Summary:
Venture funding for AI reached $99.6 billion, an 80% increase over last year.
80% of new investments from Scale Venture Partners are centered on AI applications.
The rise of assisted AI combines automation with human oversight.
Menlo Ventures launched a $100 million AI fund in partnership with Anthropic.
AI is transforming service revenue into product revenue, creating new growth opportunities.
Editor’s Note
In 2024, Crunchbase News interviewed several active startup investors in the artificial intelligence sector. Below are the key highlights from those interviews.
Record-Breaking Funding Year
This year marked a breakout year for funding to AI companies, with venture funding reaching $99.6 billion through mid-December, a remarkable 80% increase year over year. Approximately one-third of this funding was directed towards foundation model companies.
Focus on AI Applications
Investors are now pivoting their focus towards AI applications that can significantly impact various sectors. Rory O’Driscoll from Scale Venture Partners noted that 80% of their new investments are centered around AI, moving beyond just infrastructure to applications that drive substantial sector changes.
Dominance of Applied AI
In 2023, the conversation largely revolved around the infrastructure needed for AI, but in 2024, investors are keen to explore applied AI. O’Driscoll emphasized the importance of determining which applications will succeed first, as enterprises become more accustomed to the probabilistic nature of AI.
Emergence of Assisted AI
The trend towards assisted AI is growing, with investors like Sundeep Peechu from Felicis Ventures predicting a rise in services that combine automation with human oversight. New technologies such as multimodal AI, which integrates various media types into cohesive applications, are also on the horizon.
New Investment Funds
Menlo Ventures has launched a $100 million AI-focused fund in partnership with Anthropic, aimed at backing early-stage AI startups. This fund provides startups with free access to Anthropic’s models and valuable leadership opportunities.
Boosting Productivity and Revenue
AI is not just a feature; it's becoming integral to business operations. Investors like Dharmesh Thakker from Battery Ventures see companies increasing their growth rates significantly by applying generative AI across various business functions. Additionally, generative AI is shifting service revenue into product revenue, offering a new avenue for growth.
Vertical Opportunities
With the dominance of SaaS technology now waning, AI is opening up new vertical opportunities that were previously overlooked. Investors are keenly analyzing how AI can enhance each vertical, leading to potentially lucrative markets.
The Future of AI Investment
While funding is increasing, it may take several investment cycles for the full potential of AI to be realized. O’Driscoll warns of a potential correction in the next few years but believes that in a decade, AI will be central to all software development.
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