AI Startups Dominate Venture Capital Funding in 2024, Driving Market Recovery

How AI Triggered a Venture Capital Uptick in 2024

Venture capital had a growth year in 2024, but deal activity still remains well below its 2021 peak. U.S. VC firms invested a combined $209 billion across an estimated 15,260 deals last year, up from $162.2 billion in 14,712 deals, respectively, in 2023, according to research firm PitchBook's latest Venture Monitor report. Dealmaking has yet to return to its 2021 highs, which saw 19,373 deals valued at a cumulative $354.6 billion. "Venture activity is showing promising signs of recovery, fostering renewed optimism for 2025," the report said. "Deal activity increased at nearly all stages, with pre-seed/seed and early-stage deals notching 2024 highs and late-stage deals seeing a slight bounce back after two consecutive quarters of declines. The increases continue to be driven by companies finally coming back to market to raise new financings." There is reason to be cautious, however, with the report noting that a flurry of investment into artificial intelligence "provides a false sense of growth in the market." Deals involving a handful of big-name AI firms including Databricks, OpenAI, xAI, Anthropic, and Waymo account for more than $42 billion of total investment. "The increase in outsized deals was the primary driver of 2024's deal value, so venture's recovery was heavily skewed toward the top performers and AI companies," the report explains. "AI dominated the narrative in 2024 and likely will continue doing so in 2025."

AI startups drive VC funding resurgence, capturing record US investment in 2024

(Reuters) - Artificial intelligence startups have contributed significantly to the recovery of U.S. venture capital funding from market lows, with the total capital raised in 2024 nearly 30% higher year-on-year, according to PitchBook data released 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. The enthusiasm for AI technology, largely sparked by the breakout success of OpenAI's ChatGPT since late 2022, has helped revive venture capital funding after companies sought to establish true valuations in the post zero-interest-rate environment. From foundation models to applications, AI has captured both investors' imaginations and their money. Outsized funding rounds by AI companies, many of which remain unprofitable, such as $6.6 billion for OpenAI and $12 billion for Elon Musk's xAI, underline investor optimism about the sector's potential. But analysts say it is uncertain whether the enthusiasm, especially for foundation model firms that require substantial capital for computing power and talent, will be sustained. "The AI/LLM companies did enjoy a historically rich funding environment. Most raised multiple rounds at exponentially higher valuations last year. They will need to smash very significant business milestones this year to continue enjoying unlimited access to infinity capital," said James Cross, managing director at Franklin Venture Partners. Among venture capital funds some $76 billion was raised in 2024, the lowest in five years, with major funds like Andreessen Horowitz and General Catalyst securing major pieces of the pie. Exits also remain challenging. 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 IPO market did not recover as quickly as investors had hoped, though some year-end listings such as ServiceTitan helped rekindle some optimism. The incoming administration of U.S. President-elect Donald Trump, with tech executives' involvement and tech and business friendly policies, is expected to set the stage for a renewed M&A and IPO market. "With the caveat that 2024 and 2023 were so anemic with exits, it's hard not to see upside from there," said Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, who expects more VC-backed companies to be listed in the second half of 2025. (Reporting by Krystal Hu in New York; Editing by Kate Mayberry)

Almost Half of VC Funding Raised Last Year Went to Startups in One Category

Companies like xAI and OpenAI received billions of dollars in funding. AI startups captured a record-high portion of the funding pie last year. According to PitchBook data released on Tuesday and obtained by Bloomberg, venture capitalists poured $209 billion total into U.S. startups in 2024 -- and nearly half of that funding, or a record $97 billion, went towards startups focusing on AI. The amount raised by this one category of startups is more than the entire amount of startup funding raised by early-stage companies in Europe and Asia. Europe saw funding for all startups reach $61.6 billion in 2024 while funding in Asia hit $75.9 billion. Related: 4 Ways AI Startups Can Avoid Becoming Obsolete In the United States, AI companies like xAI, OpenAI, and Anthropic led the way in funding. xAI raised $6 billion in a May Series B round and another $6 billion in a December Series C to develop its AI chatbot Grok. OpenAI raised $6.6 billion in October to keep advancing ChatGPT, which has over 300 million weekly users. Anthropic raised $4 billion from Amazon in November and agreed to make Amazon Web Services its main training partner. Related: How AI Startups Can Increase Their Chances of Success in Today's Landscape Additional data shows how funding for AI startups has swelled over time. Business database platform Crunchbase released data on Tuesday showing that while global venture funding increased modestly overall from $304 billion in 2023 to $314 billion in 2024, funding specifically for AI companies grew more than 80% in that same time from $55.6 billion to over $100 billion. Nearly a third of all global venture funding last year went to AI startups, per Crunchbase. The data showed that only one-third of AI funding went to companies like OpenAI that are creating foundational AI models. The rest of the AI startups that were funded, the majority, focused on how AI applied to sectors like healthcare, security, and robotics.

