Tuesday, September 27

Tighter VC capital forces AI startups to face the music • TechCrunch

Winter may hve came early for AI and machine learning startups. After years of optimistic projections, growth and investor enthusiasm, a new report from PitchBook shows that venture capital activity in the AI ​​sector has fallen precipitously in recent months.

Deal value growth in AI startups declined 27.8% quarter-over-quarter in Q2 2022, with aggregate investments reaching $20.2 billion across 1,340 deals. Year-to-date, VCs have injected $48.2 billion into AI startups through more than 3,000 deals – which sounds healthy but is actually a 20.9% decline from a year to year.

“The 2021 IPO wave has come and gone without significant results for horizontal AI startups, leaving questions about the size of the AI ​​software market and the opportunities for AI chip companies .” Brendan Burke, PitchBook Principal Analyst

AI funding declined at all stages of the deal, according to PitchBook data. Excluding angel and seed investor rounds, seed investments hit $4.2 billion, down from $5.6 billion in the first quarter and down 35% from the same quarter last year. Meanwhile, later-stage funding fell from $18.3 billion in the first quarter to $13.4 billion in the second quarter, down 48% from a year ago.

As the value and number of VC deals in AI startups hit their lowest levels since the fourth quarter of 2020, it’s not just investors who are pulling back.