“The idea that you could actually bring automation and more due diligence to the seed stage was not common,” said Holiday.

The co-founders had prior experience that led them to this thesis. Holiday, a software engineer in equities trading at Goldman Sachs, brought those skills to the venture. Okike spent nine years at Insight Partners and saw the value from Insights’s Onsite team supporting portfolio companies with growth efforts.

“One of my learnings [at Insight] was that a really good platform team can be very valuable, not only in winning deals, but helping companies post-investment,” said Okike, referring to the firm’s in-house software developers.

645 Ventures’ first fund was a scrappy $8 million seed round announced in 2014. In late 2022 the firm raised its largest funds ever with $350 million across two;  a $195 million fourth flagship fund and a select fund of $153 million.

Seed- and early-stage venture is a network-driven business. However, what differentiates 645 Ventures is that it has also built its own software to source investments at the seed stage.

On its outbound process, reaching out to companies directly, Okike had this to say.

“We’ve also built the outbound deal-sourcing model. And that’s something that’s pretty unique for our stage,” said Okike. “There are ways for us to show the founder how we can help. And it’s also a way to figure out how good those founders are, because if they go and pitch one of those companies, and it becomes a customer, you have a sense of the quality of the product as well as their sales ability. So it’s informal due diligence.”

The research-focused investment team reviews thousands of companies every month, looking at companies that have traction, often in sectors overlooked by venture.

Getting to A

“We pretty much brought growth-equity practices and due diligence to the early stage — which lowered our loss ratio,” said Holiday.

“We have models around what makes a great founding team or what makes a great market, or what qualities of product you should be looking for with exceptional companies at the seed stage, and we try to quantify that as much as possible,” said Okike.

The firm claims that over 50% of its portfolio investments at seed get to Series A.

“If a bigger percentage of your businesses don’t fail before Series A, you just have more chances to return the fund business over time,” said Okike.

As the market has returned to capital-efficient growth in recent years, several portfolio companies with steady  revenue growth were acquired, said Holiday. These  include real estate management platform Aryeo acquired by Zillow, direct-to-consumer mattress seller Resident by Ashley HomeStore, identity threat company Oort by Cisco, and property intelligence platform Betterview acquired by Nearmap.

Portfolio company FiscalNote, a government data and analytics company, went public via a SPAC listing in August 2022. (Its value is down significantly from its listing of $1.3 billion.)

645 Ventures plans to invest in 30 companies from its fourth fund. Each fund is typically invested over a three- to four-year period, with follow-on over a longer period. For the select fund, 80% will be invested in its best performing companies.

In the past year, 645 Ventures has built out its organization. The firm has 21 team members across its New York and San Francisco office with a combined research and investment team, a success team, an engineering team and investor relations.

“We like to say our model is software systems and human systems working together,” said Okike.

Crunchbase Pro list:

• 645 Ventures Portfolio Companies

Illustration: Dom Guzman

Software developers have long touted the ability to automate dull, repetitive work. Now, they’re increasingly coming for more complex tasks.

Mayfield Fund 1 is among the firms vested in this trend, investing in the rise of the cognitive workforce through AI-enabled tools for knowledge workers.

Cognition as a Service (CaaS) is “going to transform productivity. It’s going to allow humans to do new things,” said Navin Chaddha, a managing partner at Mayfield.

To that end, Chaddha led the firm’s investment this spring in NeuBird, a service for IT operations that adds an AI-enabled “teammate” called Hawkeye. Hawkeye analyzes issues with the software stack based on prompts from engineers, chats with the team, and provides solutions.

“Each one of us will have a genie. They’ll have a teammate, and we’ll be doing things together,” said Chaddha. “So that’s the era we are entering. Where technology is not a tool, it’s actually our teammate.”

He predicts that Slack will be active with many teammates.

People first

Chaddha most recently held the fourth spot on Forbes’ 2024 The Midas List, moving up one slot from 2023. He led early investments in Lyft, Poshmark and HashiCorp, which went public. He was also an early investor in Nuvia, co-founded by Apple engineers to build chips for phones and mobile devices, which sold to Qualcomm for $1.4 billion in 2021.

Chaddha invests in people first, market second. And his forte is early-stage funding backing an idea.

While Mayfield and Chaddha are enthused about AI-enabled productivity enhancement applications, it’s just one area of the AI “stack” in which the firm is investing.

The 55-year old Mayfield Fund has ample funds to invest. It announced three funds in 2023 after ChatGPT launched: Fund 17 at $580 million to invest at Series A; an AI seed start fund of $250 million; and a select fund of $375 million for Series B opportunities.

The stack

Investors are approaching the AI sector as a layered stack — the semiconductor layer within the cloud, the generative AI model developers, the tooling companies to manage data and models and the applications on the top utilizing the stack.

In each layer of the stack, investors see opportunities in companies that could take off.

Mayfield has invested in Frore Systems, which develops the cooling chips that are in edge AI devices. In model safety it has invested in Securiti. In the data layer its portfolio company Revifi is a copilot for data engineers. In the middleware layer are MindsDB for developers to use any model and datasource to build an application, and Sema4.ai, a platform for developing, running and managing agents.

