Q2 AI Startup Funding Surges: Crunchbase Notes

Data from Crunchbase shows that investment in artificial intelligence (AI) startups jumped remarkably in the second quarter of 2024, rising from $24 billion from April to June more than double from the prior quarter. This notable rise highlights the rising interest in and funding for artificial intelligence technology.

Overall startup financing also grew, gaining 16% consecutively to $79 billion in the last quarter. Reportedly based on data from Reuters, artificial intelligence became the biggest industry for investments, surpassing biotech and healthcare the first time. OpenAI’s ChatGPT’s broad popularity has inspired a competition among sectors including manufacturing, healthcare, and corporate productivity to incorporate the most recent AI developments. Major technology companies and investors warn, meanwhile, that significant rewards from these investments will most certainly show up in the next years.

Though Q2 shows a clear increase, startup investment still lags behind the levels seen over the preceding three years. Crunchbase data shows that global funding dropped by 5% to $147 billion in the first half of the year, then stayed the same in the second half of 2023.

A tight monetary policy in the US has helped initial public offers (IPOs), a vital source of returns for institutional private market investors who usually invest in startups and sell shares, slowly revive.

According to fresh Crunchbase data, during the second quarter three out of every ten investment dollars went into artificial intelligence. Double the first quarter investment, investors bet $24 billion on artificial intelligence startups. Since the introduction of ChatGPT in late 2022, this represented the first time artificial intelligence drew more investment than any other field.

“There are indications that bigger M&A deals rose in Q2, so giving venture capital markets much-needed liquidity,” the paper says. This suggests that acquired AI businesses are giving investors instant profits, which explains the explosion in AI financing.

Though investors remain wary of the actual value AI may provide compared to its lofty valuations, the $24 billion investment in artificial intelligence marks the biggest quarterly investment in recent years. Especially, five out of six billion-dollar fundraising rounds in the quarter went to AI startups. Following $7.5 million in debt funding, AI-oriented cloud service CoreWeave raised another $1.1 billion. AI data startup Scale AI raised a billion in May; Elon Musk’s AI business, xAI, obtained another $6 million. Wayve, a British autonomous driving business, raised rather more than a billion from Nvidia and others.

Hardware firms also raised $11 billion to meet the growing need for compute power and artificial intelligence infrastructure.

With a 16% growth over Q1 and a 12% increase over the same quarter last year, overall worldwide startup investment rose to $79 billion in Q2. Combining the two quarters of 2024, the whole investment comes to $146 billion, a 5% drop from the $154 billion spent in the first two quarters of 2023. While this past quarter was one of the highest for funding since Q1 2023, Crunchbase analysts note variations based on significant growth rounds to pre-IPO businesses and those in the AI industry, thereby indicating a venture market comeback even if this past quarter was one of the highest for funding.

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