Generative AI Landscape: Q3 2024 Insights

The global venture funding in Q3 2024 reached $66.5 billion. That’s down 16% from Q2 2024 and 15% YoY from the $78 billion invested in Q3 2023, according to Crunchbase. 

Startup funding has been on a downward slide quarter after quarter for the past 2 years, and total funding is back to 2017 levels. Should we be worried? Maybe, but it feels like a reversal may be around the corner with interest rates being cut and PE activity slowly picking up.

Early-stage funding is down while the concentration of venture capital dollars went to large rounds above $100 million.

Good times for AI

Funding to artificial intelligence startups reached $18.9 billion, which is 28% of all venture capital dollars. AI surpassed healthcare and biotech, the second-largest sector, which raised more than $15 billion.

Hardware, the third-largest sector, raised more than $13 billion. Financial services companies, meanwhile, raised close to $8 billion.

Key Venture Capital Investment Trends in the AI Space

1. Large Late-Stage Rounds Dominate

While early-stage investments are still occurring, the majority of capital in the AI space is being funneled into large, late-stage funding rounds. Companies with proven AI capabilities are receiving substantial investments, often exceeding $500 million. Notable investments in Q3 2024 included: 

• Waymo (Alphabet subsidiary) raised a significant $5 billion to support its autonomous vehicle technologies.
• Safe Superintelligence, an AI research lab founded by OpenAI co-founder Ilya Sutskever, secured $1 billion in a round that included top investors like Andreessen Horowitz and Sequoia Capital.‍
• Cohere, a Toronto-based AI startup, completed a $500 million Series D round, pushing its valuation to $5.5 billion.

Not included in Q3 2024 funding numbers is OpenAI’s significant funding round in October 2024, where the company raised $6.6 billion. This round, led by Thrive Capital, also included major contributions from investors such as Microsoft, Nvidia, and SoftBank. The new funding brings OpenAI’s valuation to an impressive $157 billion.

2. AI Infrastructure and Hardware Attract Significant Funding

• There has been a notable increase in investments in AI infrastructure companies, particularly those developing specialized AI chips, data centers, and platforms. For example, Groq, an AI semiconductor and software startup, raised $640 million in a Series D round led by BlackRock, bringing its valuation to $2.8 billion.   

• This aligns with the rising demand for AI computing power, driven by the growing adoption of generative AI models like OpenAI’s GPT and similar tools.

3. Generative AI Continues to Capture Investor Interest

Generative AI remains one of the hottest areas within the AI sector. Despite concerns about cost, scalability, and reliability, generative AI applications are driving significant investment, particularly in content creation, enterprise solutions, and healthcare.

4. Sector-Specific AI Investments Increase

• AI applications tailored to specific industries like healthcare, finance, and defense have seen rising interest. For example, AI in healthcare is receiving increased funding for drug discovery, diagnostics, and healthcare IT.    

• This specialization reflects the maturing AI ecosystem, where startups address niche, high-impact problems with industry-specific solutions.

5. Fewer Seed-Stage Deals

• While large rounds dominate, seed-stage AI deals have been slowing down. Early-stage AI startups find it harder to raise capital, with deal flow dropping significantly over the past few quarters.    
• Investors are becoming more selective, concentrating their bets on fewer startups with significant upside potential and well-established product-market fit.

6. VC Focus Shifts to Profitability

• Venture investors are increasingly focused on profitability, especially in the current macroeconomic climate. AI startups are being pushed to show clearer paths to monetization and sustainable business models    
• This shift reflects a broader trend in venture capital tech investing, where growth at all costs is giving way to more disciplined, profitability-oriented strategies.

Noteworthy venture deals in Q3 2024 across Europe and the United States

1. Mercor (raised September, 2024): Mercor is an AI-based hiring platform designed to improve the recruitment process for both job seekers and companies. USD 220 million. Raised USD 30 million in Series A.

2. Glean (raised September, 2024): Glean develops an AI-based search engine software that connects enterprise data and generates answers through a tool in any company. USD 4.34 billion. Raised USD 260 million in Series E.