AI startups drive VC funding resurgence, capturing record US investment in 2024

Jan 7 (Reuters) - Artificial intelligence startups have contributed significantly to the recovery of U.S. venture capital funding from market lows, with the total capital raised in 2024 nearly 30% higher year-on-year, according to PitchBook data released 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. The enthusiasm for AI technology, largely sparked by the breakout success of OpenAI's ChatGPT since late 2022, has helped revive venture capital funding after companies sought to establish true valuations in the post zero-interest-rate environment. From foundation models to applications, AI has captured both investors' imaginations and their money. Outsized funding rounds by AI companies, many of which remain unprofitable, such as $6.6 billion for OpenAI and $12 billion for Elon Musk's xAI, underline investor optimism about the sector's potential. But analysts say it is uncertain whether the enthusiasm, especially for foundation model firms that require substantial capital for computing power and talent, will be sustained. "The AI/LLM companies did enjoy a historically rich funding environment. Most raised multiple rounds at exponentially higher valuations last year. They will need to smash very significant business milestones this year to continue enjoying unlimited access to infinity capital," said James Cross, managing director at Franklin Venture Partners. Among venture capital funds some $76 billion was raised in 2024, the lowest in five years, with major funds like Andreessen Horowitz and General Catalyst securing major pieces of the pie. Exits also remain challenging. 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 IPO market did not recover as quickly as investors had hoped, though some year-end listings such as ServiceTitan (TTAN.O), opens new tab helped rekindle some optimism. The incoming administration of U.S. President-elect Donald Trump, with tech executives' involvement and tech and business friendly policies, is expected to set the stage for a renewed M&A and IPO market. "With the caveat that 2024 and 2023 were so anemic with exits, it's hard not to see upside from there," said Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, who expects more VC-backed companies to be listed in the second half of 2025. Reporting by Krystal Hu in New York; Editing by Kate Mayberry Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence Krystal Hu Thomson Reuters Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump's SPAC and Elon Musk's Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company's retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master's degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work.

AI dominates global venture funding as other sectors faced challenges in Q4 - SiliconANGLE

