Today's AI Funding Rush Echoes 2021 Fintech Investing Hype

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A Secondary Transaction that’s Not so Unremarkable

It turns out that the massive $642 million round that U.S.-based GPU compute provider CoreWeave just closed was a secondary transaction. I can’t help but think of this as a news event that perfectly encapsulates the current state of investor interest in AI-related startups.

A Global Phenomenon: Investment Frenzy in AI Startups

The ongoing frenzy to invest in AI startups is not a local phenomenon; it’s a global trend. German AI company Aleph Alpha closed a $500 million Series B in November, and France’s Mistral AI is currently tipped to be closing in on €450 million at a €2 billion valuation, after raising a $113 million seed round earlier this year. OpenAI’s in-process secondary transaction could go through at a valuation of nearly $90 billion.

A List of Recent Funding Events

Parsing the list of recent AI funding events put together by Crunchbase, we can find more stand-out companies:

Rohirrim (generative AI for enterprise) raised $15 million
Atomic Industries (AI tuned for industrial production) raised $17 million
Assembly AI (AI speech models) closed a $50 million round

These are just a few examples from December. If we rewind to include November, we can add more names:

Togetherraised $102.5 million for its open source generative AI product
Secondmind put together a $16 million round to build an automotive-focused AI
Pika raised $55 million for its AI-generated content platform
Timekettle’s new earbuds offer real-time translation on calls

The Demand Tailwind

That demand tailwind is filling the sails of many startups. So, the question now is not whether these startups will find folks to sell to. Instead, it’s whether they can deliver on what they promise.

Venture Capital’s Bets Today

Venture capital’s bets today therefore result in a bigger tech risk than we have seen in recent venture cycles — there isn’t much of this kind of wagering happening in, say, enterprise SaaS. With so much money chasing AI companies, if the current crop of these startups fails to deliver on their promises, it won’t be due to a lack of effort and support.

The Result Will Be Notable

Let’s see how far AI tech can progress and penetrate the market in the next few months. We’re seeing a lot of folks push their capital into just a few squares on the betting table. One way or another, the result is going to be notable.