The team at CBInsights has released their latest State of Venture Q3’24 report.
As noted in the research report from CBInsights, AI startups have managed to acquire 1 in 3 VC dollars.
The research study released by CBInsights pointed out that Silicon Valley is becoming more dominant. And positive signs from tech IPOs have emerged as well
CBInsights breaks down key changes in the venture landscape.
According to the research report, AI has established a “commanding” presence across the VC landscape.
The report from CBInsights added that in some ways venture has become less dramatic. The period of steep decline in funding which came after the “dizzying” heights of 2021 has given way to somewhat moderate quarterly variations.
The research report from CBInsights added taht even in a more sober fundraising environment, excitement over AI has become a driving force for investors.
Of note, one in every 3 VC dollars now goes to the tech.
The CBInsights report added that Silicon Valley, a key AI hub, is tightening its hold on investor cash. AI startups are exiting years considerable faster than those working on other technologies, the report claimed.
As interest rates fall and the appetite for riskier assets increases, expect AI startups to be “top of mind” for an increasing number of investors in the months ahead, the research report from CBInsights added.
Topline figures paint a “sobering picture” for venture, as global funding and deals ticked down quarter-over-quarter (QoQ). The quarterly levels place Q3’24 on par with where VC was in 2016/2017, the report noted.
However, CBInsights pointed out that while deal volume has progressively declined, the “size of deals” that do happen has grown.
In 2024 so far, the report revealed that average deal came in at $13.9M (up from $12M in full-year 2023), while the median is worth $3M (up from 2023’s $2.5M).
The research report shared by CBInsights also noted that more cautious investment environment is likely driving a flight to “quality” as selective investors isolate the most “promising” ventures.
AI startups are capturing almost a third (31%) of all venture funding right now — the second-highest share on record, following Q2’s 35%.
The report also mentioned that within AI, a company’s age and stage don’t always correlate to the size of financing rounds.
And one of the largest rounds in Q3’24, for example, was a $1B deal to Safe Superintelligence (SSI) — an early-stage startup founded in June by OpenAI co-founder Ilya Sutskever.
The company has just 10 workers.
SSI’s deal is the 9th $1B+ AI equity round this year.
Given their willingness to participate in such large rounds to so many companies, investors appear confident that a new tech giant “will emerge from the space — and apparently have FOMO.”
Yet despite investors’ bullishness, many of today’s AI startups will most likely struggle to live up to expectations, and some will fail.
Even AI giants such as OpenAI face the “daunting” task of keeping costs in control: the AI leader’s losses are expected to amount to $5B this year.
The AI boom is also giving recent public debuts a boost.
CBInsights analyzed 15 of the companies with the largest tech IPOs since 2022 to see whether they’ve gained or lost value since they filed to go public IPOs.
The majority (10 out of 15) have either held steady or gained value as public players — a positive indicator for tech IPOs more broadly, which until recently were getting beaten down badly in the public markets.
The report added that the fact that startups are able to maintain and even gain value as public companies will likely draw out other IPO-ready companies.