On the application layer, it has made investments in contract reviewing platform LexCheck, Outreach for sales and customer engagement, and Qventus for hospital care operations.

AI teammates are the top layer in the stack, including NeuBird, and investments the firm has made that are yet to be announced.

Entrepreneur to investor

Chaddha grew up in India and went to Stanford University, where he earned a master’s in electrical engineering. He became an entrepreneur as the internet emerged, co-founding four companies. His first company, VXtreme, enabled delivery of video over the internet. It was acquired by Microsoft in 1997. Chaddha ran Windows Media and was a peer of Microsoft’s CEO Satya Nadella.

An investor since 2004, he witnessed the social, mobile and cloud computing waves that engineered new companies. And then he perceived a lull before this generative AI moment.

The biggest impact of AI that he has seen so far is in customer support, product development, and search and discovery.

“It’s going to elevate humans to become super humans, because the boring, repetitive tasks will be done by machines, augmenting our capabilities and amplifying our creativity,” said Chaddha.

Outside of the big models and the GPU, CPU stack, the opportunities to invest are wide open, he said.

Crunchbase Pro List:

• Mayfield Fund’s AI Portfolio Companies

Illustration: Dom Guzman

Using Crunchbase data, we set out to track the funding trajectories of these seed- and pre-seed companies, starting with the very AI-centric winter 2024 batch, which wrapped up its demo day in early April. We grouped companies by industry and recorded who has announced funding.  We also looked at which investors are most active in backing these startups.

Although not all of the latest YC companies that raised seed funding have publicly announced it yet, a few have. Those with disclosed investments include a number bringing AI-enabled tools to sectors like legal tech, recruiting, code development and medical recordkeeping. They’ve attracted funding from active seed investors like Pioneer Fund and SV Angel 1, as well as prominent venture capital firms like Benchmark, Khosla Ventures and General Catalyst.

An AI-centric batch

Half of this recently launched batch is building with AI, said Garry Tan, CEO of Y Combinator, in a post announcing its second post-COVID cohort that gathered in person in the Dogpatch neighborhood of San Francisco.

Tan took the helm over a year ago and moved YC up to the city. (He left his firm Initialized Capital, an early-stage firm he co-founded in 2012 with Reddit co-founder Alexis Ohanian.)

Being in-person and in the city has apparently created a stronger community.

“Hundreds of founders are meeting daily for office hours and events, bumping into legendary people, and surrounding themselves with people who will go deep on subjects and celebrate hard work,” said Lindsay Amos, director of communication, via email. “There is no other place in the world with the same density of great startup founders per square mile as the area around the YC office — and this is fostering innovation and growth.”

San Francisco is experiencing a resurgence due to AI, which is borne out by Crunchbase data.

According to  Jared Friedman, YC group partner, these companies skew younger — 30% of the last batch are college students or grads. Two years ago they were around 10%. “Because of AI, it’s the best time in a decade for college students to start startups,” he said.

Enterprise companies still dominate, with more than two-thirds of the companies in enterprise SaaS. Around 11% are consumer oriented — with AI as the driver for many of the consumer offerings.

After the peak of 2021, the size of YC batches have come down. But YC still launches the largest number of companies in a single cohort — 260 companies in the winter batch.

Seed funding

Interacting in person benefits founders and their rate of progress, said Jason Gray, founder of seed investor Pioneer Fund, an active investor in YC companies, via email.

Pioneer has a network of portfolio companies and venture partners that add up to 1,500 YC alumni with relationships to founders either as a friend, former colleague or customer, according to Gray.  This allows for front loading due diligence.

On the common misconception that YC companies raise funding in advance of demo day, Gray said “while it does happen, it’s not the norm.” He added that “many founders focus on traction until demo day and are selective about which investors they allocate to before then.”

YC hosts an investor evening as well as sharing pitches online. “The in-person element does drive some urgency, which we believe is a benefit to both founders and investors,” said Gray. “Minimizing the distraction of fundraising for founders is in everyone’s best interest.”

The median raise, according to YC, is around $1.3 million post-demo day.

Based on an analysis of Crunchbase data, over all time Andreessen Horowitz, Khosla Ventures and Sequoia Capital are the most active multistage investors in YC companies by deal count. On the seed fund side, Liquid 2 Ventures, SV Angel, Pioneer Fund, FundersClub, Soma Capital and Garry Tan’s previous fund Initialized Capital are most active.

