AI startups are not setting the corporate world on fire

Conventional wisdom around AI investment suggests that artificial intelligence should be red hot right now, with dollars flying to startups building with AI, similar to what happened to web3 and metaverse companies last year. Well guess what? Conventional wisdom is wrong — dead wrong, according to a new report from CB Insights.

AI has been around for decades, but only recently have we seen a resurgence of interest in the sector with the release of OpenAI’s ChatGPT late last year. Microsoft and Google soon followed suit with their own intelligent natural language chatbots.

Since then, cloud infrastructure companies have made several announcements regarding providing the resources companies need to build their own large language models. Meanwhile, large enterprises such as Salesforce, Box, ServiceNow, Zoho and many others have announced generative AI products.

With all these big companies involved, it seems inevitable that startups related to AI will emerge from the woodwork with investment dollars not far behind. It seems to be the technology everyone wants, one that is in the middle of a major hype phase right now.

So where is the investment?

According to CB Insights Q1 2023 investment data, the investment is not there yet. In fact, it’s downright lethargic: AI startups collectively raised $5.4 billion in the first quarter, down 66% from a year earlier. The number of deals also fell by 37% to 554. That is not appropriate in a frothy market.

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