VCs continue to pour dollars into generative AI

The appetite for generative AI — AI that turns text prompts into images, essays, poems, videos and more — is insatiable. And the investment dollars keep flowing, not shockingly.

According to a PitchBook report released this month, VCs have steadily increased their positions in generative AI, from $408 million in 2018 to $4.8 billion in 2021 to $4.5 billion in 2022. Angel and seed deals have grown, as well, with 107 deals and $358.3 million invested in 2022 compared with just 41 and $102.8 million in 2018.

Crunchbase broke down some of the biggest winners in an early February dispatch. In the video category, WSC Sports, which uses AI to generate personally tailored video clips for sports fans, landed $100 million in Series D funding nearly a year ago. In the writing space, Jasper, developer of a platform that helps create and vet original marketing content, raised $125 million in an October round led by Insight Partners, valuing it at over $1 billion.

The surge in interest from early-stage VC companies alone is staggering, with a total of $2.2 billion raised in 2022. Language model developer Anthropic has secured a whopping $1.3 billion in VC funding. OpenAI has raised over $1 billion. Cohere, Inflection and Stability AI have all raised over $100 million, which are all very respectable sums.

So why the massive influx of cash?

First, the declining cost of training cutting-edge machine learning tech and advances in research have propelled both in-house teams and startups alike. Models like the open-source text-generating GPT-Neo and text-to-image Stable Diffusion made it possible for ventures large and small to jump on the generative AI train, while open efforts such as EleutherAI, which developed GPT-Neo, have made available models that previously would’ve been gatekept by large commercial labs (e.g., DeepMind).

Another factor driving the generative AI investment is the increased interest from public cloud providers. Recognizing the revenue opportunity, providers are making significant acquisitions and striking generous partnerships to get ahead of the rest of the crowd.