Let us talk about the word AI fatigue
According the the website WeAreBrain:
AI fatigue refers to the weariness, disillusionment, and sense of exhaustion experienced by users and organisations from the constant torrent of information, discussions, and advancements related to artificial intelligence
Pfft, not for venture capitalists.
If you think that the excitement over artificial intelligence finally winding down a bit, think again. The AI startup scene is live and kicking, much like a new born baby, and it has investors throwing cash around like it’s confetti. Only a few early startups struggle to keep up, and another a few are laughing all the way to the billion-dollar club.
Yep, I’m talking ’bout unicorns, AI-style.
Now, let me be clear: valuation ≠ reality.
Just because a startup is worth a cool billion doesn’t mean it’s raking in the dough. But hey, who cares about revenue when you’ve got hype, right? Let’s dive in.
Before we start!
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In 2024 alone, investors threw $35.5 billion at AI startups.
Most of it went to those sweet, sweet mega-rounds you have probably heard of… funding rounds of over $100 million that give these companies the right to flex their unicorn status. If you are wondering where all the action is, look no further than the U.S., where two-thirds of those mega-rounds are happening.
For those new to startup lingo, read my previous article: Welcome to the land of overhyped unicorns (Q2 edition)
For those among you for which clicking a link is too much effort, here’s the TL;DR:
The money trail usually starts with pre-seed, seed, Series A, B, C, D, and, if they’re lucky, an IPO. But face it, 90% of startups flop before they even hit Series B, so what gives these AI companies their sky-high valuations?
The secret lies in the potential, and not the actual revenue. You know, the could be millions they’re totally going to make.
Eventually.
Reality check: Unicorns ≠ Profit
If you’d think raising millions, or billions like our friends at OpenAI, would guarantee you success.
Wrong.
Just ask any venture capitalist who’s still waiting for their ROI.
According to a study from the Stockholm School of Economics, VC funds only return 1.3x to 1.5x their investment over 10 years. That’s a lot of waiting for what’s basically a fancy version of breaking even.
But hey, who needs rational investing when you’ve got FOMO right?
(Fear of Missing Out for you bunch of nitwits…)
The AI boom has turned into a giant game of “first come, first served”.
Investors are still pouring money into anything with the words “AI-powered” attached to it because, apparently, the future of tech is just one chatbot away from changing the world.
Valuation vs. Reality
Here’s the dirty little secret: high valuations don’t always mean a startup is delivering value.
In fact, a lot of these unicorns are stuck with the same valuation from their last funding round, even if their business hasn’t exactly taken off. But, you know, it’s all about maintaining that prestigious image for investors.
Gotta keep that flat valuation looking fresh.
AI startups are capital-intensive and always hungry for more computing resources. Sure, they need to keep training new models, but just because they’re burning cash doesn’t mean they’re suddenly worth more.
For those among us who grew up with Hip Hop and scratching, here’s the history of the Fresh Sample.
Totally irrelevant, but who cares….
Let’s continue
The top 8 AI unicorns of 2024
(Because 10 was too much)
So, here they are: the chosen few who’ve hit unicorn status in 2024, according to Crunchbase, CB Insights, and PitchBook.
Grab your popcorn, put your reading glasses on, check your wallet and drewl over these figures.
8. Weka — $1.6 Billion
Weka specializes in AI-powered storage solutions. They help businesses manage massive amounts of data because, let’s face it, AI needs a ton of space to do its magic. With $375 million raised, and a $1.6 billion valuation, they’ve got investors like Nvidia and Generation Investment Management backing them.
7. NinjaOne — $1.9 Billion
Mobile device management and IT security with a side of AI. NinjaOne has raised over $280 million and now sits at a $1.9 billion valuation. Managing IT has never been so… expensive.
—
6. Cognition AI — $2 Billion
What if software engineers didn’t need to write code? Cognition AI has a AI-powered engineer, called “Devin”, which could take over the world, or at least your programming job. It is founded in 2023, and they raised $175 million and now have a $2 billion valuation.
Sorry, human engineers.
—
5. Figure — $2.6 Billion
Humanoid robots powered by Artificial General Intelligence. Sounds like the start of a sci-fi horror movie, but Figure is all about making robots as smart as humans. The have a $2.6 billion valuation, and they’ve got big backers like OpenAI and Nvidia.
Just pray these robots don’t get too smart.
Read about Figure in: Anticipating AI’s next move • article ④ •
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4. Xaira Therapeutics — $2.7 Billion
Why spend years testing new meds when AI can probably do it faster. Xaira is an AI for drug discovery, and it raised a staggering $1 billion, in one go ! And they now have a $2.7 billion valuation to match. Investors like ARCH Venture Partners are betting big on this one. AI in the pharmaceutical industry will be a killer app!
—
3. Gonad Labs — $3 Billion
Sorry, Monad labs.. couldn’t help myself (again). This is where AI meets blockchain. Monad Labs wants to build a faster, more efficient Ethereum blockchain with the help of AI. $225 million raised, and a $3 billion valuation later, they are already being called the future of decentralized finance.
Because what could go wrong with AI and crypto?
—
2. Quantinuum — $5.3 Billion
Quantum computing that is supposed to solve problems even your TI-84 can’t handle. They raised $300 million and are valued a $5.3 billion later. Now, Quantinuum is looking to crack drug discovery to climate change.
It’s basically Schrödinger’s startup, cool, but are they profitable?
—
1. xAI — $24 Billion
Yep, you guessed it right. Elon Musk strikes a home-run again. His latest gig is called xAI, because why not an X inside. He raised $6 billion (a lot came from Tesla who wants to bet on something else than cars). xAI now claims a staggering $24 billion valuation. By the way, till july 2024, the entire AI startup ecosystem grabbed hold of $24 billion in total…
Musk says the mission is to accelerate scientific discovery through AI. Investors like Andreessen Horowitz and Sequoia are totally on board.
Sure, Elon, whatever you say.
What do you think?
If, at all…
Overhyped or just getting started?
These AI unicorns are pushing the boundaries of hype. They have billions in funding to just play with (like building nuclear power plants), and they get a lot of buzz. And the pace at which these companies are achieving unicorn status is dizzying.
Faster than ever before.
Whether they’re overhyped or truly the future of tech, I think, remains to be seen.
But in the meantime, those venture capitalists will continue throwing money around because it seems that money is going out of style (hence Gonad Labs). Betting on an AI startup that might be the next big thing is what you may call… a “calculated risk’.
And that was a pun.
Stay tuned, dear reader.
Signing off – Marco
Well, that’s a wrap for today. Tomorrow, I’ll have a fresh episode of TechTonic Shifts for you. If you enjoy my writing and want to support my work, feel free to buy me a coffee ♨️
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