Of the winter 2024 cohort, meanwhile, funded companies include:

• Stockholm-based Leya, an AI assistant for lawyers using proprietary data alongside cited legal sources. The company raised a $10.5 million seed led by Benchmark with partner Chetan Puttagunta joining the board. Belgium-based Hummingbird Ventures and SV Angel participated. Leya is working with 70+ European legal firms and has plans to expand to the U.S.
• San Francisco-based Greptile, built an API that uses large language models to answer questions about a company’s code base. It raised a seed funding of $4.1 million led by Initialized Capital.
• San Francisco-based YonedaLabs, built by a team from Cambridge University, is creating a foundation model for chemists which can predict outcomes without having to run costly trials. The company raised a $4 million seed round led by Khosla Ventures with participation from 500 Emerging Europe, 468 Capital and Fellows Fund among others.
• San Francisco-based Pythagora, built by a team from Croatia, raised $4 million to help build apps with  natural-language interactions. The tool is open-sourced and said to be used by 30,000 developers. Investors include Inovo, 500 Emerging Europe, Moonfire Ventures, Rebel Fund and UpHonest Capital.
• Spacecraft software company Basalt Tech, based in San Francisco, raised a $3.5 million seed funding led by Initialized Capital.
• Paris-based Malibou helps small businesses manage payroll and compliance. It raised a $3.1 million seed led by European venture firm Breega.
• San Francisco-based Hona AI, an AI data platform for healthcare records, raised a seed funding of $3 million led by General Catalyst.
• San Francisco-based Apriora, an AI interviewer to screen job candidates, raised $2.8 million led by 1984 Ventures with participation from HOF Capital and Pioneer fund.
• Manifold Freight, a Seattle-based logistics aggregator of spot freight, raised a $2 million seed round from New Stack Ventures and YC. The founders were engineers at digital freight company Convoy which closed last fall.

Related Crunchbase Pro lists and searches

Pro subscribers can export these lists to track progress over time within their Crunchbase Pro accounts.

• Y Combinator Winter 2024 batch tracked here.
• Y Combinator Unicorn Portfolio Companies
• Y Combinator Exited Unicorn Portfolio Companies

Illustration: Dom Guzman

The largest new entrant was xAI, which raised $6 billion and officially joined The Crunchbase Unicorn Board in May 2024. The company was valued at $24 billion. 

So far this year, around 50 new unicorns have joined the board, adding close to $100 billion in value.

In addition, several companies already at unicorn valuations raised billion-dollar funding rounds at higher values. This includes CoreWeave, Scale AI, Wiz and Wayve. CoreWeave was valued at $19 billion, almost 8x its 2023 valuation of $2.4 billion, due to demand for its AI- driven data center infrastructure.

Unicorn exits

The majority of unicorn exits this past month were below their last private values.

Hangzhou-based Zeekr, an electric vehicle company, went public on the NYSE at a $5.2 billion value. Zeekr was last valued in 2023 at $13 billion. And Bengaluru-based insurance provider Digit Insurance listed at a $3 billion value on the BSE and NSE exchanges in India, $1 billion below its 2022 valuation.

Global investor Permira acquired a majority stake in Israeli unicorn BioCatch, a biometric intelligence company, for $1.3 billion. This was the single exit above its last private value, a secondary financing in 2023 which valued BioCatch at $1 billion.

API security company Noname Security, based in Palo Alto, California, was acquired by public cloud security company Akamai Technologies for $450 million, well below its $1 billion valuation from 2021. And Israeli parking app Pango acquired London-based ride hailing app Gett for $175 million, a steep discount from its 2018 value of $1.5 billion.

Here are the new unicorns in May by sector.

AI

• Elon Musk‘s xAI, a 1-year-old foundation model company based in Burlingame,  California, raised a $6 billion Series B funding at a $24 billion value. Participants in the round include Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity, Prince Alwaleed Bin Talal and Kingdom Holding Co. among others.
• Bay Area-based WEKA, a data platform for AI workloads, raised a $140 million Series E funding from existing investors. Valor Equity Partners led the funding for the 10-year-old company, which valued WEKA at $1.6 billion.
• London-based Builder.ai, a no-code AI powered app developer, raised a $250 million Series D led by the Qatar Investment Authority. The 8-year-old company announced a partnership and equity financing from Microsoft earlier in May.

Web3

• Los Angeles-based Farcaster, a decentralized social network built on Ethereum, raised a $150 million Series A. The funding to the 3-year-old company was led by crypto investor Paradigm, with participation from a16z crypto, Haun Ventures and Union Square Ventures among others, valuing the company at $1 billion.
• Humanity Protocol, a blockchain unique identity platform using biometrics, raised a $30 million seed funding led by Kingsway Capital. The company, which was founded less than a year ago, was valued at $1 billion.

Financial services

• Los Angeles-based Altruist, a digital wealth management service for wealth advisers, raised a $169 million Series E led by Iconiq Growth. The 5-year-old company was valued at $1.5 billion.

Data and analytics

• San Francisco-based Sigma Computing, a cloud analytics platform incubated at Sutter Hill Ventures, raised a $200 million Series D. The funding for the 9-year-old company was led by Avenir Growth Capital and Spark Capital, and valued Sigma at $1.5 billion.

