After two years of relatively muted investment activity, it looks like VCs are starting to pour capital into startups at pandemic-era levels once again. But a closer look shows that it really isn’t.
In the fourth quarter of last year, investors poured $74.6 billion into U.S. startups, a significant increase from the average of $42 billion invested in each of the previous nine quarters, according to PitchBook data released on Tuesday.
While these funding levels were previously only seen during the peak of the ZIRP era (late 2020 to 2021), the reality is that this recent surge in venture capital funding disproportionately benefits a select few companies. In fact, $32 billion, or 43.2% of the fourth quarter’s investment activity, was invested in a handful of exactly colossal-sized deals:
Data Bricks: In December, the data analytics company raised $10 billion at a $62 billion valuation.
OpenAI: The ChatGPT maker raised $6.6 billion at a $157 billion valuation in early October.
xAI: Elon Musk’s xAI, which is developing a productive fundamental model of artificial intelligence called Grok, raised $6 billion from investors in December.
Waymo: The self-driving car developer that operates robotaxi services in San Francisco, Los Angeles and Phoenix secured a $5.6 billion Series C in November, led by parent company Alphabet and joined by a who’s who of Silicon Valley venture firms .
Anthropogenic: In November, the AI modeling company raised $4 billion from Amazon.
Without these big deals, fourth-quarter investment activity would mirror the prior two-year average of $42 billion. This heavy concentration of venture capital investment highlights the widening gap between a few well-funded companies and the broader startup ecosystem.
Whether 2025 will see a continuation of the high levels of venture capital investment seen in the fourth quarter of last year remains to be seen. However, the bulk of venture capital funding will likely continue to flow to a small group of the most promising AI companies.
