US Venture Investing Up 2.6X From 2023, Now 20 Percent Of VC Funding

If venture flows and investor demand are any indication, the new new thing is here and it's AI.

All of the numbers are moving northeast in ways familiar to veterans of past tech trends. And unlike say, the metaverse, there actually appear to be some profit and productivity use cases emerging from this boom. If there is any room for caution, it may be the emphasis on AI and within that, the concentration on just three firms above all others which have captured 60% of VC's AI investing. Such self-limiting may accentuate benefits for some, but increases risk and decreases opportunity  more broadly. JL   

Tomasz Tunguz reports:

The fastest growing category of US venture investment in 2024 is AI. Venture capitalists have invested $18.3 billion through the first four months of the year. At this pace, we should expect AI startups to raise about $55b in 2024. AI startups now command more than 20% share of all US venture dollars across categories, including healthcare, biotech, & software. In the preceding eight years, that number was about 8% per year. Investors have concentrated total dollars in a few names, with the top three companies accounting for 60% of the dollars raised.

The fastest growing category of US venture investment in 2024 is AI. Venture capitalists have invested $18.3 billion through the first four months of the year.

At this pace, we should expect AI startups to raise about $55b in 2024.

AI startups now command more than 20% share of all US venture dollars across categories, including healthcare, biotech, & software.

In the preceding eight years, that number was about 8% per year. But after the launch of ChatGPT in 2022, there’s a marked inflection point.

Some of this is new company formation, & there has been a significant amount of seed investment in this category. Another major contributor is the repositioning of existing companies to include AI within their pitch.

Over time, this share should attenuate, primarily because every software company will have an AI component, & the marketing effect for both customers & venture capitalists, will diffuse.

Not surprisingly, investors have concentrated total dollars in a few names, with the top three companies accounting for 60% of the dollars raised. Power laws are ubiquitous in venture capital & AI is no exception.