So far, 2024 has been very similar to 2023 in the startup world.
AI continues to be a dominant topic in enterprise capital. Funding has increased barely, but most are unsure whether this is a passing trend or a passing fad. The window for IPOs is still only barely ajar.
What might occur in the second half?
Here are five trends Crunchbase News editors and reporters have been tracking this yr. Take them with a grain of salt—late last yr, we said AI valuations could fall.
Don’t bet on this big growth in mergers and acquisitions
For most of last yr, it gave the impression of everyone was pointing to 2024 as the yr when the M&A market would make a comeback after several quarters of decline.
That big comeback simply won’t occur — at least not for VC-backed startups.
In fact, the first half of this yr saw a decline in M&A activity, with only 904 deals involving startups finalized, according to Crunchbase. dataLast yr in the first half of the yr there have been over 1,000 of them.
There are many reasons—from rates of interest to regulation to valuations that are still too high—but the bottom line is that deals simply aren’t happening.
Sure, there are a few, including two $3 billion deals in Q2: Merck buying private biotech firms EyeBiotech for the amount of as much as 3 billion dollars and Hg buying Audit council for over 3 billion dollars.
But there simply wasn’t much of it. While valuations fell, it clearly wasn’t enough for buyers in the market. Plus, the November election looms over the whole lot — and buyers will likely see what sort of regulatory atmosphere will follow the end result before making a big acquisition (although it looks as if we will expect a slow antitrust regulatory process, no matter what happens).
There are some reasons to be optimistic about the M&A revival, though. The valuation reset that got here after the market correction in 2022 and 2023 has had some time to settle. Now, buyers have a much higher idea of what they’re willing to pay for a company, and buyers have a clearer idea of what they’ll accept. Plus, the historical backlog of unicorns that haven’t yet exited implies that buyers have loads of alternative in strong, still private firms.
Maybe a big deal will revive the market (like the one that not exists) Google/Wizard perhaps if it hadn’t collapsed). But haven’t we been saying that for a while now?
Chips bring in big money
Chipmakers were in the news Lately when trade sanctions and stock prices hit the front pages.
But chipmakers have also caused a stir because of the large amounts of funding they have already raised — or are about to raise.
Funding for semiconductor startups grew by about 25% in the first half of this yr, as VC-backed firms raised about $5.5 billion, according to Crunchbase. dataThis number includes huge rounds like PsiQuantum, Heavenly AI AND Etched.ai.
Just last week, each of them DreamBig Semiconductor AND Hello Industry raised large missiles.
Of course, what’s driving renewed investor interest in chipmakers is AI. People are looking for specialized, generative AI chips that are cheaper and energy-efficient, but also faster.
Artificial intelligence is the driving force behind the chip giant Nvidia is now a company value over $3 trillion. And the stock Aster Laboratory They have not yet reached their peaks, but are still well above their March IPO price.
Investors don’t expect a slowdown. While investing in semiconductor startups is highly specialized, industry insiders say there is renewed interest and increased competition for deals.
There could possibly be more big rounds on the way, as was the case reported smartphone manufacturer SAMSUNG leads at least $300 million in funding for Toronto-based AI chip startup TenstorrentAND Grok I would like to raise fresh 300 million dollars.
That’s the way it was reported that a startup producing artificial intelligence chips Cerebras Systems filed confidentially for an initial public offering. It’s a good time to be an AI chip maker.
We are all busy with our problems without delay and there is no indication that this example will change.
Will AI funding proceed to grow?
Funding for AI firms has surged in the last quarter, reaching its highest level since the launch of the ChatGPT. Funding nearly doubled year-on-year and quarter-on-quarter to $24 billion. Meanwhile, concerns from the spread of risk due to the huge capital outlay required to invest in GPUs to fund this innovation, with no prospect of transparent revenue.
The proportions have also increased. This yr, 1 in 4 invested dollars went to AI-related firms. In 2023, AI-related startups will raise slightly below 1 in 5 dollars.
Will the growth proceed? Our findings show that global funding has been volatile quarter over quarter, driven by the size and variety of mega rounds of $100 million or more. AI is no exception. Funding may decline, but AI’s pervasive influence will proceed.
New Scout Funds?
Menlo Enterprises AND Anthropic announced the creation of a latest $100 million AI collaborative fund called Anthology.
Could this be the latest version of the scout fund, as enterprise capital firms compete for access to deal flow through well-connected operators? The fund combines investment from a large language model developer, Anthropic, with the backing of an experienced enterprise capital firm, in this case Menlo Ventures.
In recent years, AI firms have launched their very own funds. OpenAI has OpenAI Startup Fund with committed capital of 175 million dollars, with investments in Harvey, Nice AND To talk. Nvidia organize something Projects in 2021 and made an investment in Twelve laboratories, MindsDB and recently Evolutionary scale.and Databricks Projectsalso founded in 2021, invested in Mistral AI, Perplexity AI AND CollectWe were talking with Andrew Ferguson who founded Data blocks a enterprise that goals to “strengthen the ecosystem of partners around us.”
Who is next? Mistral AI? Cohere? AI21 Laboratories?
Project financing will gain momentum
For startups with high infrastructure investment costs, debt financing has long been a popular option. And in recent months, we’ve seen some historically large debt rounds.
To illustrate this, we used Crunchbase data to compile a list of six venture-backed firms that raised $1 billion or more in debt financing last yr.
Large rounds of project financing are particularly common in the cleantech space. In January, we saw Swedish firms raise two of the largest debt financings: Sustainability-focused battery maker Northvolt landed at $5 billion and was a steel producer H2 Green Steel closed at $4.6 billion. Meanwhile, in the technology sector, a cloud infrastructure startup AI Weave Core secured $7.5 billion in debt financing in May.
Looking to the future with rate of interest cuts widely expected Debt financing may look increasingly attractive in the coming months. Moreover, given the large variety of firms that raised huge amounts of equity capital a few years ago, debt financing offers a less dilutive way to capitalize firms to scale further.