3. Aifleet (raised September, 2024): Aifleet is a tech-first trucking company, using AI to optimize for asset utilization and driver experience. Raised USD 16.6 million in Series B.

4. Vahan (raised September, 2024): Vahan's AI-driven virtual assistant helps field sales teams and frontliners do better work at scale. Raised USD 10 million in Series B.

5. Codeium (raised August, 2024): Codeium provides an AI-powered coding platform that maximizes developer productivity. USD 1.1 billion. Raised USD 150 million in Series C.

6. Convin (raised August, 2024): Convin is a contact center software that enhances customer interactions using AI. Raised USD 6.5 million in Series A.

7. Butlr (raised August, 2024): Butlr is a physical AI startup that specializes in wireless anonymous people sensing and occupancy detection solutions. Raised USD 38 million in Series B.

8. Opkey (raised August, 2024): Opkey is an AI test automation platform to help organizations continuously test finance, HR, and enterprise resource planning software. Raised USD 47 million in Series B.

9. SleekFlow (raised August, 2024): Automate Your Growth. The Omnichannel Conversational AI Suite for 10k+ business users worldwide. Raised USD 7 million in Series A.

10. Wethos AI (raised August, 2024): Wethos AI is pioneering the future of the AI-driven workplace revolution. Raised USD 7.5 million in Seed.

11. EliseAI (raised August, 2024): EliseAI develops conversational AI for property management and professional services. USD 1.4 billion. Raised USD 100 million in Series C.

12. Level AI (raised July, 2024): Level AI is a platform for businesses to automate tedious workflows and transform customer experience. Raised USD 39.4 million in Series C.

13. Cohere (raised July, 2024): Cohere is a data security-focused AI firm that develops scalable and private AI technology to address real-world business challenges. USD 5.5 billion. Raised USD 500 million in Series D.

14. Quatt.io (raised July, 2024): Quatt designs AI-powered smart hybrid heat pumps to decrease gas consumption. Raised EUR 27.35 million in Series A.

15. DreamBig Semiconductor (raised July, 2024): DreamBig Semiconductor provides Chiplet platforms with SMARTNIC/DPU solutions for AI, data centers, and storage acceleration. Raised USD 75 million in Series B.

16. Helsing (raised July, 2024): Helsing is an AI defense company specializing in AI-powered military solutions and components. EUR 4.89 billion. Raised EUR 488.2 million in Series C.

17. Pactum (raised July, 2024): Pactum AI helps companies unlock value from suppliers by automatically negotiating contracts. Raised USD 20 million in Series B.

18. Hayden AI (raised July, 2024): Hayden AI offers geospatial analytics and transit management services. Raised USD 90 million in Series C.

19. Canoe (raised July, 2024): Canoe develops AI technology to help alternative investment firms streamline data management. Raised USD 36 million in Series C.

20. Hebbia (raised July, 2024): Hebbia is an AI platform that helps companies turn heaps of information into insights. USD 570 million. Raised USD 130 million in Series B.

21. CosmosIQ.AI (raised July, 2024): AI, EdTech, SaaS, Mobile App. Raised USD 1.5 million in Seed.

The Sequoia Generative AI Market Map

Here’s a good overview of AI startups made by Sequoia Capital, organized by use case. 

Sequoia Capital also made an updated overview of the LLM developer stack that reflects the compute and tooling vendors that companies are turning to, as they build generative AI applications in production.

Please read the full article on Sequoia’s hypothesis about generative AI (published on September 20, 2023, but still worth reading).

Final Remarks

In conclusion, the venture capital landscape in Q3 2024 highlights a period of cautious optimism. While overall funding levels have declined to pre-2018 figures, the AI sector remains standing out, attracting a significant portion of investment despite broader market challenges. 

The focus on larger, late-stage rounds and profitability indicates a shift towards “winner takes all” investments. The continued interest in generative AI and sector-specific solutions, alongside the strategic emphasis on infrastructure and hardware, suggests that while the investment climate remains selective, the potential for AI-driven growth remains robust. This focus positions AI as a key driver for the next phase of innovation, even as the broader market seeks stability and long-term value.

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Read also

Generative AI Landscape: Q2 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

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