AI Startups Secure $11.8B in Q3 2024 Amid VC Decline

AI startups have made headlines by attracting a remarkable $11.8 billion in funding during the third quarter of 2024, representing 30% of total venture capital investments for the period, according to Stocklytics.

Strong Performance Amidst Declining VC Funding

Despite a general downturn in venture capital funding, artificial intelligence startups have continued to receive significant investments. Stocklytics reports that AI startups raised $11.8 billion in the last 90 days, maintaining strong cash flow in a challenging investment landscape.

• The surge in funding occurred despite increased export restrictions on AI chips in the U.S., valuation uncertainties, and disappointing earnings from some startups.

• Investors are becoming more selective in their choices, yet their interest in the AI sector remains robust.

Insights from Stocklytics

Neil Roarty, an analyst at Stocklytics, noted that the $11.8 billion raised is comparable to quarterly figures from 2023 and 2024, excluding the record $29.6 billion raised in Q2 2024.

• The number of deals has decreased, with a 28% year-over-year drop in transactions, falling from 110 in Q3 2023 to 79 in Q3 2024.

• Overall venture capital activity has also slowed, with a 13% decline year-over-year.

Notable Trends and Future Prospects

Data from Crunchbase indicates that investors have injected nearly $53 billion into the AI sector this year, marking a 35% increase compared to the first three quarters of 2023. Significant funding rounds include OpenAI’s recent $6.6 billion investment at a $157 billion valuation.

• Cumulatively, the AI sector has surpassed $241 billion in funding, with U.S. companies accounting for almost 65% of this total, or $155 billion.

• Asian AI startups have raised $53 billion, while European firms have secured $30.2 billion.

The Intersection of AI and Blockchain

Venture capitalists are increasingly focusing on the convergence of AI and blockchain technologies. Cosmo Jiang, a portfolio manager at Pantera Capital, expressed enthusiasm about the opportunities at this intersection.

• On October 9, investment manager VanEck announced a new venture fund targeting AI and crypto startups, with $30 million allocated for pre-seed and seed-stage companies.