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The months after ChatGPT’s release might have seemed like peak hype for generative AI, but it wasn’t until 2024 that the excitement translated into a real breakout year for startups built on the technology.
AI startups pulled in $101 billion last year, a more than 80% jump from the $55.6 billion invested in 2023, according to a recent year-end report from Crunchbase. That marks the biggest year in a decade for AI startups, which previously clocked an $83 billion record in 2021.
But the funding frenzy around AI skewed an otherwise lukewarm venture market; overall funding grew only 3%—$10 billion—from 2023 to $314 billion, well below the boomtime highs of 2021 and 2022.
A hopeful endnote: Despite the lack of huge growth in the overall funding market, Crunchbase senior data editor Gené Teare told Tech Brew an uptick in the final quarter of 2024 generated some optimism going into the new year.
“What’s changed year over year is the mood in 2024 is very, very different, and we saw a big pickup in Q4,” Teare said. “There’s a little bit more excitement this year than there was a year ago in the venture markets, even though year over year, it kind of looks the same.”
Applying AI: While nearly a third of AI funding went to foundation model companies like OpenAI, Anthropic, and xAI, Teare noted that number is actually down from 40% in 2023, as a greater proportion of money goes to applied AI and infrastructure.
“What that means is two-thirds went into that sort of infrastructure layer, the chips and the sort of picks and shovels,” Teare said. “But also a lot of funding went into the sort of applied AI space as well.”
High-dollar rounds: Nearly 20% of 2024 funding—$58.3 billion—went to billion-dollar rounds, a testament to how much money is behind big AI startups. That’s up from around 15% in 2023, according to the report.
Teare said she doesn’t expect AI investing to lose much momentum going into 2025.
“What I’ve seen in speaking to investors is everyone is pretty much focused on AI as a sector. So everything is aligned with a lot of funding going into the AI sector. Investors are focused. Founders are focused. Big Tech is focused,” Teare said. “We’re two years into this moment, and for most investors that you’re talking to, they see this as a decades-long trend that’s going to need to play out.”
Not much else: But enthusiasm around AI stands in stark contrast to almost every other sector of startups, where funding growth remains largely stagnant, according to Teare.
“Everything is down from 2021 except for AI,” she said. “And then when I look at all the sectors, they’re all kind of largely in line or slightly below year over year in 2024. So AI is clearly the standout sector. I don’t think any other sector stands out from the crowd as much as AI does in 2024.”