Related Crunchbase unicorn queries

• The Crunchbase Private Unicorn Company List
• New unicorns in 2024
• New unicorns in 2023
• Unicorns in the U.S.
• Unicorns in Asia
• European unicorns
• Unicorns from LatAm
• Emerging unicorn leaderboard
• Exited unicorns

Methodology

The Crunchbase Unicorn Board is a curated list that includes private unicorn companies with post-money valuations of $1 billion or more and is based on Crunchbase data. New companies are added to the Unicorn Board as they reach the $1 billion valuation mark as part of a funding round.

The unicorn board does not reflect internal company valuations — such as those set via a 409a process for employee stock options — as these differ from, and are more likely to be lower than, a priced funding round. We also do not adjust valuations based on investor writedowns, which change quarterly, as different investors will not value the same company consistently within the same quarter.

Funding to unicorn companies includes all private financings to companies that are tagged as unicorns, as well as those that have since graduated to The Exited Unicorn Board.

Exits analyzed here only include the first time a company exits.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Illustration: Dom Guzman

Clarification: This story has changed since its original publication: Builder.ai also joined The Crunchbase Unicorn Board in May 2024.

The uptick in the portion of startup investment going to female-founded companies — up from 15% in 2022 — was in large part due to a number of billion-dollar-plus rounds raised by AI companies with a female co-founder.

For example, OpenAI raised the largest funding deal in 2023, at $10 billion, and foundation model company Anthropic raised more than $6.5 billion across four funding rounds that year.  Both companies count women among their founders.

Within the AI sector in particular in 2023, more than 50% of U.S. investment went to AI companies with at least one female founder, in total around $21 billion, across more than 360 rounds.

But that was driven by several large fundings that skewed the numbers. The majority of funded AI startups in the U.S. did not have a female founder — just under 20% of funding rounds in AI that year went to companies with a female founder, per Crunchbase data.

Still, OpenAI and Anthropic were not the only AI companies with a female co-founder to receive significant funding deals. Several other unicorn companies — private startups valued at $1 billion or more — have female founders and joined The Crunchbase Unicorn Board in 2023. They include Adept AI, Replit and Imbue, among others.

While female startup founders have by no means reached parity when it comes to venture dollars for their companies, the ground has slowly shifted in a more positive direction, with more women in the startup ecosystem than ever.

“While high-profile, substantial investments in female-led AI startups are encouraging, they can create a perception that progress is faster than it actually is,” said Rudina Seseri, founder and managing partner at AI-focused early-stage investment firm Glasswing Ventures, via email.

“It is important to support female founders early to ensure a balanced and sustained increase across all funding stages,” she added.

A decade and counting

Crunchbase added gender information to its dataset in 2015, becoming the first database with private company and venture funding data to do so. Since then, we have been tracking funding to female founders.

Over that time frame, the venture ecosystem has seen massive change — led by the pandemic  growth surge and a subsequent slowdown in the second half of 2022.

Through the years when venture funding exploded, and with the massive increase specifically to late-stage startups, the proportion of funding to companies with a female-founder did not fall.

Above $30 billion since 2021

Although female startup founders in the U.S. saw a notable uptick in the percentage of venture dollars their companies received in 2023, last year was not the largest annual dollar amount invested in female co-founded companies, per Crunchbase data.

In 2021, close to $48 billion was invested — marking 14% of U.S. venture capital to companies with a female co-founder. That year saw healthcare and biotech as the leading sector, with $20 billion invested in companies with a female founder.

During the peak venture funding market of 2021 and strong first half of 2022, funding to companies with a female founder held up, tracking at 14% and 15% of invested capital, respectively, within a percent or above preceding year proportions since 2015.

Female-only flat

Funding amounts to female-only founded companies grew and contracted with the market changes in recent years. But the proportion of funding was flat year over year, at 3% of funding amounts. This proportion has fluctuated between 2% and 3% since 2015.

Funding amount proportions to female/male co-founded companies ranged between 9% and 12% from 2015 to 2022, but jumped in 2023.

While proportions were within a narrow range prior to 2023, the amount and count have increased over the years as venture capital grew.

Funding counts higher

Funding count proportions are typically higher than amounts invested in female-founded companies.

(This trend was reversed in 2023 with funding counts 4 percentage points lower as female/male co-founded AI companies raised disproportionate amounts.)

In 2023, female-only founded companies represented 8% of deal counts — flat year over year — while female/male co-founded companies were down from the 2021 peak by a couple of percentage points at 14% of deals.

Since 2016, overall funding counts to companies with at least one female founder ranged from 19% to 24%, with 2019 through 2022 at or above 23%.

By stage

How do we account for a greater proportion of rounds than amounts to companies with a female founder?

Companies with a female founder represent a higher proportion at seed and early-stage fundings. Late-stage funding counts show a lower proportion.

However, since 2015, late-stage deal proportions have shown the largest growth span over this time frame as seed and early-stage deals mature to later-stage companies.

Late-stage deal counts trended up in 2023, at 16% of deals compared to 14% a year earlier. As female-founded companies mature, it will be interesting to see if this upward trend continues.