AI dominates global venture funding as other sectors faced challenges in Q4 The venture capital market saw mixed results in the fourth quarter of 2024, with artificial intelligence dominating funding globally, while other sectors faced declining activity. That's according to a first look at the quarterly PitchBook-NVCA Venture Monitor report released early Tuesday. Starting with the U.S., dealmaking remained relatively robust through 2024 from a counting perspective and saw an increase of 3.3% year-over-year. The increase is a slight surprise given previous quarters, with the report noting that it indicates a holdover of certain venture mechanics from a few years ago. As explained by PitchBook's lead VC analysts Kyle Stanford and Nalin Patel, an excess of dry powder from the high fundraising years of 2021 and 2022 has kept many investors active in the market despite the lack of returns. "With the slow fundraising years of 2023 and 2024, we should likely see this relative robustness start to deteriorate as funds run through their available capital and aren't able to raise a subsequent fund," the analysts note. Not surprisingly, AI was the story of both the fourth quarter and the full year, with AI startups driving the majority of venture capital dollars through 2024. The report notes that OpenAI, xAI Corp., Anthropic PBC and others "have become synonymous with outsized deals in venture and seemingly operate in a different funding environment than most VC-backed companies who continue to struggle with lower capital availability." Though money may be flowing into AI companies, existing tech companies are not going public. The lack of exits is another defining story of the venture capital market through 2024, even if the outlook starting to improve. Some $149.2 billion in exit value was created through 2024, mostly coming from a handful of initial public offerings. Unicorns -- startups with a valuation of $1 billion or more -- now collectively hold two-thirds of the U.S. VC market value and were held tight through the year, creating pressure on investors and limited partnerships with the lack of distributions. Mergers and acquisitions weren't much better, with only a few large deals of note. "A more acquisition-friendly environment in 2025 could set the stage for a renewed M&A market, especially if a soft-landing for the economy can be fully engineered," PitchBook's analysts note. Fundraising through 2024 was dominated by large, established firms, with 30 firms accounting for more than 68% of total funding value through 2024. The shift to established firms is noted as a trend that has been developing over several years but hit a peak in 2024. Managers who raised funds through the previous boom in the VC market were unable to generate returns and had portfolios troubled by valuation changes that occurred during the market shift. Across the Atlantic, European VC deal value saw a slight decline, while deal counts dropped roughly 16% year-over-year because of a more cautious environment. European deal activity was significantly down across earlier financial stages, with the majority of industries and several regions struggling in a tougher market for funding. AI drove just over a quarter of the deal value in Europe through 2024 and just over 23% of completed financings. However, unlike the U.S., large, outsized deals did not materialize in the same amount in Europe. Exit value did pick up in Europe in 2024, largely driven by the listing of Puig Beauty and Fashion Group S.L. in April. However, the report notes that it was a quiet year for European VC-backed exists, particularly on the IPO Front. Capital raised by European-based VC funds was also flat through 2024. In the Asia-Pacific region, the venture market has struggled through the last few years and that didn't change in 2024. Unlike Europe and the U.S., the dry powder built up in various markets across APAC was much smaller, further pressuring dealmaking. China, in particular, saw a material decline in activity due to both internal economic challenges and tensions with the U.S. government. Asia accounted for 20.4% of deal count globally in 2024, its lowest portion in the last decade, and 19% of global VC-backed exists.

AI Startup Funding Hit a Record $97 Billion in 2024

Venture capitalists put $97 billion into artificial intelligence startups in the US last year -- a new record in a year of multibillion-dollar megarounds for companies like Elon Musk's xAI, OpenAI and Anthropic. The AI-focused deals represent an increasing share of all startup investment, according to new PitchBook data released Tuesday. Almost half of the total $209 billion raised by US startups last year went to AI companies, the research firm said, the highest portion on record.

