Venture Capitalists Flock to AI Startups, But Tech Funding Remains Picky
Venture capitalists are gobbling up term sheets for startups peddling artificial intelligence, but they’re remaining picky when it comes to funding the wider spectrum of technology. According to new figures from analytics firm Dealroom, AI startups raised $110 billion last year, a 62% increase from the year before. At the same time, privately-backed companies (startups and scale-ups) across the technology spectrum raised $227 billion in 2024, a 12% decrease from 2023.
AI Funding Soars
Yoram Wijngaarde, the founder of Dealroom, has been analyzing and advising in the tech industry for decades. "This is the biggest wave ever by absolute amounts invested," he said. "There’s never been anything like it." Part of the reason for that is the fact that there is a wider ecosystem being touched by AI, covering hardware and infrastructure, applications, foundational models, and more.
AI Funding Breakdown
A list of some of the biggest AI funding rounds in 2024 speaks to the different areas that are attracting attention. Anthropic (large language models, generative AI), Waymo (self-driving), Anduril (defense), xAI (applications), Databricks (processing and managing data, especially AI data), and Vantage (data centers and infrastructure) were among the top-ten biggest fundraisers of 2024. OpenAI, which feels like the poster child for AI right now, did not raise the most money last year. That spot was taken by Databricks, which raised $10 billion, compared to OpenAI’s $6.6 billion.
OpenAI: A Bellwether in the Industry
Yet, with the most funding in aggregate – more than $20 billion to date, with another $40 billion reportedly in the works – and a viral app in the form of ChatGPT, OpenAI has come to represent a bellwether in the industry. Its two biggest business interests, foundational models and generative AI, appear to be the engines driving all VC activity, with generative AI companies raising $47.4 billion in 2024, and foundational AI technology overtaking AI applications with the most growth (and a giant slice of funding) over the last two years.
Global Funding Trends
The Dealroom report was commissioned to coincide with a week of AI events in Paris around the French government’s AI Action Summit. Part of the event’s agenda is focused on the question of how to champion more equitable AI development across more markets, beyond the U.S.
Regional Funding Disparities
For those who believe AI companies are under-supported outside of the U.S. market, Dealroom’s figures lay bare how that works. A full 42% ($80.7 billion) of venture capital raised in the U.S. went to AI startups last year, compared to just 25% ($12.8 billion) in Europe, and 18% across the rest of the world. China was the standout last year with $7.6 billion invested.
The Future of AI Funding
One of the reasons AI startups have raised so much money is that the costs of building and operating these services: large language models cost a lot in computing infrastructure to build and run. The emergence of DeepSeek and other projects – one built a rival to an OpenAI model for just $50 – present an alternative approach built on open source. Is that something we will see develop further in the year ahead?
Open-Source AI
So far, the prospects for open-source companies have been fairly modest, even counting the outsized presence of Mistral (which bills itself as open source) in Europe and Meta’s efforts in the space. Dealroom says some 12% of AI VC funding last year went to startups building open-source AI. "However, there is considerable grey area for what is considered open source or not," Orla Browne, its head of insights, told me. "For example, xAI is not included in these figures, as while Grok-1 was open source, Grok-2 is currently not. With the inclusion of xAI alone, the percentage would rise to 22%."
VC Firms’ Investments
As for VC firms, Dealroom found that Antler made the most investments in the field last year, with a16z, General Catalyst, Sequoia, and Khosla Ventures rounding out the top five.
Conclusion
In conclusion, the report highlights the significant funding trends in the AI industry, with AI startups raising over $110 billion in 2024, while privately-backed companies across the technology spectrum raised $227 billion. The report also highlights the regional disparities in funding, with the US receiving the majority of funding, while Europe and the rest of the world receive significantly less. The report also touches on the emergence of open-source AI and the potential for further development in the year ahead.
FAQs
Q: What were the top AI funding rounds in 2024?
A: Anthropic, Waymo, Anduril, xAI, Databricks, and Vantage were among the top-ten biggest fundraisers of 2024.
Q: Which company raised the most money in 2024?
A: Databricks raised $10 billion, compared to OpenAI’s $6.6 billion.
Q: What are the two biggest business interests of OpenAI?
A: Foundational models and generative AI.
Q: How much funding did AI startups receive in 2024?
A: AI startups raised $110 billion in 2024.
Q: What is the regional funding disparity in AI?
A: The US received 42% ($80.7 billion) of venture capital funding, while Europe received 25% ($12.8 billion) and the rest of the world received 18%.
