AI startups are commanding a premium.
Valuations for early-stage AI companies in 2023 were substantially higher than non-AI startups.
This holds true into the mid-stages as well — AI startups raising Series B rounds notched valuations over 1.5x higher than their counterparts.
AI advances, such as the emergence of generative AI, have fueled investors eager to capitalize on the trend.
Meanwhile, corporate attention to AI has skyrocketed, with big tech and incumbents scrambling to harness its potential — another factor in the AI valuation premium.
Despite surging interest in AI across sectors, venture funding and dealmaking to AI startups have continued to fall since 2021’s peak.
In fact, total equity deals to AI startups in 2023 declined to their lowest level since 2017 — a trend felt across the venture landscape.
The declines in VC dealmaking suggest investors are focusing their efforts in an industry-wide flight to quality. For the select AI startups able to capture investors’ attention right now, this gives them even more leverage to command better deal terms and higher valuations when raising.
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