Fintech SAN FRANCISCO–In what will come as no surprise to any credit union that has attended a pitch session by fintechs seeking investments from credit unions, start-ups offering AI-related solutions are defying the overall trend and having little difficulty raising funds.
According to an analysis compiled by GlobalData, startup funding has been subdued in 2023 with $224 billion in total venture capital funding falling 65% since 2021 when startups raised a record $655 billion.
“But the story is very different for Generative AI (GenAI) startups, which have raised $10 billion in venture capital, 110% rise compared to 2021,” according to the company.
Since 2018, GenAI startups in the U.S. secured the lion’s share of the funding with 75% share ($16 billion), followed by Israel, Germany, France, the U.K. and China – which added another 15% share, GlobalData stated.
Deal Volumes
In terms of deal volumes, early stage startups formed 40% of all deal volumes, followed by seed stage with 37% of all deal volumes - meaning first time funding of GenAI startups potentially dominated startup funding, the analysis added.
“The slowdown in startup funding over the last couple of years, dubbed ‘startup winter,’ was driven by rising interest rates, recessionary risks and overall tough macro environment,” said Adarsh Jain, director of financial markets team at GlobalData. “Despite these challenges, GenAI startups raising record sums underscores the breakthrough nature of the technology, its widespread applicability, and its power to transform entire sectors and industries.
‘Expected to Continue’
“GenAI startups are expected to continue to attract investment in 2024 and beyond because the technology is underpinned by solid drivers,” Jain continued. “For instance, apart from accelerating startup funding, patenting activity in GenAI registered 85% CAGR over the last five years, as per GlobalData’s patent analytics.”
In addition, companies across sectors are ramping up human capital by aggressively hiring talent around GenAI, according to GlobalData Job Analytics.
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