In 2023, there has been a substantial surge of 110 percent in global venture capital funding for Generative AI (GenAI) startups, reaching a remarkable $10 billion. However, overall startup funding has experienced a downturn this year, totaling $224 billion as of December 8, marking a significant 65 percent decrease from the record-breaking $655 billion raised in 2021. Nonetheless, according to GlobalData, the narrative is distinct for GenAI startups, which have seen a significant rise in investment despite the broader decline in startup funding.

"Amidst the 'startup winter', characterized by a slowdown in startup funding due to factors like increasing interest rates, recession concerns, and a challenging macroeconomic environment, the remarkable ability of GenAI startups to secure substantial investments highlights the groundbreaking nature of this technology. It demonstrates its wide-ranging applications and transformative potential across various sectors and industries", explained Adarsh Jain, CFA, who leads the Financial Markets team at GlobalData.

In the United States, GenAI startups dominated funding, securing 75 percent ($16 billion) since 2018, followed by Israel, Germany, France, the UK, and China, contributing an additional 15 percent. The distribution of deal volumes indicates that early-stage startups accounted for 40 percent of all deals, followed closely by seed-stage startups, comprising 37 percent of the total - suggesting a significant influence on initial GenAI startup funding. Jain anticipates continued investment influx for GenAI startups in 2024 and beyond due to strong underlying drivers. For instance, besides accelerating startup funding, the patenting activity within the GenAI sphere has witnessed an impressive 85 percent Compound Annual Growth Rate (CAGR) over the last five years, as per GlobalData's patent analytics".