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Why Big Companies Are Pulling Ahead in AI and What Smaller Firms Must Do

Gen AI promised to democratize innovation, making advanced technology accessible to all. But the reality emerging in 2025 is quite different. Instead of equalizing the playing field, AI is amplifying existing advantages especially for large enterprises that are accelerating ahead, while smaller firms struggle to keep pace.

This isn’t merely a matter of budget or hardware. It’s a fundamental difference in how organizations are structured to adopt, govern, and leverage AI effectively.

According to McKinsey’s March 2025 State of AI report, the disparities aren’t just about how much AI is used but about leadership engagement, operational change, and performance measurement. Without deliberate action, smaller companies risk a widening and possibly permanent gap.

Leadership Matters: Only 28% of Companies Have CEO-Led AI Governance

It might be surprising that fewer than one-third of organizations place AI oversight directly under the CEO’s authority. But this reveals a crucial insight: companies where the CEO actively governs AI initiatives tend to deliver stronger results.

In large enterprises, AI governance often extends to the boardroom, with executive teams embedding AI into strategic decision making and risk management frameworks. This executive sponsorship turns AI adoption into a business imperative, not just a tech experiment.

Conversely, smaller companies often relegate AI to IT departments or innovation labs. Without sustained C-suite accountability, projects lack momentum, visibility, and alignment with broader business goals. AI remains a side project rather than a core strategy.

True Transformation Requires Workflow Redesign Only 21% Have Done It

Deploying AI isn’t about bolting on new tools; it’s about fundamentally rethinking how work gets done. McKinsey finds only 1 in 5 companies have redesigned workflows to fully embrace AI driven processes.

The difference is stark. A flashy demo that generates marketing content is useful, but integrating AI deeply for example, in sales lead scoring, forecasting, and customer outreach creates systems that scale and improve outcomes.

Large organizations have the infrastructure and change management capabilities to overhaul workflows across teams and functions. Smaller firms often lack this muscle and are stuck layering AI onto existing, suboptimal processes, limiting impact.

Fewer Than 20% Track AI KPIs

The most worrisome gap: only a minority of companies monitor key performance indicators for their AI initiatives. Without clear metrics whether ROI, efficiency gains, risk mitigation, or customer impact AI risks becoming a novelty rather than a driver of business value.

Leading companies build rigorous feedback loops with dashboards, regular progress reporting, and cross functional steering committees to optimize outcomes. Smaller firms often operate blind, unable to assess if their AI efforts truly move the needle.

What Smaller Companies Can Do Right Now

The situation may feel daunting, but it’s also an opening. Large firms, despite their lead, are often slowed by scale and bureaucracy. Smaller companies can catch up but only if they act decisively and strategically.

Here are three immediate steps:

• Elevate AI governance to the executive level. Make AI a standing topic for leadership discussions and decision-making.

• Choose one key workflow and redesign it with AI at the core. Prioritize high-impact areas where AI can transform how work is done, not just automate tasks.

• Define and track success metrics from the start. Establish clear KPIs to measure value and course-correct quickly.

 In 2025, the real difference between AI winners and laggards isn’t the tech stack, it’s the ability to transform. And that transformation begins with leadership.

BA Startups Collectively Secured $116B in 2025

July's $12B+ brought the Bay Area funding totals to over $116B, substantially over the full year totals all the way back to 2021, the peak year for funding, driven by zero-interest policies. AI companies – and particularly the frontier foundation model companies – OpenAI ($40B), Anthropic ($3.5B), Safe Superintelligence ($2B), Thinking Machines Lab ($2B) – all contributed billions to that total.

IPO Watch – good news for investors, LPs and startups - After Figma's successful IPO last week, Heartflow (NASDAQ: HTFL) followed them onto the public markets today and exceeded expectations. The company sold 16.7 million shares at $19 (4 million shares were added and offering price increased twice from $15-$17), raising $317M with stronger than expected demand. Shares then opened at $28 - almost 50% above their offering price - and closed at $28.75, for a valuation of ~ $2.5B. Heartflow's investors included Bain Capital, Wellington Management, USVP, Emergent Medical and Baillie Gifford. 

Startups raising capital: The Pulse of the Valley weekday newsletter keeps you current with the startups that are getting funded and who's investing in them – get the full $50/month package for just $7/month with LinkSV's Entrepreneur membership, details and signup here.Follow us on LinkedIn to stay on top of what's happening in 2025 in startup fundings, M&A and IPOs, VC fundraising plus new executive hires & investor moves.

Early Stage:

• Chai Discovery closed a $70M Series A,  builds frontier artificial intelligence to predict and reprogram the interactions between biochemical molecules, the fundamental building blocks of life.

• Oxmiq Labs closed a $20M Seed, re-architecting the GPU full stack from Atoms to Agents to meet the demands of next-generation gaming, graphics and multimodal AI.

• Celera Semiconductor closed a $20M Series A, offering full-custom or standard products in a fraction of the time of traditional semiconductor companies.

• Streamline AI closed a $8.6M Series A, the modern, AI-powered platform designed specifically for busy in-house legal teams to automate intake, triage, and matter management processes.

• Lava Payments closed a $5.8M Seed, the wallet and credit infrastructure powering how the internet pays for AI.

Growth Stage:

• Apreo Health closed a $130M Series B, redefining interventional pulmonology with a non-destructive, tissue-sparing solution for severe emphysema.

• Decart closed a $100M Series B, our AI infrastructure enables a 10X improvement in training and inferencing of the largest generative models, so that we can train our own foundational generative interactive models and make them accessible in real-time.

• SiMa.ai closed a $85M Series C, a pioneer in Physical AI computing, developing innovative platforms that enable intelligent applications at the edge.

• Lyric Inc. closed a $43.5M Series B, a leading AI powered platform that puts algorithmic decision making into the hands of supply chain builders.

• Fullpower-AI closed a $25M Series C, delivers an enterprise-grade LAM (Large Action Model) biosensing solution engineered to scale specialized conversational and generative AI for the health, wellness, senior living, and sleep science sectors.

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