American startups raised more than $91 billion in venture capital funding in the first quarter of this year, according to new data out this week from the research firm Pitchbook.
More than a third of that funding went to one company: OpenAI. But even if you leave that mega-deal out, AI-focused companies still received about half of the remaining VC dollars in the United States.
One reason venture capitalists are piling into AI? They have a serious case of FOMO.
“People tend to chase hot sectors. Venture is a very shiny object industry,” said Sarah Kunst with the venture capital firm Cleo Capital.
She’s invested in AI companies herself and said lots of startups that were first focused on fintech or e-commerce but use artificial intelligence for something are rebranding themselves as AI companies now.
“Because you know that leaning into the AI story will help you raise money, will help your company get off the ground,” Kunst said.
Still, there’s a drawback to all this focus on AI.
“If all these companies are doing AI, are we missing out on potential innovation in other spaces?” asked Emily Zheng, an analyst at Pitchbook.
She also points out that a lot of AI-focused companies have yet to make money. If they never do, this big bet VCs are making won’t pan out and will have less to invest with in the future.
