The much-anticipated slowdown in AI funding did not materialize in the first quarter of 2024. Venture capitalists continued to pour billions into AI-related startups, indicating sustained confidence in this rapidly evolving sector.
According to Crunchbase data, Q1 2024 saw a staggering $12.2 billion invested in venture-backed AI startups across 1,166 deals. This figure represents a modest 4% uptick from the previous quarter, Q4 2023, which saw $11.7 billion invested in 1,072 deals.
While the total funding amount is down 25% from the $16.3 billion raised in Q1 2023, that quarter was an outlier due to OpenAI's historic $10 billion-plus funding round from Microsoft.
Q1 2024 witnessed a few sizeable deals that would have been considered exceptional just a year ago. The three biggest AI-related rounds of the quarter were:
- Moonshot AI (China) raised over $1 billion from Alibaba Group Holding and HongShan.
- Figure (Sunnyvale, CA) raised $675 million to develop AI-enhanced robots for dangerous jobs.
- MiniMax (China) secured $600 million in Series B funding for its AI text-to-visual/audio technology.
Michael Marks, founding managing partner at Celesta Capital, stated, "AI is real, just like SaaS or e-commerce." He noted that startups applying AI to specific sectors or problems continue to attract investor interest, along with hardware plays.
Recent deals, such as AI search startup Perplexity AI's reported $250 million-plus funding at a $2.5-$3 billion valuation, demonstrate investors' willingness to pay premium valuations for promising AI companies.
Layoffs a potential warning sign not all AI startups are thriving, however. Stability AI and Tome recently announced layoffs, which could signal funding challenges for some players. Nevertheless, the overall trend suggests that investors remain eager to back AI-related technologies.
As the AI revolution continues to unfold, venture capitalists appear undeterred, with their checkbooks wide open for the next game-changing AI startup.
