EY: Global venture capital investment in GenAI almost doubled in 2024
Investor enthusiasm for generative artificial intelligence (GenAI) continues to grow, with venture capital investment in the sector expected to top $45 billion globally for the year, almost double the figure for 2023 ($24 billion) and more than five times the total VC investment in 2022 ($8.7 billion). That’s according to EY Ireland’s Generative AI Key Deals and Insights Report, which analyses deals, investments and trends in the sector. The report also found that the majority of GenAI investment to date continued to be located in North America, however there are a growing number of European unicorns and a significant opportunity for Ireland to establish itself as a GenAI hub.
VC activity in GenAI has been growing exponentially since the release of OpenAI’s ChatGPT in late 2022 and this year has seen a record surge in funds invested. EY Ireland forecasts that this will exceed $45 billion globally for the year, with more than 1,050 separate investments to the end of November.
A significant trend in the market during 2024 has been the degree to which established technology companies are partnering with leading large language model (LLM) start-ups such as such as Mistral AI, alongside AI companies like Waymo and xAI. Notable transactions in 2024 include Open AI’s $6.6 billion funding round in October, Mistral AI’s $651 million round in June and xAI’s $5 billion round in May as well as Waymo’s $5 billion round in July, Glean’s $260 million round in September and Moonshot AI’s $300 million round in August,
Another noticeable feature of the market during 2024 has been an apparent change in strategy on the part of VCs. Average deal size for GenAI companies in late-stage VC rounds has seen a significant surge increasing from $48 million in 2023 to $327 million in 2024. By contrast, the average deal size for early-stage and angel/seed remained relatively stable indicating that VCs may now favour more established companies rather than riskier start-ups that are attempting to get a foothold in the big-tech dominated end of the market.
The United States and North America continue to dominate both investment flows and the number of Unicorn startups, with more than 85% of deal value and 70% of deal volume taking place in North America, which is also home to 18 of the top 25 GenAI Unicorns. Europe and EMEA rank a distant second in terms of both deal volume and value, but is home to two of the world’s top 10 GenAI unicorns, Mistral AI and Poolside – both from France.
While we have yet to see significant VC investment in Ireland’s GenAI sector to date, the country remains an attractive location given its vibrant technology and life sciences ecosystem, business friendly policies and availability of talent.
Looking ahead there are significant tailwinds expected that may drive increased investment in the sector, including high customer AI adoption, growing innovation in AI hardware, a reduction in the cost of foundation models and the growth of vertical AI in specific industries. It has been estimated that that the total customer base for GenAI could grow from $40 billion in 2022 to €1.3 trillion by 2032.
Grit Young, partner and technology sector leader at EY Ireland (pictured) said: “Following a breakout year for VC investment in 2023, this year we have seen the trend really accelerate. Despite a number of headwinds facing VCs and investors in the wider markets, we are seeing record breaking investment in GenAI companies this year, and a very strong pipeline emerging for 2025 with a number of landmark funding rounds due to close early in the new year.
“The key factors driving investment is the size of the market opportunity, estimated to reach up to $1.3 trillion by 2032, as well as the anticipated widespread adoption of GenAI by both businesses and consumers. This in turn is driving VC investment growth that has the potential to spur advancements in AI core technologies, natural language interfaces, and specialised applications. The high adoption rates of AI/GenAI by organisations as well as the falling cost of training models have also been contributory factors in the investment surge in 2024.
“The increased targeting of specific industries by vertical AI companies has also fed into the market. In the fintech sector, for example, AI is being leveraged for fraud detection, compliance automation, and operational excellence while in digital commerce it is being used for customer support, conversational commerce, and AI-core services. In the biopharma sector an AI-driven drug discovery platform attracted substantial interest and a remarkable $1 billion Series A funding round earlier this year.”
She continued: “There is now a big opportunity for Ireland to establish itself as a GenAI hub, but it will be important for Ireland to ensure it does not get left behind in terms of supporting local champions and emerging AI startups. Government initiatives to support investment will be key, but equally we must ensure that the advantages that served Ireland so well in recent decades when it comes to acting as a hub for foreign direct investment – talent and education, economic and political stability, a business friendly and open environment – are not only maintained but enhanced and amplified. While it is still early days in the development of this technology, the future won’t wait.”
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