Funding for US-based startups has surged to its highest level since the pandemic began, but it’s not all good news. The funding surge is characterized by a divide between big AI deals versus overall market pressure.
Despite more than $55 billion invested during the second quarter of 2024, the figures mask a more complex reality.
US startup funding rebound
Even though total funding is up, the number of startups receiving investments has significantly decreased, according to data released by PitchBook and the National Venture Capital Association.
However, this discrepancy points to a market dominated by a small number of large AI-related deals, rather than broad-based growth.
Key findings from the PitchBook report include:
- Pre-money valuations for growth deals hit a median of $238 million.
- Female-founded startup funding is down significantly, both in dollars and deals.
Why does this matter? The current funding environment presents a stark contrast between the hype surrounding AI startups, and overall market pressures.
This means implications for startups, investors, and the broader tech ecosystem.
AI hype versus market reality
Nizar Tarhuni, PitchBook’s VP of institutional research and editorial, says the surge is mainly attributed to “the AI boom.” Speaking to Axios, Tarhuni says there are “a lot of sloppy Series A deals [getting] done for AI startups.”
These Series A deals usually come with a “$15 million checks,” which Tarhuni attributes to being business as usual during “a hype cycle.”
Unfortunately, this AI-driven boost is not representative of the broader startup market and ecosystem. Tarhuni explains: “We’re seeing VCs deploy less capital, making it harder to raise new money, and then there’s less money to deploy.”
While the figures look impressive, the underlying challenges remain. These challenges include:
- Startups outside of the AI hype find it harder to get funding.
- Meanwhile, AI startups should be cautious about unsustainable valuations.
This culminates in a perfect storm, where both founders and investors need to balance opportunities driven by the hype with the realities of the venture market.
Robotics are recovering too
Investments in robotics are gaining momentum as well. Crunchbase data shows that the sector secured more than $4 billion during the first half of 2024. This signals a recovery from the post-pandemic slowdown.
As of this writing, the investment surge is on track to surpass 2023’s total of $6.8 billion. This is good news, considering the impact COVID-19 had on robotics.
The industry was brought down from an all-time high of $17.7 billion raised in 2021.
Now, in a post-pandemic world driven by AI, investors are taking note again.
NOW READ: Robotic startups boosted by $4.2B in post-pandemic, AI-driven world
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About the author
Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.
