The use of artificial intelligence is gaining momentum across all industries. As IT leaders, staying on top of trends is important for understanding the direction of technology. According to a report by CB Insights, investment in artificial intelligence (AI) took a hit in 2022 as global AI funding fell by 34% to $45.8 billion.
While the total AI deals for the year fared slightly better, they also faced a 10% decrease, culminating in 2,956 deals. This decline in AI funding directly corresponds to the broader venture funding slowdown experienced in 2022. However, there was a faint silver lining in Q4 2022, as funding witnessed a slight rebound, reaching $9.3 billion. Unfortunately, the number of deals continued to decline during this time.
Q4 2022 sees 5 new AI unicorns
The fourth quarter of 2022 saw five new additions to the 166 unicorns in the AI ecosystem, bringing the total up to 171. This was a relatively slow pace compared to 2021 when 74 companies were added throughout the year. One of these new unicorns was Stability AI, a generative AI company that raised an impressive $101M seed round. Europe added 2 AI unicorns in Q4 2022 — more than any other region.
Even as mega-deals decline by 39%, the US secures the most among regions in Q4 2022
The landscape of mega-round funding experienced a significant shift recently, with the number of these prominent deals taking a nosedive. In comparison to the record-high numbers seen in 2021, there was a remarkable 39% drop, resulting in just 115 mega-rounds. As a consequence, funding for these deals witnessed a 47% downfall year-over-year, coming in at a total of $21.8 billion.
This trend is further exemplified within the AI sector, where the average deal size for AI-based companies decreased by 30% over the same period, settling at a modest $21 million. The highest AI funding round still managed to secure a sizable sum, as defense tech startup Anduril raised a staggering $1.5 billion through their Series E round.
In 2022, Europe experienced remarkable growth in the artificial intelligence sector, defying the general trends in AI investment activity.
The region witnessed a significant 6% surge in AI deals, reaching a record number of 616 transactions. This achievement demonstrates Europe’s potential in the field and highlights its resilience, as funding only fell by 9%, to a still impressive $6.2 billion. The United Kingdom played a pivotal role in driving this momentum, contributing to nearly half of Europe’s AI funding (48%) and 32% of its total deals.
IPOs and SPACs fall in 2022
The year 2022 witnessed a significant decrease in AI exits, as various forms of closures such as mergers and acquisitions (M&A), initial public offerings (IPOs), and special purpose acquisition companies (SPACs) all experienced steep declines. Among these, M&A deals demonstrated the most resilience, seeing a relatively smaller drop of 17% year-over-year, which amounted to 259 transactions. In stark contrast, IPOs took a severe hit, plummeting by a remarkable 57% to a meager 19 events, whereas SPACs faced a sharp 50% reduction, settling at just 8.
AI funding surged in Q4 2022, climbing 15% to reach a total of $9.3B despite the 19% decrease in venture capital investment throughout the quarter, bucking industry trends. For more details regarding AI funding in 2022, download the report here.
Image & source credits: CB Insights
Read next: Microsoft launches the Microsoft 365 Copilot, bringing the power of next-generation AI to work
