Global financing and M&A activity surged in Q2, while AI funding surged

Global financing and M&A activity surged in Q2, while AI funding surged

Global startup funding surged in the second quarter, reaching $79 billion — up 16% quarter-on-quarter and 12% from the $71 billion invested in Q2 2023. Large rounds — funding of $100 million or more — accounted for most of the growth in the latest quarter.

AI funding greater than doubled quarter-on-quarter to $24 billion—30% of all dollars invested, the largest quarter of AI funding in recent memory. And there are signs that larger M&A deals surged in Q2, providing much-needed liquidity to enterprise capital markets.

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Crunchbase data shows that we are in the eighth to ninth quarter of the current funding decline. While this last quarter was one of the highest for funding since Q1 2023, it is not necessarily a sign of a return to the enterprise market. Funding has fluctuated quarter to quarter since 2023, based on the rise of huge growth rounds for pre-IPO and AI firms. This last quarter is no exception.

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Artificial Intelligence Enhancement

For the first time since its launch, AI was a leading sector OpenAI‘S ChatGPTbased on Crunchbase data evaluation. The $24 billion in total raised in Q2 was the largest amount raised in the AI ​​sector in recent years, despite investor concerns about revenues and high valuations.

Five of the six billion-dollar funding rounds went to artificial intelligence firms. Elon Musk‘S xAI Raised $6 Billion and Is an AI Infrastructure Provider Weave Core raised $1.1 billion. Automated driving company Waydata preparation company AI scales and AI biotech company Xair Therapy each raised billion-dollar rounds. In addition to AI, cybersecurity firm Wizard raised a billion dollars.

Healthcare and biotech were the second-largest sectors, raising $17 billion. Hardware firms — largely driven by AI infrastructure and semiconductor funding — raised $11 billion. Financial services firms, typically the two largest sectors at their peak in 2021, raised $9.8 billion.

Half-yearly update

Despite the growth in the last quarter, funding didn’t increase in the first half of this 12 months. Global funding reached $147 billion in the first half of the 12 months, down 5% year-on-year, in comparison with $154 billion invested in the first half of 2023. And funding was flat in comparison with the second half of 2023.

Late financing up

Late-stage funding reached $36 billion, up from $33 billion in Q2 2023. The bulk of the funding went to firms focused on AI foundation models and AI infrastructure, autonomous driving, electric vehicles, cybersecurity, drug development and quantum computing.

Early stage of growth

Early funding increased in Q2, largely resulting from xAI funding. Outside of xAI funding, funding was in line QoQ and YoY. Large early funding rounds also went to biotech, lending, AI, and renewable energy firms.

Stable seed breeding

Seed funding has been the most stable during the recession. It has remained stable for the past five quarters, with about $8 billion invested in seed funding per quarter. Seed funding is down about a third from its peak quarters, falling much less in this slower funding environment than early- and late-stage funding. During the recession, firms are staying in seed for longer, while the bar for Series A funding has risen, based on an evaluation of Crunchbase data.

Known Mergers and Acquisitions

Among the significant large transactions in the software M&A market in the last quarter were transactions involving firms from the security industry CyberArkcompany’s offer for an identity management company Venafi for $1.5 billion. Intelligence platform AlfaSense has plans to take over the competition Work for 930 million dollars. And Run: AIGPU performance improvement company to be acquired by Nvidia for $700 million.

Uncertain markets

Despite the growth in enterprise capital in Q2 2024 and increased AI funding, the overall market outlook stays unchanged. Concerns about revenue growth, a difficult environment for startups to lift funding, a higher bar at each stage, and a slower exit environment proceed to affect enterprise capital allocation.

In the meantime, signs of increased activity in the M&A market may help ease some of the uncertainty about enterprise capital returns.

Methodology

The data in this report comes directly from Crunchbase and is based on reported data. Reported data is as of July 7, 2024.

It is essential to keep in mind that data lags are most noticeable in the earliest stages of a enterprise’s life, and seed funding amounts increase significantly after the end of the quarter/12 months.

Please note that each one funding values ​​are reported in US dollars unless otherwise noted. Crunchbase converts foreign currency to US dollars at the prevailing spot rate from the date that funding rounds, acquisitions, IPOs, and other financing events are reported. Even if these events are added to Crunchbase well after the event is announced, foreign currency transactions are converted at the historical spot price.

Glossary of financing terms

As of January 2023, we have made a change to how we account for corporate funding rounds in our reporting. Corporate rounds are only included if the company has raised seed equity funding through a series enterprise funding round.

Seed and angel consist of seed, pre-seed, and angel rounds. Crunchbase also includes undisclosed enterprise rounds, equity crowdfunding, and convertible bonds of $3 million (USD or USD equivalent after conversion) or less.

Early stage includes Series A and Series B rounds, in addition to other sorts of rounds. Crunchbase includes unspecified enterprise, corporate enterprise, and other rounds above $3 million and those lower than or equal to $15 million.

Late stage includes Series C, Series D, Series E and later enterprise rounds after “Series [Letter]” naming convention. Also included are enterprise rounds of unknown series, corporate ventures, and other rounds above $15 million.

Technology Development is a round of personal capital raised by a company that has previously raised funds in a enterprise round. (Basically any round from the previously defined stages.)

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