In 2024, artificial intelligence startups experienced a substantial surge in funding, while the broader startup ecosystem saw a decline. Venture capitalists have shown a strong preference for AI ventures, leading to a notable increase in investments in the AI sector, even as overall startup funding decreased.
According to data from the analytics firm Dealroom, AI startups secured $110 billion in funding in the past year, marking a 62% increase from the previous year. In contrast, total funding for privately backed companies, including both startups and scale-ups, across all technology sectors, reached $227 billion in 2024, a 12% decrease compared to 2023.
Yoram Wijngaarde, the founder of Dealroom, who has extensive experience analysing and advising the tech industry, noted the unprecedented impact of AI on investment activity and value. “This is the biggest wave ever by absolute amounts invested,” he said. “There’s never been anything like it.”
The extensive reach of AI, which spans across hardware, infrastructure, applications, and foundational models, is a key factor driving this surge in funding.
The distribution of the largest AI funding rounds in 2024 highlights the diverse areas attracting investment. Companies such as Anthropic (specialising in large language models and generative AI), Waymo (focused on self-driving technology), Anduril (in the defense sector), xAI (applications), Databricks (handling and processing AI data), and Vantage (data centres and infrastructure) were among the top ten recipients of funding in 2024.
Despite OpenAI’s prominence in the AI landscape, it was Databricks that secured the most funding in the past year, raising $10 billion, while OpenAI raised $6.6 billion.
Nevertheless, with over $20 billion in funding to date and an additional $40 billion reportedly anticipated, coupled with the widespread popularity of ChatGPT, OpenAI remains a significant player in the industry.
Generative AI and foundational models are major drivers behind the increased venture capital activity, with generative AI companies raising $47.4 billion in 2024. Foundational AI technology has surpassed AI applications in both growth and funding over the past two years.
The Dealroom report, which coincided with AI events in Paris during the French government’s AI Action Summit, also examined the uneven distribution of AI development across different markets, particularly beyond the United States.
The data reveals a disparity in AI funding, with 42% ($80.7 billion) of venture capital in the U.S. allocated to AI startups, compared to only 25% ($12.8 billion) in Europe and 18% in the rest of the world. China stood out with $7.6 billion in investments.
Looking ahead to 2025, the future of AI funding remains uncertain. The high costs associated with building and operating AI services, especially large language models, raise questions about the sustainability of the current funding model. The emergence of projects like DeepSeek, which developed a rival to an OpenAI model for just $50 using open-source methods, presents a potential alternative approach.
Although open-source companies have shown promise, with Mistral and Meta making notable contributions, their overall presence remains modest.
According to Dealroom, approximately 12% of AI venture capital funding in the past year went to startups focused on building open-source AI. Dealroom’s analysis of venture capital firms revealed that Antler was the most active investor in the AI field last year, followed by a16z, General Catalyst, Sequoia, and Khosla Ventures.