Startup Funding Regained Its Footing In 2024 As AI Became The Star Of The Show

Global venture funding in 2024 edged above 2023's totals, with AI showing the biggest leap in amounts year to year. Overall startup funding in 2024 reached close to $314 billion -- compared to $304 billion in 2023 -- up around 3%, based on an analysis of Crunchbase data. Global venture investment in 2024 was above the pre-pandemic year of 2019, but below 2018 and 2020 amounts at $346 billion and $350 billion, respectively. Close to a third of all global venture funding went to companies in AI-related fields, making artificial intelligence the leading sector for funding. Funding to AI-related companies reached over $100 billion -- up more than 80% year over year from $55.6 billion in 2023 -- Crunchbase data shows. Funding to the AI sector in 2024 surpassed every year in the past decade, including the peak global funding year of 2021. Of those AI dollars, almost a third of all AI funding went to foundation model companies. The other two-thirds of funding went to sectors impacted by these new models. Infrastructure and data provisioning to manage and operate AI grew. Other leading sectors included autonomous driving, healthcare, robotics, professional services, security and military, Crunchbase data shows. The higher total in 2024 was due to a big push in Q4 -- which saw the highest funding total since the downturn in Q3 2022. The fourth quarter reached $93 billion, up 36% year over year from $69 billion in Q4 2023 , based on an analysis of Crunchbase data. In recent years, Q4 was typically slower. The 2024 fourth quarter, however, closed with the largest rounds raised this year -- $22 billion by three companies. In 2024, a greater share of funding went to billion-dollar rounds, in large part driven by funding to the AI sector. In 2024, $58.3 billion -- or 19% of all funding -- went to billion-dollar rounds. Compare that with 2023, when $45.8 billion -- or 15% of funding -- went to rounds of a billion dollars or more. The fourth quarter picked up steam with the largest valuations achieved last year. OpenAI was awarded a $157 billion valuation. Databricks was valued at $62 billion in the year's largest venture deal, a $10 billion round. And xAI doubled its valuation in a six-month period, to $50 billion. Not surprisingly, the largest funding rounds this past year went to companies in the AI sector -- not only Databricks, OpenAI and xAI, but also Waymo and Anthropic raised funding of at least $4 billion -- or much more. Other large valuations to companies in AI went to CoreWeave ($19 billion), Anthropic ($18.4 billion), Anduril Industries ($14 billion), Scale AI ($13.8 billion) and Perplexity ($9 billion). Venture funding to U.S. companies totaled $178 billion -- around 57% of total global funding. The U.S. funding market raised a greater proportion of global funding, up from 48% in 2023. Of all U.S. funding, $90 billion was invested in the corridors of the San Francisco Bay Area, which experienced a boom from AI investing. Compare that with 2023, when Bay Area companies raised $59 billion in total funding. Late-stage funding in the fourth quarter reached $61 billion, up more than 70% quarter over quarter and an increase year over year from the $36 billion invested in Q4 2023, Crunchbase data shows. The biggest change in Q4 from a year earlier was the increase in billion-dollar rounds. Large fundings were raised in multiple sectors such as AI, applied AI, energy, semiconductor, banking, security and aerospace, among others. Early-stage funding was flat in Q4. Large early-stage rounds went to data centers, renewable energy, AI, robotics and biotech. Seed funding trailed in Q4, for now. Reaching $7 billion in Q4, seed funding was down 16% from the $8.4 billion invested a year ago. (However seed fundings are often added to the Crunchbase dataset after the close of a quarter, and should increase over time.) M&A activity was slightly up compared to 2023 -- but slower than expected and somewhat concentrated in biotechnology and cybersecurity companies. An opening up of the IPO markets in 2025 will drive LP allocation to venture, said Beezer Clarkson, a partner at Sapphire Ventures, in an interview. "History just shows very clearly that when there's positive liquidity, more money goes into venture funds," she said. The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Jan. 3, 2025. Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year. Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price. Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less. Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million. Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the "Series [Letter]" naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round. Technology growth is a private-equity round raised by a company that has previously raised a "venture" round. (So basically, any round from the previously defined stages.)

Global VC investments rose 5.4% to $368.5B in 2024, but deals fell 17% | NVCA/Pitchbook

