It’s safe to say Which venture capital has hit while the iron is hot this year where generative AI is concerned.
While venture capital investments are down overall compared to last year thanks to macroeconomic challenges and other related factors, startups in generative AI — and AI more broadly — have performed well.
Funding for AI-related startups topped $68.7 billion in 2023, according to PitchBook, with generative AI vendors like OpenAI, Stability AI, and Anthropic accounting for a large portion of that number. The sector appears likely to end the year with much higher investments than the previous two years.
But could the top-level numbers be misleading?
A Q3 AI investing report from PitchBook, released this morning, found that “mega-deals” (i.e., hundreds of millions of dollars in investments from big-name backers) have significantly inflated deal totals this year.
For example, just a few months ago, Amazon pledged to invest up to $4 billion in Anthropic, the company developing the AI-powered chatbot Cloud. OpenAI received a $10 billion investment from Microsoft (although not all at once and partly in the form of cloud computing credits). Inflection AI, a company creating what it describes as “personal” AI assistants, has raised $1.3 billion in a funding round led by Microsoft. The list goes on.
In the third quarter, venture capital financing comprehensive to The total huge deals amounted to about $22.1 billion. But after subtracting segments led by tech giants and secured by AI startups, the total is closer to $15.1 billion for the sector.