AI Companies: The New Investing Goldmine for VC Firms 

Artificial Intelligence is already the star sector of 2023. If an AI startup currently exists, there’s a fair chance that at least one venture capital firm has eyes on it. In the public markets, almost any AI-related company has seen its stock price soar over the past six months. In the private markets, VC and private equity firms are working around the clock to invest in, or acquire, AI companies, in hopes that their firm lands the next unicorn moneymaker.   

Why are VC firms investing in Artificial Intelligence (AI) companies?    

The AI sector’s valuation has mushroomed over the past year, at a trailblazing pace never seen before. Statista currently value’s the AI sector at $100 billion, and expects that number to explode by twenty fold by 2030, placing its potential value at $2 trillion in under seven years. Venture capital firms completed nearly $240 billion in total deal value in 2022, according to VentureBeat, with that number expected to grow this year, venture capital firms are working to stock their war chests with as many AI companies as possible.  

The rapid success of ChatGPT, an AI chatbot service developed by American artificial intelligence research laboratory OpenAI, is the current and overwhelmingly star of the AI sector. ChatGPT, which surpassed 100 million users within its first three months of existence, is a natural language processing tool driven by AI technology that allows users to have human-like conversations, and answer questions and assist with a myriad of tasks including composing emails, essays, and code. 

Venture capital and private equity firms have significantly ramped up their investments in artificial intelligence over the past year. Since 2022, an astonishing 15,400 deals in the AI space have been completed by private investment firms, according to PitchBook. 

Here are the top ten most active VC firms in the AI sector, according to PitchBook: 

Top Artificial Intelligence (AI) & Machine Learning (ML) Investors (since 2022) 

Machine learning systems function through programming created by computer scientists, and are “trained” on data, allowing them to make predictions or created responses on new, unseen data. Machine Learning essentially means computer models can automatically learn and improve from data, or by experiencing other programmed tasks. Models learn from inputted data, therefore generating predictions or decisions when tasked with never-before-seen data.

1. Plug and Play Tech Center

Plug and Play is an accelerator firm based in Sunnyvale, California. The firm tends to invest in seed, early-stage, and later-stage companies. AI & ML investments include Transmit Security, Momenta, Workato, Dialpad, and others.  

Investments since 2022: 281

2. Techstars   

Techstars is an accelerator based in Boulder, Colorado focused on business products, business services, consumer products, consumer services, and other sectors. AI & ML investments include Rapyuta Robotics, Comet, Inspectorio, Fathom, and others.  

Investments since 2022: 270 

3. Y Combinator

Y Combinator is an accelerator firm based in Mountain View, California focused on b2b software and services, education, consumer, healthcare, and other sectors. AI & ML investments include Faire, Veriff, Replit, and others. 

Investments since 2022: 264

4. Alumni Ventures 

Alumni Ventures is a venture capital firm based in Manchester, New Hampshire. The firm manages fund families that invest in companies across a number of sectors. AI & ML investments include Mobilete, SenseTime, Dataminr, Iterative Health, and others.  

Investments since 2022: 89