In conclusion

While progress on funding for female startup founders has been slow and still hasn’t reached anything close to parity, 2023 offered new hope that women-founded startups will continue to see gains, particularly as new tech waves like AI come along.

Women have founded some of the most significant companies in the new wave of generative AI. In recent years, AI companies have raised some of the largest funding rounds and have reached billion-dollar values at a faster pace than seen in other sectors.

Time will tell if the AI wave — and the gains for female founders it has helped bring about — last, or if 2023 will prove to be an outlier. In the meantime, it’s encouraging to see female startup founders take a leading role in building one of the most transformative technologies of our time.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of May 29, 2024.

Our analysis is based on announced funding to U.S. companies with founders associated. We include private company fundings from seed through late-stage venture as well as corporate funding and private equity to venture-backed companies.

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed on its Crunchbase profile, or Crunchbase might not have a gender listed for founders. (Note: In addition to “male” and “female,” Crunchbase has more than two dozen other gender tags.) Based on an analysis of current data for this report, more than 95% of dollars raised and 90% of deal counts since 2015 in the U.S. are associated with companies that have founders listed.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. It can sometimes take between weeks and months for some rounds to be announced publicly and subsequently added to Crunchbase. This is especially the case for the most recent year, and for seed and early-stage deals, which are often raised by companies before they launch a product or otherwise get much outside media coverage surfacing information about its funding history. As data is added to Crunchbase over time, some of the numbers in this report may shift slightly.

Illustration: Dom Guzman

A spate of billion-dollar fundings contributed to the total, with $11 billion — over a third of capital raised last month — invested in six companies in rounds at $1 billion or more. This was the highest count of billion-dollar fundings in a single month since the venture market slowdown began in 2022.

Elon Musk’s xAI raised the largest funding, $6 billion at a $24 billion value. Billion-dollar rounds also went to CoreWeave, Wayve, Abound, Scale AI and Wiz. Investors who led or co-led these fundings include Lightspeed Venture Partners, Andreessen Horowitz, Accel and GSR Ventures on the venture side. Growth investors Thrive Capital, Coatue and SoftBank also led rounds.

AI leads

In total, companies in the AI sector raised 40% of venture funding in May with $12.5 billion invested across more than 250 companies, based on an analysis of Crunchbase data. xAI raised close to half of that amount.

Other leading sectors include healthcare and biotech companies, which raised $5.1 billion, and financial services companies, which raised $3.9 billion last month.

As of the end of May, AI, healthcare and biotech are the leading sectors so far this year, with each raising around $27 billion in funding.

Are the M&A markets making a comeback?

A record five venture-backed companies were acquired for more than $1 billion this past month. Three were biotech companies EyeBiotech, HI-Bio and Mariana Oncology. In the enterprise software sector, Venafi, a machine identity security company, and AuditBoard, a cloud compliance management software provider, were acquired.

Looking forward

The increase in funding in May does not signal a growth in venture funding in future months. In the current slower funding environment, month-to-month funding tends to fluctuate, with large fundings raised predominantly by companies in the AI sector or late-stage unicorn companies.

Within the past 12 months, May 2024 was not the highest month for venture funding. The peak was $35 billion in September 2023 with $9 billion of that total raised in fundings of a billion dollars or more across four companies. In the months that followed, funding totals dropped by $10 billion or more from that 2023 monthly funding peak.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of June 4, 2024.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Industries in Crunchbase are not exclusive. A company can be in more than one industry and in more than one industry group.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

As of January 2023, we have made a change to how we include corporate funding rounds in our reporting. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Bain Capital Ventures is investing out of its 10th flagship fund of $1.9 billion announced in February 2023 after the launch of ChatGPT, the technology that took generative AI mainstream.

Despite the firm’s many decades in the investment business and its sizable funds — it has $10 billion in assets under management — investing in AI companies comes with a new set of risks and a highly competitive funding environment.

“This market is unlike any other. The field is moving so quickly,” Rak Garg, a partner at BCV who divides his time between AI infrastructure and cybersecurity investments, said in an interview.

To keep up, BCV set up a lab in Palo Alto, California, more than a year ago to support promising researchers and incubate companies in the artificial intelligence sector. The lab also hosts paper readings and debates, and invites prominent researchers in the field to present.

Research first

The only way to stay ahead of developments is to take a research-first approach, Garg said.

“Two years ago, we were doubting that large models could even exist and be served reliably,” he said.

Then, a year ago, vector databases were seen as the answer to enterprise AI.

And now the  answer is “some combination of alignment, fine-tuning and vector databases.”

It takes small groups of people to figure out, “how do you get these models to be performant? how do you prompt them in the right ways?” he said.

BCV has made four seed investments from the lab since it launched less than a year ago.

The first company to publicly launch from the lab was Contextual AI, a startup that is building models for enterprises to access proprietary data to make employees more productive. The company raised a $20 million seed funding led by BCV in mid-2023.

Contextual co-founders Douwe Kiela and Amanpreet Singh met at Facebook AI Research (FAIR). There, Kiela helped develop RAG, or retrieval augmented generation, for large language models.

