Startup Funding is Drying up as the AI Revolution Begins
Can generative AI also generate funding?
Startup funding has continued its downward trend in 2023 after funding levels were halved in 2022 amid recession fears.
Investors are increasingly focusing their attention on AI startups.
The evolving landscape of these startups is also accompanied by a changing geography. While traditional hubs like San Francisco and NYC maintain their vibrancy, surprisingly, Philadelphia has outpaced NYC in terms of AI startup growth.
In recent years, startups thrived in a favorable climate—even the pandemic failed to deter investors from injecting funds. However, amidst rising interest rates and heightened fears of recession in 2022, the startup ecosystem encountered a substantial setback. The median startup funding halved in 2022 relative to previous years. Despite the prevailing sense of "soft-landing" optimism, our company and funding data points to a continued decline in startup funding in 2023, with the median funding at only $500K USD.
AI startups are taking center stage in the startup landscape. Since ChatGPT catapulted itself to the center of public attention, an increasing number of companies have been unveiling innovative applications of generative AI. This has led to an arms race among large firms and startups alike to capture their stake in the burgeoning market. In 2022, 12% of new startups were operating in the generative AI space, according to our workforce intelligence data.
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Our workforce intelligence data also shows that the evolving landscape of these startups is accompanied by a changing geography. While traditional startup hub San Francisco is leading the race, Philadelphia has outpaced NYC in terms of AI startup growth by a significant margin. This positions the City of Brotherly Love as a strong contender in the realm of cutting-edge technology.
