Despite AI craze, U.S. startup funding continues to decline By Reuters
© Reuters. FILE PHOTO: The ChatGPT logo and AI artificial intelligence words are seen in this picture taken on May 4, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
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(Reuters) – U.S. investors invested $170.6 billion in startups in 2023, down nearly 30% from the $242.2 billion recorded in 2022, according to publicly available PitchBook data. This is as the venture capital funding market continues to struggle due to valuation resets due to rising interest rates. On Thursday.
In a year in which massive deals in artificial intelligence (AI) captured the imagination of investors, the latest data shows a continued decline in U.S. venture funding compared to its peak in 2021, when startups raised $348 billion.
AI startups attracted $1 in every $3 of U.S. investment last year, reflecting a surge in investor interest after OpenAI’s ChatGPT came into the spotlight and startups raced to develop AI technology.
AI labs that train large-scale language models, which are expensive given the computational power required, have made notable contributions in a year of cautious investment. Large investments in AI leaders OpenAI and Anthropic accounted for 10% of total deal value in 2023, according to PitchBook data.
Deal activity increased slightly in the fourth quarter, with 3,934 transactions completed, sparking hopes of a potential stabilization in the market.
The number of startups raising money at a lower valuation than the previous round jumped from 8% in 2022 to 20% in 2023. This suggests a widespread reset in valuations of late-stage companies.
“AI names are trading at a premium. Some software names are trading at a premium,” said Ken Smythe, founder of Next Round Capital. “Meanwhile, food and grocery delivery and poor consumer concepts are all down 95% from the last round. “He said. Invest in private markets.
Many of the 723 so-called unicorn companies valued at more than $1 billion in recent funding rounds are expected to try to raise capital again this year as they burn through cash.
