The AI Wave: Are You Building Under the Radar or Missing Out?

Hi, I'm Amy Shapiro, journalist at CEK. We're here today with Leah Cromwell, partner at UpWest. Leah, thank you so much for joining us today. >> Absolutely. Thank you for having me. >> It's a pleasure to have you. Uh, to start off with, can you tell us a bit about yourself and and UPWest? >> Of course. So, I'm the Israel based partner at UPWest. I lead our activities over here. We're actually a US-based early stage fund. So, our headquarters is in Palo Alto in Silicon Valley. Uh we lead early stage so preede and seed investments for Israeli founders who want to enter the US market from day zero. Uh basically we bridge founders over to the states and push them into that ecosystem from the beginning. Some of our portfolio companies include Sentinel 1, Zenity, Honeybook, uh Stampley, Be Hero, and a bunch of others.

>> Amazing. So So we're coming to the end of the year. Uh for you as an investor, what is your year in review? Definitely. Um, wow. So, you know, reflecting on 2025, it was a really hectic year. >> We were super active. The ecosystem was overall. Um, and I would say some of the main things that stand out for me are sort of the the disconnect between the noise and the reality. Uh, obviously we've seen a bunch of announced funding rounds at massive amounts. You hear about the companies that are running really fast and raising at massive valuations. And on the other hand, you also hear about the companies who are really struggling. The reality is that actually most teams are building under the radar somewhat quietly in the middle. Uh where we're hearing about all of those, you know, massive rounds even for early stage companies at high valuations. Actually, there's a lot of teams who are looking to do a lot more with less. Uh and they're achieving similar milestones. And I think it's important to highlight that because

we're building in this new AI era where people talk about how, you know, AI is supposed to disrupt the workforce and the reality is it also actually allows even the earliest stage of companies to achieve a lot more with a lot less. So that's definitely one main thing that we've seen this year. Another we've seen

is the return of AI to Silicon Valley. um after co or during and after COVID we saw you know really a big spread of founders in the US including Israeli founders in the US leaving Silicon Valley for New York and other ecosystems. What we're actually seeing today is everyone's coming back. Uh the heart of AI is in Silicon Valley. Everyone's looking to build in San Francisco where the heart of the action is. Uh in a way, you know, I would compare it to how people want to be in Tel Aviv if they're building in cyber over there. It's all AI. So, we're hearing from Israeli founders as well who want to be physically in the valley from day zero. Uh, we're talking to teams who say that they set up shop in New York and they actually want to go to the West Coast instead. Same thing with teams in Miami and things like that. So, we're definitely seeing a reconentration of AI talent there. Uh, and I think it's really important also for Israeli teams to to be in the middle of it.

>> Interesting. And I definitely want to come back to touch on AI in a second, but first uh Lee, I want to get your opinion on uh the fact that this year against all odds in Israel, it's actually been a pretty good pretty wonderful year for uh Israeli startups in terms of fundraising. Why do you think that is? >> The reality is that Israeli companies have the fundamentals. Um what's been amazing to see, you know, through the war and now that it's sort of tapered off is actually the market here has continued to track macro trends completely. So even when you zoom in more, you'll see that the impact of the war was relatively minimal, especially compared to what one would expect. And what we're seeing is that Israeli founders know how to focus, you know, amid massive uncertainty, which is relevant for the war, sure, but frankly more than that, it's relevant for everything that's happening in the macro situation, right? We wake up every single day to find out in the news about new advancements with AI that suddenly completely shift the gold post. So what

that means is that if you're a founder today, you have to focus on actually in a way the same things you did before just with a lot more you know balagan around you right uh so it means you have to put the customer first you have to listen to the pain points of the market and optimize for that and Israelis are just excellent at doing that when there's a lot of noise around them >> great and looking next uh looking

towards next year what are your kind of hot takes are there any sectors that we should be looking out for on the horizon rising. >> So I don't know that I would say hot takes. Um but I can tell you that for us as a fund though we're very generalist and we've spent quite amount uh quite a amount of our time in cyber security for example we also are really focused and excited about um vertical AI. If years back I was telling people I was investing in vertical SAS companies, today you just replace SAS with AI, right? So we've been looking at a lot of teams in domains uh that are more specialized. For example, we invested earlier this year in a team that's in stealth. They're building something in AI for the manufacturing space. Uh we've done things in healthcare, in biotech, um in various domains. So we really are excited about teams who are taking their expertise whether it's in a specific domain where they know the problem better than anyone else uh and executing there or teams who have some sort of subject matter expertise in a technology or in a type of product and they apply that to a new sector. Uh so that's an area where we're spending a lot of time. something I expect to see more of next year. Also, uh let's see, we're going to

continue of course to see massive rounds in cyber security. Uh the reality is that as much as people talk about perhaps fluff in that market with valuations, and I I can't really argue against some of it, um >> there's just massive need there. So with everything happening in AI uh and all of the volatility that we're seeing in markets and you know at more of kind of I guess the nation state level people need cyber security. Uh so the there's relatively inelastic demand there. Um thinking about sectors like

fintech I actually think that one which has had a rough few years will pick up again uh both in the US and in Israel. Uh we have some really exciting fintech companies in both the early and growth stages. Specifically in fintech though I think people will continue to take a more verticalized approach. Um so like I mentioned we're spend a lot of our time in vertical AI. We have a really amazing portfolio company called Ecton that's building um a focused financing solution actually embedded payment rails within the healthcare space for the US. So you know fintech but within a specific area excuse me a specific industry. >> Um and more than that I actually just

think that we're going to continue to see strength in the local market here. So, I'm meeting teams every single day who are thinking outside the box and building really amazing stuff. Um, and I don't expect it slowing down. >> Amazing. And very quickly, right at the end, do we AI, I know we touched on it, do we think it's a bubble that will burst or do we think it's a kind of enduring opportunity? >> It's both. Um, it's absolutely going to be enduring. Um, you know, basically think about AI today in many ways. the the same way that you would have said software before. It's just the new baseline for everything and that's not going to change. Um there I do think there will at some point be a bit of a correction. Uh I don't know if I want to call it necessarily a full-on bubble that will burst, but there will definitely be a level of cooling across certain companies in the space just because we've seen certain names raise at wild valuations with a lot of you know forward-looking promise and then you find out that for some of those companies there's actually much higher customer churn than expected and other challenges that >> will maybe hamper valuations at some point in the road. Uh but it remains where the biggest opportunity is. Again,

it's basically the substitute for how you thought of software before. So, every company that we meet is absolutely building something with AI because there's no way to avoid it. Um, I think that Israeli teams will continue to find ways to build outside of the box solutions using AI. It's something that we're very strong at here in Israel and I'm really proud to back companies who are taking that sort of approach. And one more thing within AI is we're seeing

teams who are raising small almost like microsized preceeds. So think half a million dollars or less to hit the ground running and build really fast in AI. And I think that'll continue to be a trend moving forward in the AI space because the reality is that despite the fact everyone's building an AI company today, you know, AI is almost never anyone's moat. So the reality is that what most people need is a small check to be able to push forward and validate the go go to market assumptions in the early days. And I think that'll also be healthy for the market without necessarily it being a bubble bursting, just an alternate, you know, strategy for raising capital. >> Fantastic. Well, Leah, thank you so much. It's been so interesting to talk to you and best of luck to you and to Up West for 2026. >> Thank you so much.