But the number of global deals in 2024 fell 17% to 35,686 from 43,320 a year earlier in 2023. AI deals as a percentage of all deals rose for the year, as you can see in the chart below. The 2024 global deals are down 50.9% from $751.5 billion in the peak year of 2021 and down 37% from 57,068 in deal count in 2021. AI deals are big part of the picture now. There were 8,343 global AI deals in 2024, down 3.6% from 8,661 in 2023 and down 16.6% from 10,007 in 2021. The value of those global AI deals in 2024 was $131.5 billion, up from 52% from $86.3 billion in 2023 and down 6% from $140.2 billion in 2021. AI and machine learning were 35.7% of global deal value in 2024, up from 24.7% in 2023. And AI and machine learning were 23.4% of the global deal count in 2024, up from 20% in 2023. In 2021, AI was 18.7% of global deal value and 17.5% of global deal count. Q4 global numbers On the global level in Q4, Asia Pacific's venture market has struggled through the last few years, something that didn't change in 2024, Pitchbook lead VC analyst Kyle Stanford said. Compared with Europe and the U.S., the amount of dry powder built up within the various markets across APAC was much smaller, further pressuring dealmaking over the past year. China, which has driven around half of the annual deal activity for APAC, has seen a material decline in activity, due to both economic challenges within the country, as well as the tensions with the U.S. government, which has curtailed activity by U.S.-headquartered firms. Just 20.4% of deal count occurred in Asia, the lowest proportion in the past decade. Globally, AI has continued to dominate the headlines and investment focus of investors despite some noting that the investment activity is not sustainable long-term. Whether or not that true is trivial in the current moment. Just over half of all VC invested globally during Q4 went to an AI-focused company. Its true that amount was heavily influenced by the likes of OpenAI, Databricks, xAI, and other well-known companies raising for share buybacks and investment into chips and computing energy needs, but the most important factors is the level of capital availability for AI compared with other sectors, Stanford said. The proportion of total deals going to AI companies has consistently increased over the past couple years as large corporates and investors alike move to harness the expected efficiencies of the next tech wave, he said. "VC-backed exits have not been strong historically for APAC, though many markets are still too young to develop a healthy exit environment," he said. "The lack of exits across many of the regions has kept many foreign investors weary of increased activity during the market slowdown. Japan has been an outlier in terms of count, as many IPOs within the country have helped drive returns to investors. In 2024, 19% of the global VC-backed exits originated in Asia-based companies." Fundraising has been slow globally, as new commitments dropped just over 20% YoY. The lack of exits has had a large impact on fundraising for Asia as LPs have been less inclined to reup commitments at this time. 2024 marked the lowest year for new commitments since 2018, and was the lowest year for closed funds in the market in the past decade. North America and Europe similarly struggled to secure new commitments to venture funds. Q4 U.S. deals U.S. Dealmaking remained relatively robust in the fourth quarter of 2024 from a count perspective, and increased slightly by 3.7% compared to a year earlier, Pitchbook and the NVCA said. In the quarter, AI deals accounted for nearly half (46.4%) of total US deal value. Stanford said it seems counterintuitive to the narrative in the market over the past few years, but is indicative of holdover of certain mechanics of venture from a few years ago. "What has happened is that the excess of dry powder from the high fundraising years of 2021 and 2022 have kept many investors active in the market despite the lack of returns," Stanford said. "With the slow fundraising years of 2023 and 2024, we should likely see this relative robustness start to deteriorate as fund run through their available capital and aren't able to raise a subsequent fund." Artificial intelligence continues to be the story of the market, and drove a near majority of dollars for VC in 2024, he said. OpenAI, xAI, Anthropic, and others have become synonymous with outsized deals in venture, and seemingly operate in a different funding environment than most VC-backed companies who continue to struggle with lower capital availability, Stanford said. But the lack of exits remains the story of the venture market, even as the outlook is more hopeful, he said. Just $149.2 billion in exit value was created during 2024, largely coming from a handful of IPOs. Unicorns, which hold around two-thirds of the U.S. VC market value, have held tight as private companies, creating pressure on investors and limited partners with the lack of distributions. Merges and acquisitions were was also "silent in 2024," with few large deals to note, Stanford said. A more acquisition-friendly environment in 2025 could set the stage for a renewed M&A market, especially if a soft-landing for the economy can be fully engineered, he said. In the U.S., fundraising was dominated by large, established firms. Thirty firms accounted for more than 68% of total fundraising value in 2024. This is a trend that has been developing over the past few years, but hit a forefront last year, Stanford said. Many of the emerging managers that raised funds during the ZIRP-era boom in the VC market have been unable to generate returns, and have portfolios troubled from the valuation changes that have occurred during the market shift. Without a track record to speak to, many firms are finding a very challenging market to raise new commitments from LPs, Stanford said. European VC market In Europe, VC deal value reflected a slight decline, while deal counts dropped by roughly 16% compared to year ago, said Pitchbook analyst Nalin Patel, as a more cautious environment was on display in 2024. European deal activity was down across earlier financing stages, the majority of verticals, and several regions as tougher market for funding was evident. He said AI drove just over a quarter of deal value to the region during 2024, on just more than 23% of completed financings. The large, outsized deals attributable to other venture markets did not materialize in the same amount in Europe, keeping the proportion of deal value in line with count. And he said exit value picked up in 2024, largely driven by the listing of Puif. Otherwise it was a quiet year for European VC-backed exits, particularly on the listings front as companies avoided exits. "We expect exits to pick up in 2025 as market conditions improve," Patel said. Capital raised by European-based VC funds was flat YoY in 2024 and remained below the peak set in 2022. Fund counts also dipped in 2024 dropping by approximately by a fifth compared to 2023. Lower fund counts and flat capital raised figures indicate fewer, but larger funds closed in 2024. The outlook? One way to look at how much dry powder the industry has and whether VCs are successful themselves is to look how well they have done raising money themselves. That's where the news looks fairly bleak, or at least is corrected now compared to the overhyped days of 2021. In 2024, 1,344 funds raised capital, down from 2,333 in 2023 and a record 4,283 in 2021. In terms of capital raised, the 1,344 VCs raised $169.7 billion in 2024, down from $213.8 billion in 2023 and down from the record $404.4 billion in 2021.