Herd mentality is alive and well as VCs chase AI craze
Last month, a story popped up on my news aggregator about a four-week-old startup yet to develop its first product that has raised over $100 million in venture funding. At first I dismissed the story thinking that it was old news.
But upon closer inspection, I was surprised to see that Mistral AI's funding announcement was not from June 2021, when markets were hot, but from midyear 2023.
AI startups have seemingly defied the overall decline in VC funding of the past 18 months, collectively raising $15.5 billion this year, according to PitchBook data. Even when you exclude OpenAI's $10 billion round, the sector's VC funding in 2023 has surpassed last year's total and is well over halfway to 2021's peak of $9.1 billion. On top of that, deal pace has remained steady and median post-money valuation is up 109.8% from last year.