The VC market is increasingly defined by deals for AI companies, which captured a remarkable 41% of US VC deal value in the first half of 2024, according to the latest PitchBook-NVCA Venture Monitor. Driving much of the investment, though, are larger deals involving actors that aren’t traditional VC firms.
AI and machine learning companies collected $38.6 billion of the $93.4 billion invested in US VC deals during that period, and the sector’s share of total US VC deal count increased to 26.8%.
The dominance of technologies like generative AI may be hiding a tougher reality for startups and investors. Coming against a difficult fundraising environment where many startups are strapped for cash, PitchBook lead VC analyst Kyle Stanford said these deals are skewing the overall picture.
“These are outsized deals driving deal value,” Stanford said, “but these aren’t deals coming from VC firms.”
The growing role corporations like Microsoft, Nvidia, and Amazon are playing in the venture space obscures a more cautious market environment, Stanford said
GP fundraising has become particularly difficult, especially for smaller emerging managers. Investors are also raising the bar for the kinds of investments they make, according to Stanford, meaning fewer deals are getting done—a reality that is even evident at the earliest stages of AI investing.
Large entities have backed many of the biggest deals in AI & ML this year. Figure, an AI robotics company, raised a $675 million Series B in February with backers like Microsoft, Nvidia, Intel Capital and others. Groq, an AI chipmaker, raised a $640 million Series D led by BlackRock in early August. And Amazon completed its $4 billion investment in the large language model creator Anthropic in March.
More than 40% of all newly minted unicorns have been AI startups, according to PitchBook’s Q2 2024 US VC Valuations Report.
“Yes, AI is raising a lot of money because it is the hottest tech,” Stanford said. “But the caution in the market makes it all the more difficult for all companies to raise.”
Related read: Can crypto alleviate AI’s computing crunch? Not so fast.
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