While the AI industry has continued to attract venture capital and produce exits in 2022, headwinds in the venture capital and broader capital markets have, as compared to 2021, resulted in a decrease in the number of venture capital financings and exits, as well as a decrease in the total amount raised by AI companies in such financings and achieved by AI companies in such exits.
According to PitchBook, AI companies have raised only $59.3 billion year-to-date through Q3 2022 across 4,554 financings, representing a 13.1% decrease year over year, although the industry appears to be poised to exceed the total deal value and deal count numbers set in 2020 ($65 billion raised across 5,543 financing transactions). By contrast, in 2021, AI companies raised $118.9 billion across 7,078 financings.
CBInsights reports similar trends on the financing side of the marketplace, with only $8.3 billion invested in AI companies in Q3 2022, the lowest quarterly amount raised since Q3 2020 and a 31% drop from Q2 2022 (mirroring a general trend in the venture industry), including a 39% quarter-over-quarter drop in mega-round funding and a 59% drop in Silicon Valley AI funding.
With respect to exits (buyouts, acquisitions and public offerings), PitchBook reports that, in contrast to exits in 2021 which totaled nearly $250 billion, AI company exits through Q3 2022 total less than $50 billion, with only $1.9 billion in disclosed value in Q3 2022, down from $15 billion in Q2 2022. Increased costs in capital across the marketplace, as well as significant challenges in the IPO marketplace, have contributed to making both financings and exits more challenging for AI companies and technology companies in general, a trend that is expected to continue through the remainder of Q4 2022 and into 2023.
This post is a part of a series on trends in the artificial intelligence space for 2023, authored by MoFo lawyers.