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Generative AI Seed Deals Explode Despite Concerns

Pitchbook | Marina Temkin | Dec 23, 2022

Pitchbook Generative AI funding rounds Dec 23 2022 - Generative AI Seed Deals Explode Despite Concerns

Source: Pitchbook (as of Dec 23, 2022)

Generative AI has been around for years. But in the last 18 months, the language models that power most tools in the field have become stunningly good at creating art, writing and making other content with a human-like touch.

  • Access to these innovations had been limited until late summer, when OpenAI and Stability AI made their so-called foundation models available to developers at an affordable price or in an open-source environment.  Since then, the number of existing and new companies building products on top of these technological capabilities has exploded, and VCs are taking notice.

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  • Seed deals explode: In 2022 alone, investors bet at least $1.37 billion on this crop of VC-backed companies across 78 deals—almost as much as was invested in all of the previous five years combined, according to PitchBook data. That's a rare bright spot in a year that saw deal values slump in most categories.
    • Scale led a $10 million Series A for, a startup that automates blog posts and sales emails.
    • In December, Runway, a developer of image-to-text and image-to-image generation tools, raised a $50 million Series C led by Felicis at a $500 million valuation.
    • Other recent deals include a Series A for copywriting company Jasper, which garnered a $1.5 billion valuation in October.
    • In November, Descript, an audio and editing company, was valued at $575 million in a deal led by OpenAI Startup Fund.
  • Rapid adoption despite worries over ease of build:  Much of the hype among VCs has focused on the rapid adoption of OpenAI's ChatGPT bot, which gained 1 million users in the first five days after its release in November.
    • Olteanu said that she believes that foundation models could eventually become a commodity, and most of the value will be realized by the companies that customize the models for specific use cases.

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