidentially filed its draft S-1 for an IPO."
Agility Robotics
- Description: Nvidia-backed humanoid robotics startup
- Why mentioned: Completed SPAC merger with Churchill Capital Corp. XI
- Quotes: "completed its SPAC merger with Churchill Capital Corp. XI and began trading on Nasdaq."
Dropbox / Tigris Data
- Description: Public cloud company acquiring Spark Capital-backed object storage platform for AI
- Why mentioned: Incumbent buying AI infrastructure
- Quotes: "Nasdaq-listed Dropbox agreed to acquire Spark Capital-backed Tigris Data, the developer of an object storage platform for AI."
Evos
- Description: Amsterdam-based liquid storage operator
- Why mentioned: Sold by Igneo to Adani Ports for €2.56B EV
- Quotes: "Igneo Infrastructure Partners is offloading Evos... to Adani Ports and Special Economic Zone for an enterprise value of €2.56 billion."
LIV Golf
- Description: Professional golf league
- Why mentioned: Cautionary tale of sovereign-backed sports, shutting down after financing collapse
- Quotes: "is shutting down after BC Partners Credit withdrew a proposed $300 million financing for a relaunch."
Brightmind Partners
- Description: Cybersecurity-focused VC firm
- Why mentioned: Raised $251M first fund
- Quotes: "raised $251 million for its first fund."
4. People Identified
Franco Granda
- Description: Senior Research Analyst, Private Company Coverage at PitchBook
- Why mentioned: Author of the prediction markets analysis
- Quotes: "Kalshi and Polymarket had a better batting average than polls and other forecasters..."
Leah Hodgson
- Description: Deputy Editor, European Private Markets at PitchBook
- Why mentioned: Author of the Sequoia/Europe piece
- Quotes: "Sequoia is consolidating around the Bay Area, but European startups haven't fallen out of favor with US investors."
Luciana Lixandru
- Description: Sequoia's first partner in Europe
- Why mentioned: Staying in Europe despite office closure
- Quotes: "She'll remain a partner, supporting portfolio companies, and investing personally."
Julien Bek
- Description: Sequoia partner
- Why mentioned: Staying in Europe
- Quotes: "Fellow partner Julien Bek has also said he is staying in Europe."
Anas Biad
- Description: Sequoia partner
- Why mentioned: Only partner confirmed to move to the US
- Quotes: "Of the four partners, only Anas Biad has confirmed he will move to the US."
George Robson
- Description: Sequoia partner
- Why mentioned: Plans undecided
- Quotes: "George Robson has yet to share his plans for the future."
Stephen Ward
- Description: Former Secret Service member; co-founder of Brightmind Partners
- Why mentioned: Cybersecurity VC with unusual background
- Quotes: "co-founded by former Secret Service member Stephen Ward"
Elizabeth Holmes
- Description: Convicted Theranos founder
- Why mentioned: Viral brand effect on a jerky company
- Quotes: "Elizabeth Holmes boosted sales of this jerky by 345% after she ate it in 'You Can See Everything.'"
5. Operating Insights
Support portfolio companies remotely, but keep a local anchor. Sequoia's remote-support thesis is paired with retaining partners on the ground.
"We believe that Europe will continue to produce outlier founders and companies, and that we can continue to provide world class support from our home base in the Bay Area."
Prepare for volatile exit windows when political risk hits AI. With a correction underway and IPO valuations questioned, founders planning AI-linked listings should expect scrutiny of lofty targets.
"investors doubting that a $1.5 trillion valuation goal is realistic"
Diversify revenue concentration before the next growth phase. Prediction markets show that a single dominant segment (sports) can mask limited breadth.
"We're still awaiting further evidence that the platforms can diversify beyond sports."
6. Overlooked Insights
Fund flexibility when sovereign backers withdraw. LIV Golf's collapse illustrates dependency on a single patron: after the Saudi PIF withdrew, replacement credit financing also fell through.
"LIV filed for Chapter 11 in September after Saudi Arabia's Public Investment Fund backed away in April."
The AI roll-up model is spreading to professional services. Beacon Holdings and Numica both buy established businesses and run them on AI software, a pattern worth watching for margin expansion.
"Beacon Holdings, which buys software companies and integrates AI into them..." / "Numica, which acquires US accounting firms and runs them on its own AI accounting software..."