Bad news appear to dominate the startup landscape of late – unicorns cutting staff and down rounds increasing in prevalence. But what about the venture money for small AI-focused startups? The good news is that such companies are indeed growing and getting investments at higher valuations than other startups. A survey conducted by Carta, a provider of cap table management and other services, shows that AI startups have substantially higher valuations and investments than other startups at the seed and Series A stages.
OpenAI is a major example of AI raising large rounds from influential tech investors and large corporations. Hugging Face and Anthropic, two other well-known AI companies, have also made headlines for their success. Not only does the data from Carta show that generative AI is on the rise, but it also suggests that starting an AI startup could be one of the best ways to avoid a down round. Indeed, Carta figures for the first quarter of this year confirm a 34% drop in seed funding for non-AI startups in the U.S., corroborating a similar trend suggested by other data on venture capital this year.
Carta itself is a prime example of its own data. The 16-year-old firm recently reached its highest-ever valuation of $3.5 billion after its most recent funding round, reaching unicorn status. The company was founded by Henry Ward, Jacob Mullins, and Henry M. Cohler, and offers services ranging from corporate formation and venture fundraising to secondary liquidity and stock option grants. With its impressive capital raise, sign of the technology firm’s being received positively by investors.
Meanwhile, AI startups continue to receive an increasing amount of venture attention, as the Carta survey illustrates. AI startups, especially those in the generative AI space, are hot and offer the potential to considerably increase the likelihood of avoiding a down round. If planned and executed correctly, starting an AI startup could be a financial rewarding and successful venture.