If you give “the model the right data at the right time and then loop back and look at the way the human interacts with that data, you end up with a sort of closed-loop system where it retrieves the right static information and then dynamically enriches it with interaction data,” said Garg.

Contextual has seen strong use cases in finance, healthcare, legal and other industries. It can also help employees answer questions like, “who should I prioritize this week?” or  “what should the message be?” Garg said.

Compared to a technology like ChatGPT, Contextual models are smaller and require less compute.

Contextual built a joint system of “two small models with the right embeddings,” he said. “We can fine-tune them continuously on interaction data, then we can approach something that gets to be really, really accurate for that enterprise.”

“You would never use the Contextual system to generate a Shakespearean sonnet about employee insights,” he said.

The second company to come out of stealth from the lab is Prophet Security, co-founded by Kamal Shah and Vibhav Sreekanti. It raised $11 million in seed funding last month led by BCV. The company says it uses AI to analyze and triage security alerts in seconds, saving time for security teams.

Other investments from the lab still in stealth are in data science and analytics.

Beyond the lab

Garg said that competing with established software companies with an added layer on top for summarization will not cut it in this market. “The co-pilot for Atlassian is going to be built by Atlassian,” he said.

That’s why BCV is focused on investing in hyper-specialized models on the infrastructure side and inefficient processes for which there are no incumbents, said Garg.

BCV is an investor in Unstructured Technologies, a company the firm seed-funded before ChatGPT became mainstream. The company recently raised a Series B from Menlo Ventures.

Unstructured has a proprietary model that extracts textual information from PDFs, email or SaaS applications to get clean data for a database or for pre-training or fine-tuning data. It boasts 50,000 customer deployments, said Garg.

Other notable BCV portfolio companies in AI are Moveworks, which uses AI to support internal teams to address issues in a remote-work world; Poolside a foundation model company that aims to generate code with natural language prompts; and Cleanlab, a data cleaning company.

In software, more dollars are spent on services integrating technology solutions than on products, Garg said. Generative AI presents an opportunity to turn service revenue into product revenue.

“These services are taking data from one place, molding it in different ways, putting it in a different place,” he said citing Unstructured as an example. “Models are really, really good at that.”

Related Crunchbase Pro query:

• Bain Capital Ventures (BCV) AI Portfolio Companies

Illustration: Dom Guzman

The AI, Web3 and e-commerce sectors each added two companies to the board, Crunchbase data shows.

Of the 11 new unicorns created last month, six are U.S.-based, with one each from Germany, France, Brazil, Cayman Islands and Australia.

The largest round among the new unicorns was raised by Xaira Therapeutics, which announced an initial funding of $1 billion as it launched out of stealth.

Two of the new April unicorn companies were valued at a billion in their first year: Xaira Therapeutics and Cognition.

Two unicorn companies also exited the board at valuations above their last private value. Cybersecurity company Rubrik and cash reward company Ibotta both went public in April on the New York Stock Exchange.

And four companies already listed as unicorns increased valuation from prior rounds. Island, a secure browser company, doubled its valuation from its previous funding round six months ago. And FloQast, Rippling and Ramp each raised up rounds from prior fundings.

Let’s look at the new unicorns in April by sector.

AI

• Cognition, maker of Devin, an AI software engineering teammate, raised a $175 million Series A funding led by Founders Fund. The less than 1-year-old San Francisco company was valued at $2 billion.
• San Francisco-based Perplexity AI raised a $63 million funding led by Daniel Gross, former lead of AI at Y Combinator. The 1-year-old company was valued at $1 billion.

E-commerce

• Berlin-based Autodoc, an online auto parts dealer, raised a minority funding led by Apollo. The 15-year-old company was valued at $2.5 billion.
• Social video commerce app Flip raised a $144 million Series C led by Streamlined Ventures. The 4-year-old company based in Los Angeles was valued at $1.2 billion.

Web3

• Blockchain platform Berachain, a 2-year-old company based in the Cayman Islands, raised a $100 million Series B. The funding, led by Framework Ventures and Brevan Howard Digital, valued the company at $1.5 billion.
• New York-based Monad, a 1-year-old company, raised a $225 million Series A funding. The company is a layer 1 blockchain that can process Ethereum transactions faster.  The funding was led by crypto investor Paradigm and was valued at $1 billion.

Healthcare

• AI drug discovery platform Xaira Therapeutics, based in San Francisco, launched with a   $1 billion Series A funding. The company was incubated by Arch Venture Partners and Foresite Capital, which led the funding.

Security and privacy

• New York-based data security platform Cyera raised a $300 million Series C led by Coatue. The 2-year-old company was valued at $1.4 billion.

Professional services

• Paris-based business forecasting platform Pigment raised a $144 million Series D that valued the company at $1 billion. The funding was led by Iconiq Growth. The 4-year-old company announced it had tripled its revenue and doubled its customer base in the last year.

