Well, the data is out. Of the $128 billion in venture capital raised by companies on Carta last year, AI startups accounted for 41%, the highest annual share ever. But in a way, we knew it. Last year, investors were eager to put money into AI startups, with 10% of startups accounting for half of the funding.
These startups included Anthropic, OpenAI, and xAI, which raised double-digit billions last year at sky-high valuations. In fact, it continues to rise at an even more alarming rate. In January, xAI raised $20 billion in Series E funding. In February, OpenAI secured the largest private round ever raised at $110 billion, pushing the company ever closer to a $1 trillion valuation.
In terms of size, between OpenAI and xAI is Anthropic, which raised a $30 billion Series G at a $380 billion valuation last month. OpenAI and Anthropic accounted for the lion's share of the $189 billion in global venture capital raised last month and, along with xAI, have hinted at IPOs later this year, leaving investors frothing at the mouth.
The state of the venture market is currently K-shaped, or bifurcated, with capital remaining concentrated in and supporting a select few companies, while others are just, well, there.
“Funding rounds are getting a little harder to raise, but each round is increasing in funding,” Peter Walker, Head of Insights at Carta, told TechCrunch. “So the stakes are lower, but the capital is higher. AI startups are raising more money not because they have a lot of employees, not because they don't have any employees, but because AI models are more expensive to run.”
The latest Carta data also shows that funds raised in 2023 and 2024 (after the launch of ChatGPT in late 2022) recorded the highest internal rate of return (IRR), compared to lower IRR for funds raised from 2017 to 2020. The report sees the rise in IRR over the past few years as a positive indicator for funds backing some of the major startups that have emerged from this AI moment.
“It's encouraging to see the strong start to IRR for young funds,” Walker said, but added there are several factors to consider. For one thing, the new fund may look like it's doing well on paper, he said. That's because, on paper, if you invest in a seed round and the company raises a Series A at a higher valuation, it looks like you're making a higher return in the short term.
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“This increases the IRR,” Walker said. “Also, the portfolios of more recent vintage funds are likely to be filled with AI-native startups, unlike the portfolios of 2021/2020 funds.”
Only time will tell whether this early enthusiasm translates into real returns for investors through exits like blockbuster IPOs and big acquisitions, or whether this is just the hype phase of a bubble that will eventually burst.