Artificial intelligence (AI) startups have contributed significantly to the recovery of US venture capital funding from market lows, with total capital raised in 2024 up nearly 30% year over year, according to data from PitchBook published on Tuesday.
AI startups also captured a record 46.4% of the total $209 billion raised last year, compared to less than 10% a decade earlier.
Enthusiasm for AI technology, largely fueled by the runaway success of OpenAI’s ChatGPT since late 2022, has helped revive venture capital funding after companies sought to establish real valuations in the post-stock environment. zero interest rate.
From basic models to applications, AI has captured investors’ imaginations and their money. Outsized funding rounds from AI companies, many of which remain unprofitable, such as OpenAI’s $6.6 billion and Elon Musk’s xAI’s $12 billion, underscore investor optimism about the potential of the sector.
But analysts say it’s not certain that enthusiasm, especially for grassroots model companies that require substantial capital for computing power and talent, will sustain.
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Enthusiasm for AI technology has helped revive venture capital funding
“AI and LLM companies enjoyed a historically rich funding environment. Most of them raised multiple rounds at exponentially higher valuations last year. They will need to pass very important business milestones this year to continue enjoying unlimited access to infinite capital,” said James Cross, CEO of Franklin Venture Partners.
Among venture capital funds, around $76 billion was raised in 2024, the lowest level in five years, with major funds such as Andreessen Horowitz and General Catalyst securing significant slices of the pie.
Exits also remain a challenge. The exit value in 2024 was $149.2 billion, above the seven-year low of $120 billion in 2023, but a fraction of 2021’s $841.5 billion.
The incoming administration of US President-elect Donald Trump, with the involvement of technology executives and pro-business AI technology policies, is expected to lay the groundwork for a renewed M&A and IPO market .
“Given that 2024 and 2023 were very anemic years in terms of exits, it’s hard not to see upside potential from there,” said Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, who expects more companies venture capital-backed companies will go public in the second half of 2025.
With information from Reuters.
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