By Adam Levine

In its annual global roundup, venture capital tracker Crunchbase reported that 2024 was a middling year for start-up fund-raising, with just a few artificial intelligence investments pushing up the total.

Funding rose to $314 billion, up 3% from 2023, though that is still 55% below investments in 2021.

"One thing was clear: 2024 was the breakout year for funding to AI companies," Crunchbase said. "Close to a third of all global venture funding went to companies in AI-related fields," which require larger investments on average.

AI start-up investments in 2024 were even greater than the banner 2021 financing rounds, and up over 80% on the year, while all other funding was down around 15%.

Start-ups also benefited from a fourth-quarter surge, with 30% of 2024's total investments coming at the end of the year.

Around 13% of all capital went to just four companies: xAI, Databricks, Anthropic, and OpenAI, which raised a combined $40 billion on valuations totaling $309 billion. Databricks has already raised another $1.6 billion in 2025.

Four other hot AI start-ups raised almost $5 billion combined in 2024.

U.S. companies captured 57% of global investments, with half of that going to Silicon Valley, up from 40% in 2023. After a few years of other U.S. regions eating into the Valley's share, AI has reversed that, as no other region can boast its network effects, especially in highly skilled AI engineers.

The ultimate purpose of these investments is for VCs to exit through acquisition or initial public offerings, and 2024 was a slow year for that.

"M&A activity was slightly up compared to 2023 -- but slower than expected and somewhat concentrated in biotechnology and cybersecurity companies," Crunchbase reported. "The IPO market -- also slow in 2024 -- ended on a positive note with the unexpected bump from the ServiceTitan IPO, which as of the new year is above its IPO price by more than 40%."

Along with possible regulatory changes from the incoming Trump administration that would allow Big Tech to make more acquisitions, 2025 could mark the start of a more receptive environment for acquisitions and IPOs.

"As they consider an IPO, executives typically look to their peers to see how other recently IPO'd companies are performing," said VC Wellington Management in its 2025 outlook. "Post-IPO performance has been very strong to date, with US IPOs outperforming the S&P by almost 10%."

There may be a host of new public companies in 2025 for investors to consider.

Write to Adam Levine at adam.levine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 07, 2025 07:01 ET (12:01 GMT)

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