Financial Services

• São Paulo-based QI Tech, a financial services infrastructure company, raised an undisclosed amount in a Series B extension led by General Atlantic that valued the 5-year-old company at $1 billion. General Atlantic also led its $200 million Series B funding six months earlier. QI Tech provides businesses with the ability to offer credit and banking services to customers.

Food and beverage

• New South Wales-based Guzman y Gomez, a Mexican-themed restaurant chain in Australia, raised $135 million at a value of $1.7 billion. The 17-year-old company plans to expand to the U.S. market.

Related Crunchbase unicorn queries

• The Crunchbase Private Unicorn Company List (1,532)
• Unicorns in the U.S. (741)
• Unicorns in Asia (493)
• European unicorns (209)
• Unicorns from LatAm (35)
• Emerging unicorn leaderboard (387)
• Exited unicorns (453)

Methodology

The Crunchbase Unicorn Board is a curated list that includes private unicorn companies with post-money valuations of $1 billion or more and is based on Crunchbase data. New companies are added to the Unicorn Board as they reach the $1 billion valuation mark as part of a funding round.

The unicorn board does not reflect internal company valuations — such as those set via a 409a process for employee stock options — as these differ from, and are more likely to be lower than, a priced funding round. We also do not adjust valuations based on investor writedowns, which change quarterly, as different investors will not value the same company consistently within the same quarter.

Funding to unicorn companies includes all private financings to companies that are tagged as unicorns, as well as those that have since graduated to The Exited Unicorn Board.

Exits analyzed here only include the first time a company exits.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Illustration: Dom Guzman

Last year, more than 50% of all global venture funding for AI-related startups went to companies headquartered in the Bay Area, Crunchbase data shows, as a cluster of talent congregates in the region.

Beginning in Q1 2023, when OpenAI’s ChatGPT reached 100 million users within months of launching, the amount raised by Bay Area startups in AI started trending up. That accelerated with OpenAI raising $10 billion from Microsoft — marking the largest single funding deal ever for an AI foundation model company. In that quarter, more than 75% of AI funding went to San Francisco Bay Area startups.

AI-related companies based in the Bay Area went on to raise more than $27 billion in 2023, up from $14 billion in 2022, when the region’s companies raised 29% of all AI funding.

From a deal count perspective, Bay Area companies raised 17% of global rounds in this sector in 2023 — making the region the leading metro area in the U.S. That is an increase over 13% in 2022.

The figure also represents more than a third of AI deal counts in the U.S., and means the Bay Area alone had more AI-related startup funding deals than all countries outside of the U.S.

Bay Area footprint

Leading Bay Area-based foundation model companies OpenAI, Anthropic and Inflection AI have each raised more than $1 billion — or much more — and have established major real estate footprints in San Francisco.

OpenAI has closed on 500,000 square feet of office space in the city’s Mission Bay district and Anthropic around 230,000 square feet in the Financial District.

“From a leasing standpoint, [AI] is the bright spot in San Francisco right now,” said Derek Daniels, a regional director of research in San Francisco for commercial real estate brokerage Colliers, who has been following the trends closely.

By contrast, “big tech has been pulling back and reassessing space needs,” he said.

According to Daniels, the city’s commercial real estate market bottomed out in the second half of 2023. While the San Francisco office space market still faces challenges, there is “quality sublet space which is also seeing some demand” for smaller teams, he said. And some larger tenants who have been out of the picture for office space of 100,000 square feet or more are starting to come back.

Center of gravity

Fifty percent of startups that graduated from the prestigious startup accelerator Y Combinator’s April batch were AI-focused companies.

“Many of the founders who came to SF for the batch have decided to make SF home — for themselves, and for their companies,” Garry Tan, president and CEO of Y Combinator, said in an announcement of the accelerator’s winter 2024 batch.

YC itself has expanded its office space in San Francisco’s Dogpatch neighborhood adjacent to Mission Bay. “We are turning San Francisco’s doom loop into a boom loop,” Tan added.

Of the batch 34 companies that graduated in March from 500 Global, another accelerator, 60% are in AI. Its next batch is closer to 80% with an AI focus, said Clayton Bryan, partner and head of the global accelerator fund.

Around half of the companies in the recently graduated 500 Global batch are from outside the U.S., including Budapest, London and Singapore. But many want to set up shop in the Bay Area for the density of talent, events and know-how from hackathons, dinners and events, he said.

Startup investors also see the Bay Area as the epicenter for AI.

“In the more recent crop of AI companies there is a real center of gravity in the Bay Area,” said Andrew Ferguson, a partner at Databricks Ventures, which has been actively investing in AI startups such as Perplexity AI, Unstructured Technologies, Anomalo, Cleanlab and Glean.

“The Bay Area does not have a lock on good talent. But there’s certainly a nucleus of very strong talent,” he said.

Databricks Ventures, the venture arm of AI-enhanced data analytics unicorn Databricks, has made five investments in AI companies in the Bay Area in the past six months. In total, the firm has made around 25 portfolio company investments since the venture arm was founded in 2022, largely in the modern data stack.

