Startup Funding In AI Has Doubled In Q2. Heres Why

AI has become the latest tech advancement that businesses within different industries are pushing towards. The same can be true when it comes to the startup scene: after Q2 of this year, AI investments went up by $24 billion, doubling the figure from the previous year.

This is the first time in history that AI is the largest startup investment across industries. This is due to the success of AI startups such as the famous OpenAI with ChatGPT and competitors. In fact, Crunchbase confirms it was exactly since ChatGPT’s launch that the increase came about.

“AI was the leading sector for the first time since the launch of OpenAI’s ChatGPT, based on an analysis of Crunchbase data,” they announced.

Another interesting aspect to look at is how AI drew more investors specifically towards chips. “Four AI-focused chip startups receiving rounds of more than $100 million, targeting data centre ASICs for transformers, highly flexible platforms for the embedded edge, dataflow processors, and mixed-signal neuromorphic chips,” explains Semiconductor Engineering.

A Look Into Overall Startup Funding

Globally, startups saw a 16% increase in investments. The total investment figure sits at around $79 billion, of course with AI making up a large portion of this.

“While this past quarter was amongst the highest for funding since Q1 2023, it is not necessarily a signal of a venture market comeback. Since 2023, funding has fluctuated quarter by quarter based on an increase in large growth rounds to pre-IPO companies and to companies in the AI sector. This past quarter is no exception,” Crunchbase added.

And even though there was an overall increase, the first half of this year saw a 5% decrease in growth, as compared to the second half of last year.


Different Investments In Numbers

Before getting into the numbers, its businesses and startup owners should understand the different stages of investment as a way to fully grasp where to notice trends, and for investors to make informed decisions when allocating resources such as capital.

Different Funding Rounds Explained

Seed funding is the first round that helps startups with initial operation and starting out. This is where investors fund conceptual projects that may still be in their research, testing and prototype stages.

Once the startup completes this stage and is operating, the next round of funding is Series A, or “early-stage” funding. Here, the goal is to grow the business from a marketing, brand awareness and staffing perspective.

Then, late-stage, or “Series B” funding is the round that helps established businesses who already have their business models in order and have witnessed growth through time. This round is dedicated to taking startups to the next level, in cases where they’re ready to expand markets.

The Crunchbase report proceeds to compare the amounts received through different investment stages, and they found that there was an increase in late-stage funding, going from $33 billion in Q2 last year, to $36 billion in Q2 2024. This was dedicated mainly to improving AI infrastructure among already established startups.

With seed funding, the figure averages at $8 billion, and has been this way for the last 5 quarters, despite the general changes taking place elsewhere.

Musk’s xAI was a main investment that took early-stage investments up to $34.6 billion, up from $28.8 billion in Q2 last year.