So far this year, VCs have invested $5.9B in AI startups, nearly four times as much as they did during the entire year of 2020, per Pitchbook data reviewed by Reuters.
Khosla Ventures' founding partner Samir Kaul thinks that VCs are following the "herd mentality" when investing in generative AI startups. Kaul continues by saying that some lackluster businesses "will get funded" as a result of the enormous volume of investments, only to "fail and give the entire sector, which is very promising, a black eye."
- Per the Reuters report, Dust, a two-person AI startup that is yet to be incorporated, received $5M in seed funding led by Sequoia Capital, with participation from Coatue. This demonstrates VCs' fervor for the AI sector.
- The sector's promise has heated competition between Alphabet and Microsoft, with the former developing its Bard and the latter investing nearly $10B into OpenAI.
- Kaul adds that ChatGPT's rising popularity served as the catalyst for the increase in funding since "90-plus percent of venture capitalists are actually very risk averse. Until you see a real application, people don't really dive in."
- VCs invested $1.5B in AI startups in 2020.