Moving back

Freed from in-person office requirements during the pandemic, many young tech workers decamped from the expensive Bay Area to travel or work remotely in less expensive locales. Now, some are moving back to join the San Francisco AI scene.

“Many young founders are just moving back to the Bay Area, even if they were away for the last couple of years, in order to be a part of immersing themselves in the middle of the scene,” said Stephanie Zhan, a partner at Sequoia Capital. “It’s great for networking, for hiring, for learning about what’s going on, what other products people are building.”

Coincidentally, Sequoia Capital subleased space to OpenAI in its early days, in an office above Dandelion Chocolates in San Francisco’s Mission District.

Zhan presumes that many nascent AI companies aren’t yet showing up in funding data, as they are still ideating or at pre-seed or seed funding, and will show up in future funding cycles.

Outside the Bay

While the Bay Area dominates for AI funding, it’s important to note the obvious: Much of that comes from a few massive deals to the large startups based in the region, including OpenAI, Anthropic and Inflection AI.

There is a lot of AI startup and research activity elsewhere as well, Zhan noted, with researchers coming out of universities around the globe, including École Polytechnique in Paris, ETH Zürich and the University of Cambridge and Oxford University in the U.K., to name a few. Lead researchers from the University of Toronto  and University of Waterloo have also fed into generative AI technology in San Francisco and in Canada, Bryan said.

While the U.S. has a strong lead, countries that are leading funding totals for AI-related startups outside of the U.S. are China, the U.K., Germany, Canada and France, according to Crunchbase data.

London-based Stability AI kicked off the generative AI moment before ChatGPT with its text-to-image models in August 2022. Open source model developer Mistral AI, based in Paris, has raised large amounts led by Bay Area-based venture capital firms Lightspeed Venture Partners and Andreessen Horowitz.

And in China, foundation model company Moonshot AI based in Beijing has raised more than $1 billion.

Back to the Bay

Still, the center of gravity in the Bay Area is driven by teams coming out of Big Tech or UC Berkeley and Stanford University who have a “history of turning those ideas into startups,” said Ferguson.

The unique congregation of Big Tech companies, research, talent and venture capital in the Bay Area has placed the region at the forefront of AI.

“The valuation of the AI companies and some of the revenue by the top end of the AI companies is driving that population migration,” said 500 Global’s Bryan. At a recent AI event at Hana House in Palo Alto, California, he found it interesting that most people were not originally from the Bay Area. “Everyone now wants a direct piece or an indirect piece of that value that is going into AI.”

Related Crunchbase Pro query

• Rounds Raised By Startups Using AI

Illustration: Dom Guzman

The slowdown in venture funding has continued despite the AI technology wave that has washed over startups in the past few years.

Of the $22 billion invested in startups globally last month, around $2.4 billion, or 11%, went to about 1,000 seed-stage companies. Around 500 early-stage companies raised $9 billion globally in April.

And more than 150 companies from Series C onward raised $10.7 billion, representing about 49% of funding last month, Crunchbase data shows. Those amounts are in line with funding at those stages in April 2023.

Big deals

The largest startup funding round in April was a $1 billion deal to stealth startup Xaira Therapeutics for drug development using AI. Large fundings were also raised by several deeptech and energy sustainability companies: electric vehicle developer Hozon; solar provider Pine Gate Renewables; and quantum computing company PsiQuantum.

Top sectors

Biotech and healthcare was the leading sector by funding amount in April. Companies in that space raised $5.7 billion, or around 26% of all funding, according to Crunchbase data.

AI companies raised $3.9 billion, or about 17% of funding last month. Besides Xaira, notable fundings were raised by AI coding assistants Augment and Cognition, the latter of which claims to have created the first AI engineering teammate, named Devin.

Other leading sectors in April include hardware startups, which collectively raised $3.3 billion; manufacturing ($2.9 billion); and financial services companies ($2.9 billion).

Looking to the public markets

The Rubrik IPO in April marked the third venture-backed private company to list at a value above $5 billion this year so far, compared to two companies for all of 2023. That is an increase over 2023, but still too few companies to suggest the public markets are truly opening.

Recent market cap increases in the public markets have swayed largely toward big tech, with many listings from 2021 — the most active year for IPOs on record —  trailing behind their first-day peaks.

Not growing, not slowing

The launch of generative AI has led to the creation of new startups in this cycle. However, larger private software companies are adapting quickly to this new technology cycle. In many ways, the AI revolution stands to benefit incumbents who raised large amounts of capital in the prior venture cycle and are adding AI into products with existing customers, while cutting costs in other areas to reallocate to AI efforts.

Big tech has stepped in to compete, with the billions required to fund this leap, while some generative AI startups struggle to pay those bills.

For now, venture is still in the midst of a reset with valuations settling and the exploration of new AI use cases while startups increase their spend on cloud and GPUs.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of May 6, 2024.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Industries in Crunchbase are not exclusive. A company can be in more than one industry and in more than one industry group.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

As of January 2023, we have made a change to how we include corporate funding rounds in our reporting. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman