Venture capital firms are heavily investing in artificial intelligence (AI) projects, and the industry might witness a record increase in the current year given the success of generative AI so far.
According to a Pitchbook report, VC funding in the sector has been growing over the past few years. In 2018, these firms only invested $408 million, but that figure has increased to $4.5 billion as of the end of the previous year.
Most of this funding went into projects focused on generative AI, i.e., artificial intelligence that generates new content based on large language models. These investments were influenced mainly by the success of ChatGPT.
Other startups that received substantial funding in 2022 included Stability.AI, the company behind the Stable Diffusion text-to-image generator, which raised $100 million. Jasper, the AI copywriting application, also raised $125 million at an over $1 billion valuation.
Given the breakthroughs of ChatGPT since its launch, investments in AI projects are already increasing this year. Open.AI itself reportedly won $10 billion in funding from Microsoft.
But more startups have also raised capital from VC firms. These include Character.AI, which raised $150 million, and others like TypeFace, which raised $65 million from Google and Microsoft.
The influx of money into the sector has also led to the emergence of more startups. One VC estimates that more than 450 startups are working on generative AI.
Crypto AI projects also gathering waves
Several AI crypto projects like CryptoGPT, Rejuve.AI, SingularityNET, Fetch.AI have gained traction and raised significant sums from investors.
#AI is embedded in our everyday life in a manner driven mainly by large centralized tech companies. #SingularityNET is creating a new kind of decentralized, equitable AI economy that drives progress and prosperity to all, not just the elite few.
— SingularityNET (@SingularityNET) March 30, 2023
Besides that, traditional crypto blockchain networks like Tron have also shown interest in AI. Tron has dedicated a $100 million fund to AI development.
Crypto entrepreneur Justin Sun said the fund would leverage cutting-edge technology in artificial intelligence to provide more utility to the blockchain world.
Why are investors lured to AI investments?
The reduced cost of training machine learning programs is a significant reason for the increased funding. Similarly, recent technological advancements have made it an attractive option for investors.
An AI entrepreneur pointed out that while investors were skeptical about the space in the past, recent events have shown them that the industry could have a revolutionary impact on the world.
Another factor worth mentioning is the increasing public interest in Generative AI technology. Consequently, investors are banking on the public interest as a revenue opportunity, hence the increased funding, acquisitions, and partnerships.
Colin Tresler, co-founder of AI startup Supernormal, noted that the hype surrounding AI has made the industry an exciting place to invest. According to Tresler, the declined interest in “Web3” investments gave rise to AI because “these people needed a place to go.”