AI startups raise more in 2024

Artificial Intelligence (AI) startups in the United States raised 30 percent more in venture funds last year than in 2023, despite the fact that large companies developing this technology such as Sam Altman's OpenAI or Elon Musk's xAI have not reported profits, specialists indicated. According to data compiled in PitchBook, AI startups also captured a record 46.4 percent of the total $209 billion raised last year, compared to less than 10 percent a decade earlier. The enthusiasm for AI technology, sparked in large part by the resounding success of OpenAI's ChatGPT since late 2022, has helped revive venture capital funding after companies tried to establish realistic valuations in the post-zero interest rate environment. From foundation models to applications, AI has captured both investors' imaginations and their money. Huge funding rounds for AI companies, many of which remain unprofitable, such as the $6.6 billion for OpenAI and $12 billion for Elon Musk's xAI, underscore investor optimism about the sector's potential. But analysts say it's unclear whether the enthusiasm, especially for foundation model companies that require substantial capital for computing power and talent, will be sustained. "AI companies enjoyed a historically rich funding environment. Most raised multiple rounds at exponentially higher valuations last year. They will need to overcome very significant business milestones this year to continue to enjoy unlimited access to infinite capital," said James Cross, managing director at Franklin Venture Partners. One of the recent changes announced by OpenAI is that starting this year it will operate as a Public Benefit Corporation (PBC), a hybrid figure that combines for-profit with a social mission. This move seeks to secure the billions of dollars needed to continue developing advanced AI, a field in which OpenAI competes with giants such as Anthropic and xAI. A common criticism of PBCs is that their model does not ensure that companies place their stated mission above profit. In addition, publicly traded PBCs may be more susceptible to takeovers, as bidders may argue that their public benefit objectives conflict with profit maximization. Among venture capital funds, some $76 billion was raised in 2024, a five-year low, with large funds such as Andreessen Horowitz and General Catalyst securing significant portions of the pie. Exits also remain a challenge. Exit value in 2024 was $149.2 billion, above the seven-year low of $120 billion in 2023, but a fraction of the $841.5 billion in 2021. ?? Join El Sol de México's WhatsApp channel so you don't miss the most important information The IPO market did not recover as quickly as investors expected, although some year-end IPOs such as ServiceTitan helped revive some optimism. The incoming administration of U.S. President-elect Donald Trump, with the involvement of technology executives and pro-tech and pro-business policies, is expected to set the stage for a renewed M&A and IPO market. "With the caveat that 2024 and 2023 were so anemic with exits, it's hard not to see an upside from there," said Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, who expects more VC-backed companies to list in the second half of 2025.