In the third quarter of 2024, artificial intelligence (AI) and machine learning (ML) continued to dominate early-stage venture capital (VC) investment, according to the Pitchbook report. Despite a decline in total funding compared to the previous quarter, where two outlier deals accounted for the majority of the funds raised, the report suggests that AI/ML funding activity remains strong. This indicates ongoing investor interest in the sector, with a steady normalization in activity excluding the outliers.
While AI/ML companies raised approximately $2 billion across 42 deals in Q3, surpassing biotech funding by over four times, the total was significantly lower than the $8 billion raised in Q2 across 53 deals. The decline was largely attributed to xAI’s $6 billion funding round and Safe Superintelligence’s $1 billion raise. These outlier deals skewed the overall funding total, but excluding them shows a steady level of investor interest across the AI/ML sector, as indicated by deal volume.
In addition to AI/ML, the report also shows a surge in fintech funding during Q3, with companies raising $449 million, nearly double the amount raised in the previous quarter. Despite a decrease in the number of deals from 25 in Q2 to 18 in Q3, key fintech funding deals included Slope, Neo Asset Management, and Coast, raising significant amounts to enhance their respective platforms. This increase in funding highlights continued investor confidence in the fintech sector.
Furthermore, there was a significant spike in Web3 and decentralized finance (DeFi) investment activity in Q3, with funding jumping from $93.9 million in Q2 to $373.8 million. This surge is attributed to renewed investor interest in blockchain technologies and decentralized platforms. Leading the sector were Story Protocol and ID Planet, each raising $80 million in Series B rounds, along with Partior and Chaos Labs securing substantial funding in Series B rounds as well.
Overall, the Pitchbook report showcases the continued dominance of artificial intelligence and machine learning in early-stage venture capital investment in Q3 2024, despite a decline in total funding compared to the previous quarter. Fintech funding also saw a significant increase, pointing to ongoing investor confidence in the sector. Additionally, the surge in Web3 and DeFi investment activity reflects renewed interest in blockchain technologies and decentralized platforms among investors. These trends indicate a diverse investment landscape in the tech sector, with AI/ML, fintech, and blockchain technologies continuing to attract significant funding in the current venture capital environment.
