After two years of relatively muted investment activity, it appears that VCs are once again pouring capital into startups at pandemic-era levels. But a closer look shows that they really are not.
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 Tuesday.
While these levels of funding have only previously been seen during the peak of the ZIRP era (late 2020 to 2021), the reality is that this recent surge in venture capital funding is disproportionately benefiting a select few companies. In fact, $32 billion, or 43.2% of the fourth quarter’s investment activity, was invested in just a handful of colossal-sized deals:
Data bricks: In December, the data analytics company raised $10 billion at a $62 billion valuation.
OpenAI: The maker of ChatGPT raised $6.6 billion at a $157 billion valuation in early October.
xAI: Elon Musk’s XAI, which is developing a basic generative AI model 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, joining a who’s who of Silicon Valley venture firms.
Anthropic: In November, the generative AI model developer raised $4 billion from Amazon.
Without these megadeals, fourth-quarter investment activity would have mirrored the prior two-year average of $42 billion. This strong concentration of venture capital investment highlights the growing 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, most venture capital funding will probably continue to flow to a small group of the most promising AI companies.
