AI Investment Growth in 2024: Surging Despite Funding Decline

AI Investment Surges While Overall Startup Funding Declines

Venture capital firms are actively pursuing investment opportunities in artificial intelligence startups. However, a more selective approach is being taken when considering funding for the broader technology landscape.

AI Funding Growth in 2024

Recent data from Dealroom analytics reveals that AI startups secured $110 billion in funding last year. This represents a substantial increase of 62% compared to the previous year.

Conversely, privately funded technology companies – encompassing both startups and scale-ups – collectively raised $227 billion in 2024. This figure indicates a 12% decrease from the $259 billion raised in 2023.

A Historic Investment Wave

Yoram Wijngaarde, founder of Dealroom and a long-time tech industry analyst, emphasizes the unprecedented nature of current AI investment. He notes that while marketplaces experienced significant investor interest in the late 1990s and early 2000s, the current AI boom surpasses it in both scale and value.

“This constitutes the largest investment wave observed to date,” Wijngaarde stated. “No prior period has witnessed such levels of financial commitment.”

The Broadening AI Ecosystem

The expansive reach of AI is a key driver of this investment surge. AI is impacting a wide range of sectors, including hardware, infrastructure, application development, and foundational model creation.

Leading AI Funding Rounds of 2024

Notable companies receiving substantial AI funding in 2024 include:

• Anthropic (large language models, generative AI)
• Waymo (self-driving technology)
• Anduril (defense applications)
• xAI (AI applications)
• Databricks (data processing and management, particularly for AI)
• Vantage (data centers and infrastructure)

These companies represent the diverse areas attracting significant investment within the AI landscape.

Databricks Leads in Funding

Despite OpenAI’s prominence as a leading AI innovator, it wasn't the top fundraiser of last year. Databricks secured $10 billion in funding, exceeding OpenAI’s $6.6 billion.

However, with over $20 billion raised to date and an additional $40 billion potentially in the pipeline, coupled with the popularity of its ChatGPT application, OpenAI remains a key indicator of industry trends.

Generative AI and Foundational Models Drive Investment

The core areas fueling venture capital activity are foundational models and generative AI. Generative AI companies attracted $47.4 billion in investment during 2024.

Furthermore, foundational AI technology has experienced the most substantial growth, surpassing AI applications in both funding and overall investment over the past two years.

Promoting Equitable AI Development

The Dealroom report was released in conjunction with a series of AI events held in Paris, centered around the French government’s AI Action Summit.

A key focus of the summit is addressing the need for more balanced AI development across various global markets, extending beyond the United States.

Geographic Distribution of AI Funding

Dealroom’s data highlights the current concentration of AI funding. The U.S. accounted for 42% ($80.7 billion) of all venture capital invested in AI startups last year.

Europe received 25% ($12.8 billion), while the rest of the world collectively secured 18%. China stood out with $7.6 billion in AI investment.

Europe’s Cautious Approach

“Europe faces a degree of innovator’s dilemma,” Wijngaarde explained. “There’s a reluctance to disrupt existing systems, which can lead to a more conservative investment strategy.”

The Future of AI Funding: 2025 Predictions

A significant factor driving substantial investment in AI startups is the considerable expense associated with developing and maintaining these technologies. Constructing and running large language models demands substantial computing infrastructure. However, the rise of initiatives like DeepSeek demonstrates an alternative path, leveraging open source principles.

These projects, such as the creation of an OpenAI competitor for a mere $50, suggest a potentially disruptive trend. Will this approach gain further traction throughout the coming year?

Current Status of Open Source AI

To date, the financial success of companies focused on open source AI has been relatively limited. This assessment includes the notable impact of Mistral, a European entity identifying as open source, and Meta’s contributions to the field.

Data from Dealroom indicates that approximately 12% of all AI venture capital funding in the previous year was allocated to startups engaged in open source AI development.

• However, defining what constitutes "open source" can be ambiguous.
• For instance, xAI’s initial release of Grok-1 as open source doesn’t automatically categorize subsequent versions, like Grok-2, as such.

Including xAI would elevate this percentage to 22%, highlighting the impact of specific projects on the overall statistics.

Leading Venture Capital Firms

Dealroom’s research reveals that Antler led the field in AI investments last year. Following closely were prominent firms including a16z, General Catalyst, Sequoia, and Khosla Ventures, completing the top five.

These firms are actively shaping the landscape of AI funding and influencing the direction of innovation.