Generative AI Landscape: Q2 2024 Insights

AI (robot) playing piano
July 5, 2024
Perspectives
Written by
Sofia Svanqvist
Investment Analyst

Looking back at the second quarter of 2024, it's evident that Generative AI is still drawing strong interest from investors, similarly to Q1 this year (visit the Q1 update here). In May, VC funding soared to $31 billion, the highest monthly amount this year. This was a 40% increase from the previous month and a 29% rise from the same time last year, with the AI sector receiving the most investment.

In the second quarter of 2024, companies within the AI space raised a total of $11.4 billion spread out across more than 900 companies (Crunchbase News). To put this in perspective, this constitutes almost 40% of the VC funding in Q2’2024 being distributed to only AI companies. Additionally, the number of VC rounds in AI companies declined slightly compared to 1,052 companies for Q1. Which is almost a 30% decline from the same quarter in the previous year (ibid).

Despite these figures, early-stage AI funding may be showing some cracks, with concerns about sustainability and overvaluation becoming more pronounced (Crunchbase News). 

Source: Crunchbase

This influx of capital highlights significant investor interest and confidence in the sector’s growth potential, reflecting the transformative impact that AI technologies are poised to have across various industries. The public market has mirrored this enthusiasm, with AI stocks continuing to dominate. Companies like Nvidia have seen substantial demand for their AI GPUs and GPU clusters, securing their dominant market position and driving the broader rally in tech stocks (Morningstar). However, this surge also raises critical questions about whether we are in the midst of an AI bubble, with investments being made at a premium without fully assessing the long-term value (Reuters).

Notable AI Investment Rounds

Let’s delve into some of the noteworthy deals mapped across the US and Europe: 

Hailo (raised April, 2024): AI infrastructure for data ops & interface. Israel, founded 2017, valued at $1.2 billion. Raised $120 million in Series C from investors including Zisapel family, Taglit Ventures, Gil Agmon, Maniv Mobility, and more.

Pigment (raised April, 2024): Vertical AI for AI fintech tools. France, founded 2019, valuation undisclosed. Raised $145 million in Series D from investors including IQONIC growth, Sandberg Bernthal Venture Partners, IVP, Meritech, Greenoaks, and more.

Sigma (raised April, 2024): Horizontal AI for enterprise productivity. US, founded 2015, valued at $1.5 billion. Raised $200 million in Series D from investors including Avenir Growth Capital, Altimeter Capital, NewView Capital, Sutter Hill Ventures, D1 Ventures, and more.

Augment (raised April, 2024): AI infrastructure for DevOps. US, founded 2020, valued at $977 million. Raised $227 million in Series B from investors including Meritech Capital Partners, Innovation Endeavors, Sutter Hill Ventures, Index Ventures, Lightspeed Venture Partners, and more.

xAI (raised May, 2024): AI infrastructure for end-user applications. US, founded 2014, valued at $24 billion. Raised $6 billion in Series B from investors including Sequoia Capital, Page One Ventures, E1 Ventures, Redstone, Andreessen Horowitz, and more.

Coreweave (raised May, 2024): AI infrastructure for data ops & interference. US, founded 2017, valuation undisclosed. Raised $1.1 billion in Series C from investors including Blackstone Group, Magnetar Capital, Coatue, Fidelity, and more.

Wayve (raised May, 2024): AI infrastructure for foundational model. UK, founded 2017, valuation undisclosed. Raised $800 million in Series C from investors including Softbank, Eclipse Ventures, Future Fifty, Ocado Group, Balderton Capital, and more.

ScaleAI (raised May, 2024): AI infrastructure for DevOps. US, founded 2016, valued at $14 billion. Raised $1 billion in Series F from investors including Accel, Index Ventures, Tiger Global Management, Founders Fund, Dragoneer Investment Group, and more.

Vercel (raised May, 2024): AI infrastructure for DevOps. US, founded 2015, valued at $3.25 billion. Raised $250 million in Series E from investors including Accel, Google Ventures, Bedrock, Notable Capital, and more.

Mimic Robotics (raised May, 2024): AI infrastructure for data ops & interference. Switzerland, founded 2019, valuation undisclosed. Raised $2 million in Pre-seed from investors including Founderful, Tiny VC, Another.vc, and more.

7Analytics (raised May 2024): Vertical AI. Norway, founded 2020, valuation undisclosed. Raised $4 million in Seed from investors including Scale Capital, Momentum Partners, Link Venture Capital, Construct Ventures AS, and more.

Spoor (raised May, 2024): Vertical AI. Norway, founded 2021, valuation undisclosed. Raised $4 million in Seed from investors including Ørsted CVC, Antler, Norrsken VC, Nysnoinvest, and more.

Etched (raised June, 2024): AI infrastructure for AI chips. US, founded 2020, valued at $34 million. Raised $120 million in Series A from investors including Firestreak, Primary Venture Partners, Earthshot Ventures, Skybox Datacenters, Two Sigma Ventures, and more.

Omi (raised June, 2024): Horizontal AI for media generation. France, founded 2019, valuation undisclosed. Raised $15 million in Series A from investors including Dawn Capital, Founders Future, and more.

Typeface (raised June, 2024): Horizontal AI for media generation. US, founded 2020, valued at $1 billion. Raised $100 million in Series B from investors including Salesforce Ventures, Lightspeed Venture Partners, Menlo Ventures, Madrona, and more.

