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AI’s Share Of US Startup Funding Doubled In 2023

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More than 1 in 4 dollars invested in American startups this year has gone to an artificial intelligence-related company, Crunchbase data shows.

At first glance, that may not sound too shocking. AI is generating more buzz than ever, and we’ve seen a plethora of enormous financings recently for companies in the space including those to OpenAI and Anthropic.

Comparing 2023 and 2022, however, one striking takeaway is how much larger the share of investment going to AI has become. It’s more than double year-ago levels.

To get a sense of how AI’s piece of the funding pie has shifted over time, we charted out investment to the space over the past six calendar years. It shows that from 2018 through 2022, artificial intelligence startups attracted an average of 12% of total funding — less than half of current levels.

AI gets a bigger piece of a smaller pie

What happened to cause such a shift this year? Well, a couple things stand out as most obvious.

First, overall startup investment has plummeted, with North American venture funding down 50% year over year in the first half of 2023.

The downturn is widespread across most industries. Pretty much every time we take a look at funding to a sector lately — from real estate to fintech to  Web3 to HR tech — we find it’s way down from last year.

Yet amidst this all, not only has AI been resilient, it’s actually trending higher year over year, as charted below. So while the overall investment pie is getting smaller, AI’s piece is getting much larger.

Is AI its own category, or something bigger?

One thing that’s interesting about AI’s growth is that it’s not specific to a particular industry.

Per Crunchbase categorization, AI isn’t necessarily a discrete sector but rather a set of technologies that can be applied to many industries. It’s perfectly possible to be a real estate AI company, a fintech AI company, a biotech AI and so on.

This is noteworthy because it seems that while most sectors are seeing less investment, the companies in those industries with compelling AI pitches are doing better at securing funding.

There’s a case to be made that this trend will continue, given that artificial intelligence represents an increasingly ubiquitous part of so many startups’ technology stacks.

In some ways, today’s AI funding craze is reminiscent of 25 years ago, when a startup could tout being “an Internet company” as some sort of special differentiator. Now, no one talks about internet companies. It’s just assumed the internet is key to the business model of virtually every startup.

Similarly, there is a possibility that being an AI company may cease to be a relevant categorization. Not because it’s irrelevant — but because it’s too essential for anyone to leave out.

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Illustration: Dom Guzman

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