Written by Kristal Hu
(Reuters) – Artificial intelligence startups have had a major impact on the return of U.S. corporate capital in a market downturn, with total capital raised through 2024 up nearly 30% year over year, according to data from PitchBook released on Tuesday.
AI startups also accounted for a record 46.4% of the $209 billion in funding raised last year, compared to less than 10% a decade ago.
Enthusiasm for AI technology, largely fueled by the initial success of OpenAI’s ChatGPT from late 2022, has helped revive venture capital funding after companies sought to establish real scale in a low interest rate environment.
From basic models to applications, AI has captured the imaginations of both investors and their money. Outside funding estimates for AI companies, many of which remain unprofitable, such as $6.6 billion for OpenAI and $12 billion for Elon Musk’s xAI, underscore investors’ optimism about the sector’s potential.
But analysts say it’s uncertain whether the enthusiasm, especially for basic model firms that need big money to deploy computing power and talent, will be sustained.
“AI/LLM companies have historically enjoyed a funding environment. Most raised multiple rounds at very high valuations last year. They will need to break business milestones this year to continue to enjoy unlimited access to infinity capital,” said James Cross. managing director at Franklin Venture Partners.
Among venture capital $76 billion was raised in 2024, the lowest amount in five years, with big funds like Andreessen Horowitz and General Catalyst getting big pieces of the pie.
Getting out is also always a challenge. Output in 2024 was $149.2 billion, above a 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, although some year-end listings such as ServiceTitan helped revive some optimism. The incoming administration of US President-elect Donald Trump, with the involvement of technology executives and technology- 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 very anemic for exits, it’s hard to disagree from there,” said Brijesh Jeevarathnam, head of global investments at Adam Street Partners, who expects more VC-backed companies to list. second half of 2025.
(Reporting by Krystal Hu in New York; Editing by Kate Mayberry)
Source link
