Despite funding winter, GenAI startups raise $10 billion in 2023

Generative AI startups have emerged victorious this year despite the rest of the startup industry facing a funding crunch. According to a report by GlobalData, Gen AI startups have raised a record $10 billion this year, marking a 110% increase compared to 2022. This compares to venture capital funding for the startup industry as a whole falling by a whopping 65% to $224 billion dollars during the same period.

GlobalData Report

As per the report the startup funding winter is due to rising interest rates, recessionary risks, and a challenging macro environment. US based GenAI startups have received the most funds accounting for 75% ($16 billion) since 2018. This was followed by Israel, Germany, France, the UK, and China contributing an additional 15%.

Also Read: Startup funding winter: Indian startups begin reducing burn rate with 70% funding drop

The GlobalData report reveals that the first-time funding of GenAI startups dominated the startup funding making up 40% of all deal volumes. The report also predicts that GenAI startups will continue to attract investment in 2024 and beyond. This will be driven by solid factors such as accelerating startup funding, an 85% CAGR in patenting activity over the last five years, and aggressive hiring of GenAI talent across sectors.

Notable GenAI startups that received funds include Sarvam AI from India, which secured $41 million to build GenAI solutions for India’s multitude of languages, and Cradle from the Netherlands, which uses GenAI to help scientists design and engineer proteins and secured $24 million in funding.

Companies focussing on GenAI are also getting investor support by increasing its valuation. For instance, Google’s share price rose 5% a day after the company announced its latest artificial intelligence model, Gemini.