Artificial intelligence startups have significantly boosted U.S. venture capital funding, with total capital raised in 2024 nearly 30% higher year-on-year, according to PitchBook data released on January 7, 2025.
AI ventures captured a record 46.4% of the total $209 billion raised last year, compared to less than 10% a decade ago. The surge in interest for AI technology, particularly following the success of OpenAI's ChatGPT since late 2022, has revitalized funding as companies sought accurate valuations in a post-zero-interest-rate environment.
Large funding rounds for AI firms, such as $6.6 billion for OpenAI and $12 billion for Elon Musk's xAI, reflect investor confidence in the sector, despite many companies remaining unprofitable. However, analysts express uncertainty about the sustainability of this enthusiasm, especially for firms reliant on substantial capital for computing resources and talent.
James Cross, managing director at Franklin Venture Partners, noted, 'The AI/LLM companies did enjoy a historically rich funding environment. They will need to smash very significant business milestones this year to continue enjoying unlimited access to infinity capital.'
In 2024, $76 billion was raised among venture capital funds, the lowest in five years, with firms like Andreessen Horowitz and General Catalyst securing substantial portions. The exit value for 2024 was $149.2 billion, an improvement from the seven-year low of $120 billion in 2023, but still a fraction of 2021's $841.5 billion.
While the IPO market has not rebounded as quickly as anticipated, year-end listings like ServiceTitan have offered some optimism. The incoming administration of U.S. President-elect Donald Trump is expected to foster a more favorable environment for mergers and acquisitions and IPOs.
Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, stated, 'With the caveat that 2024 and 2023 were so anemic with exits, it's hard not to see upside from there,' anticipating more VC-backed companies to be listed in the latter half of 2025.