AI startups defy venture capital slowdown with $11.8 billion in Q3 funding

Despite the overall reduction in venture capital funding, artificial intelligence startups were able to secure $11.8 billion in the third quarter of 2024. This amount accounted for 30% of the total venture capital investment in the same period, as stated in the data from Stocklytics.

The funding boost occurs amid the US export ban on AI chips, the instability of startup valuations, and some companies’ poor performance. However, investors’ interest in AI has not waned in any way. 

AI Funding Reaches Sixth-Largest Quarter on Record

Despite a 13% decline in year-over-year venture capital funding, AI companies were able to secure a significant sum, making it the sixth-largest quarter on record. This $11.8 billion is in line with the funding patterns seen across the years 2023 and 2024, with the exception of the Q2 2024 peak of $29.6 billion.

Stocklytics analyst Neil Roarty stated, “The $11.8 billion of fresh capital is close to quarterly figures seen throughout 2023 and 2024, excluding the absolute record of $29.6 billion raised in Q2 2024.”

Crunchbase data also shows that VC investors have invested close to $53 billion in AI up to now,  a 35% rise from the total amount invested in  2023. This also goes beyond the $49.4 billion that was raised in the year 2021, which makes the year 2024 the most funded year for AI.

“Much of the high funding total for AI-related companies comes from a few ultra-large rounds.” Crunchbase stated.

The total capital investment in the AI sector has now crossed $241 billion. Of this total, U.S. companies command about 65%, or $155 billion, with California being the leading state for AI investment. On the other hand, Asian companies have secured $53 billion, and European AI startups come in second with $30.2 billion.

Study reveals rapid revenue growth of AI companies

In the recent news, investment manager VanEck revealed a new venture fund on October 9 that focuses on AI and crypto startups. It has $30 million in funding for pre-seed and seed-stage companies, which shows that the fund still believes in the AI sector’s potential.

Furthermore, a recent study by Stripe, a fintech firm, shows that leading AI companies are attaining millions of dollars in sales within one year. Stripe analyzed its revenues of the 100 most successful privately held AI companies operating on the platform as of July 31, 2024.

Stripe data shows that AI startups achieved $1 million in annualized revenue after their first sales within 11 months. Also, the AI startups that reached over $30 million in annualized revenue did it in 20 months.