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There was a dramatic fall in funding at the pre-seed and seed stages of generative AI startups resulting in 76% decrease from $517.7 million recorded in Q3 2023 to just $122.9 million registered in Q1 2024; this is the lowest since ChatGPT’s launch in November 2022, which initially triggered an AI boom.
The Cause of Reduced Funding
After one year of heavy investments made into generative AI start-ups, investors have taken a pause. They are now waiting to witness how the technology market will shape up before committing more funds. There are doubts about their ability to make money and whether or not they have sustainable business models.
Investor Worries
Many investors fear that they would not realize their anticipated returns from these investments. The initial hype concerning generative AI has died down, so it is now time to know which start-ups can offer real value.
A Shift in Focus
Initially, there were investments made into generative AI infrastructure but venture capitalists have turned their interests towards application-based opportunities such as music generation, AI therapists and virtual teaching assistants.
