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'Mega-deals' could be inflating overall AI funding figures | TechCrunch

Dec 06, 2023 - techcrunch.com
Venture capital investments in generative AI startups have been robust in 2023, despite an overall decline in VC funding due to macroeconomic challenges. AI-related startups received over $68.7 billion in funding, with significant contributions from generative AI vendors like OpenAI, Stability AI, and Anthropic. However, a report by PitchBook suggests that these figures may be inflated due to "mega-deals" involving large investments from major companies.

For instance, Amazon pledged up to $4 billion in Anthropic, while OpenAI secured a $10 billion investment from Microsoft. Inflection AI also raised $1.3 billion in a funding round led by Microsoft. In the third quarter, VC funding inclusive of mega-deals totaled around $22.1 billion. However, after excluding these large investments, the total funding for the generative AI sector is closer to $15.1 billion.

Key takeaways:

  • Despite a decline in overall venture capital investments, AI-related startups, particularly in the generative AI space, performed well in 2023, with funding surpassing $68.7 billion.
  • Major generative AI vendors like OpenAI, Stability AI, and Anthropic accounted for a significant portion of the total funding.
  • A large part of the funding was due to "mega-deals", which are multi-hundred-million-dollar investments from big-name backers, such as Amazon's pledge to invest up to $4 billion in Anthropic and Microsoft's $10 billion investment in OpenAI.
  • When subtracting the mega-deals, the total VC funding for the generative AI sector in Q3 is closer to $15.1 billion, rather than the initial $22.1 billion.
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