Anyone who was around in the late ’90s remembers the Dotcom Bubble– the tech boom of 1995-2000 and the resultant tech collapse of 2000-2002. It’s an old adage that whenever everyone is moving in one direction, it might be advisable to move the other way. In other words, the investment opportunities may not be there, and the madness of crowds creates high expectations that can never really be achieved. Some argue the same thing may be happening in Artificial Intelligence, commonly known as “A.I.”… Is A.I. All the Rage?
Consider this- the total number of venture capital deals and the overall value of the deals have dropped significantly since the end of 2021. Approximately 4,000 deals were funded to the tune of $93.3 billion during Q4 2021; that figure has dropped to about 2,000 deals and $29.8 billion in Q3 2023. See the chart below for details.
Equity financings into VC-backed companies headquartered in the U.S. Sources of cash investments include, but are not limited to, VC firms, corporate investors, other private equity firms and individuals. Source: Crunchbase, as of 10/03/23, Ernst & Young LLP
How does venture funding for A.I. fit into this investment picture? Money raised for Silicon Valley A.I. ventures outpaced the funding totals in every other tech category in Q3 2023. The average funding valuation for A.I. firms has grown from about $20 million in 2020-2021 to about $90 million now.
For insight, I’ve included a link below to a Chicago Booth Review with a panel of industry experts who are interviewed about A.I. startup funding. Enjoy the panel discussion and see how the funding for A.I.-related ventures is running against the overall downward venture capital investment trend and attracting an increasing amount of funding.
What do you think- Is there a right way to invest in A.I. or are investors just following the latest fad? Reach out to me here to let me know what you think!
~ Brian Kasal- The Leadership Matrix
P.S.- Did you see my last Leadership Matrix post? Where Do Rates Go From Here?
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