CuspAI (raised June, 2024): Vertical AI for material design process. UK, founded 2021, valuation undisclosed. Raised $30 million in Pre-seed from investors including Northzone, Basis Set Ventures, Lightspeed Venture Partners, Giant Ventures, and more.

Axelera AI (raised June, 2024): AI infrastructure for data ops & interference. France, founded 2019, valuation undisclosed. Raised $68 million in Series B from investors including CDP Venture Capital Sgr, EIC Fund, Fractionelera, Imec, and more.

Dust (raised June, 2024): Horizontal AI for enterprise productivity. France, founded 2020, valuation undisclosed. Raised $16 million in Seed from investors including Connect Ventures, Sequoia Ventures, AIGrant, XYZ VC, Motier Ventures, and more.

Mistral AI (raised June, 2024): AI infrastructure for models - open foundation. France, founded 2023, valued at $8 billion. Raised $645 million in Series B from investors including Bpifrance, Firstminute Capital, Headline, Index Ventures, JCDecaux, and more.

Synthflow (raised June, 2024): Vertical AI for customer service. Germany, founded 2021, valuation undisclosed. Raised $7 million in Seed from investors including Atlantic Labs, BigStory VC, Singular VC, and more.

Tandem Health (raised June, 2021): Vertical AI for customer service. Sweden, founded 2021, valuation undisclosed. Raised $9 million in Seed from investors including Amino Collective VC, Northzone, and more.

Poolside (raised June, 2024): AI infrastructure for DevOps. France, founded 2022, valued at $2 billion. Raised $400 million in Seed from investors including Bain Capital, BPI France, Redpoint Ventures, Felicis Ventures, and more.

AI Investment Rounds, Q2 2024
Please note that all the information presented is based on data from Crunchbase, while the classification of companies into the infrastructure or application layer and their identification as vertical or horizontal is based on our own internal analysis.  We extend our special thanks to Dragos Novac at Nordic 9 for his consistent support in keeping us informed about the latest deal flow in Europe.

The total amount raised among these companies in Q2 is $5.283 billion covering approximately 45% of all rounds raised globally. Additionally, there are some other key takeaways to note from this mapping:

  • Andreessen Horowitz, Index Ventures and Lightspeed Venture partners seem to be the most active AI investors in Q2 2024 (each having invested in 3-4 of these companies) with Lightspeed Ventures taking the lead. 
  • A significant focus on AI infrastructure with companies like Mistral AI, OpenAI, Coreweave, and ScaleAI raising large rounds.
  • The US leads with the highest number of AI mega-rounds, followed by France and the UK.
  • Valuations vary widely, with some companies reaching unicorn status (over $1 billion) such as Mistral AI, OpenAI, and Vercel.

AI Investment Frenzy: Are We on the Brink of a Bubble?

Among the many investors fueling this growth, Lightspeed Venture Partners has emerged as the most active. Their strategic focus on AI technologies is evident through investments in multiple companies, including Mistral AI, Augment, Typeface, and CuspAI. Yet, the question remains: Are these investments being made at inflated valuations, and can these companies sustain their growth?

Several companies in the Generative AI space have achieved unicorn status this quarter, indicating robust market confidence. For instance, Mistral AI and OpenAI were valued at $8 billion and $80 billion, respectively. These valuations highlight the financial viability of these companies and their potential to lead the AI industry into new frontiers. However, we must question whether these high valuations are sustainable or if they are indicative of speculative investments driven by hype rather than tangible value.

The rapid influx of capital and soaring valuations raise the question of whether we are in an AI bubble. The massive amounts of money being funneled into AI companies could reflect speculative enthusiasm rather than grounded investment strategies. Investors must critically evaluate whether these companies can deliver on their promises or if the current excitement is inflating their worth beyond reasonable expectations.

It is reasonable to suggest that investing in AI companies currently may involve paying a substantial premium, potentially around 60%, compared to previous valuations or other sectors. As valuations climb, the risk of overvaluation increases, which could lead to disappointing returns if these companies fail to meet high expectations. Investors must consider whether they are paying too much for future growth that may not materialize as predicted.

Final Remarks

As we navigate this rapidly evolving landscape, it’s important to balance optimism with critical scrutiny to ensure that the AI revolution delivers on its promise.

As AI valuations soar, early-stage investors may find fewer opportunities with reasonable entry points, while late-stage investors face the challenge of justifying sky-high prices. Perhaps we are witnessing a natural evolution of market dynamics, or maybe these are signs of a market operating within a bubble. Either way, there is a possibility that the current trend could limit the diversity of investors who have historically fueled innovation through bold, early-stage investments. This is a complex issue, and only time will tell how it will unfold.

Full mapping is available upon request in excel (sofia@scalecapital.com)

Read also

Generative AI Landscape: Q3 2024 Insights

Generative AI Landscape: Q1 2024 Insights

Cutting Through the Noise in the Generative AI Landscape as an Early-Stage Investor

AI Will Change the World More Than the Internet Ever Did

About
Sofia Svanqvist
Coming from an entrepreneurial family, Sofia understands the struggles and rewards of entrepreneurship. Born in Sweden and raised in London, she has lived in five countries, fostering her global perspective. Inspired by different individuals, Sofia aims to bring positive change through technological innovation.
Scale Capital
Scale Capital a Danish venture fund investing in digitization and disruptive technologies within B2B. €1–3M in Nordic and German B2B tech startups at Seed and Series A, and helping them win in the US. Scale is headquartered in Copenhagen with a presence in the Nordic countries and Silicon Valley.