The week's developments in investing & technology, explained | 18.04.24

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This week a new Stanford report signals troubled waters for AI investments. With global funding in the space down for the second year running, both private and corporate players seem to be tightening their belts. Is this a sign of trouble or a much-needed correction? We take a look at this below.

Elsewhere, Andreessen Horowitz raises a $7.2bn mega fund to invest in tech startups, Microsoft's partners with Abu Dhabi-based AI group G42 and new numbers show just how oversaturated the US startup market has become.

Read these stories and more below — in our CogX must reads.

—Charlie and the Research & Intelligence Team

PS. Limited availability for our CogX Transatlantic Accelerator at $795 (RRP $23,621). If you are or know a UK startup, they can apply now for over $20k worth of support to attend, exhibit, and network at the CogX Festival in LA on 7th May here.

The investment ecosystem

🤖 Investors are growing increasingly weary of AI. A new Stanford report revealed global investment in AI fell for the second year in a row in 2023, with overall funding dropping 20%. Experts say slower-than-expected growth is causing investors to be more cautious. (Despite this drop, funding for generative AI surged to over $25.2 billion, up significantly from previous years)

🇪🇺 Megarounds make a comeback in Europe. Over €17 billion was invested in these "megarounds" in Q1, with Germany, Sweden, and the UK seeing the most action. This trend could signal a return to high-growth investment in Europe, with climate tech leading the charge.

💸 The US has more startups than VCs can support. Over 2,000 VC firms halted new investments in startups during the first nine months of 2023, while approximately 3,200 startups failed in the same year. The data on capital availability, seed deals, and exits all point to an oversaturated US startup market.

📈 Carveouts provide greater deal reservoir for PE buyers. As company valuations stabilise, carveouts are becoming an increasingly important source of PE buyout deals. According to PitchBook data, carveouts accounted for 12.6% of all buyout deals.

Chart of the week

Big tech is dominating AI, especially when it comes to building and releasing new foundation models. In 2023, Google beat other industry players in releasing the most models, including Gemini and RT-2.

How AI is transforming investing 

💰 Andreessen Horowitz raises $7.2bn to invest in tech start-ups. This is one of the biggest hauls since the downturn in the tech sector and a big chunk is earmarked for AI startups, particularly those building applications on top of the latest AI models.

🦾 Microsoft to invest $1.5bn in Abu Dhabi AI group G42. Microsoft hopes to use G42 as a launchpad for AI services in developing countries and plans to bolster the creation of a skilled and diverse AI workforce in the region. Could this be the start of a new Silicon Valley-Middle East tech alliance?

⚖️ UK rethinks AI legislation as alarm grows over potential risks. The proposed regulations would target large language models like those that power OpenAI’s ChatGPT, with a focus on transparency and safety in their development process.

Startups

🤑 Sky-high AI engineer salaries are complicating startups’ equity playbook. The red-hot demand for AI engineers is making it tough for startups to attract talent. This is forcing some founders to consider giving up a bigger slice of the ownership pie.

🚀 Choosing a winning startup is tricky — but is there a way to improve your odds of avoiding the dumpster fires and finding all the hidden gems? According to IMD’s Jim Pulcrano, it's all about gathering diverse perspectives — and asking the right questions when it comes to understanding the reasons behind a venture.

Jobs

• Analyst | Nut Tree Capital | US | $125 - $250K

• Portfolio Manager | URS | US | $245K

• Senior Finance Business Partner | HFG | UK | £100 - £850k

• Treasury Change Manager | Lloyds | London | £79 - £87K

Noteworthy deals

• Cobot, a California-based startup developing “non-humanoid” robots for manufacturing, healthcare and retail has raised $100m in series B funding led by General Catalyst.

   

• Bcomp, a Switzerland-based company manufacturing bio-based textiles for industries like autos, sports, and aerospace has raised $40m in series C funding led by EGS Beteiligungen AG. 

   

• Quilt, a US based startup developing smart heat pumps has raised a $33m series A round led by Energy Impact Partners and Galvanize Climate Solutions

   

• Reshape, a Copenhagen-based startup working to help R&D teams automate lab experiments, has raised $20m in series A funding led by Astanor Ventures.

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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.