Nearly one-fourth of new start-ups seeking venture backing are AI-based
Those companies accounted for $7 billion in investments through Q3 of 2024.
Here’s a startling statistic.
According to PitchBook data, artificial intelligence (AI) start-ups account for 22 percent of first-time venture capital financing, reflecting a mass pivot among founders that is ringing alarm bells for investors concerned that the technology is increasingly being used as a marketing tool to raise capital.
“Among start-ups that raised money for the first time this year, $7 billion went to AI and ML (machine learning) companies,” according to PitchBook data through Q3. “It’s another historic high for a vertical that has been outpacing its peers in metrics like valuation and unicorn creation.”
The trend does not come without significant challenges.
“The real challenge is cutting through the ‘AI washing’ to identify founders who aren’t just using AI as a buzzword,” said Richard Dulude, Co-Founder and General Partner at pre-seed and seed investor Underscore VC. He said that finding companies working genuinely to solve novel problems that large foundation model providers can’t address has become his chief objective.
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