Venture capitalists have piled billions of dollars into young startups working on the breakthrough technology since the launch of ChatGPT-3 in November 2022. High-profile investors have jostled to back, in some cases, weeks-old startups like Mistral as the hype around generative AI intensified.
The US has already produced nine generative AI startups worth more than $1 billion this year, while Europe and Israel have produced three, according to the latest Euroscape report from Californian investor Accel Partners. The new high-value companies have emerged despite a backdrop of depressed venture capital funding and widespread layoffs and valuation slumps in the technology sector.
Generative AI has fared much better than its counterparts in health or fintech, with investors pumping a record $18 billion into startups in the industry in 2023 — nearly five times the $3.9 billion invested in 2022.
Globally, around 60% of new unicorns in the SaaS and cloud sectors were described as “GenAI native,” according to Accel’s report. The proportion was higher at 75% in the US, where companies such as Anthropic, Jasper, and Runway eclipsed $1 billion valuations this year. In Europe and Israel, which is home to newly-minted unicorns such as Synthesia and AI21, that figure dropped to 45%.
Both regions also tout a batch of promising unicorns across the generative AI stack. Accel’s report highlighted three key verticals that these companies were a part of: application, infrastructure, and foundational models.
Phillipe Botteri, partner at Accel, said that Gen AI was a “fundamental trend” that was redefining the potential of software and that he expected “more to come.”
The report noted that France had become a hotbed for generative AI, where French startups closed the top three largest funding rounds in Europe, including Mistral’s mammoth $113 million seed round.
However, Europe has a long way to go before it catches up with the US when it comes to later-stage funding. While generative AI startups in Europe secured $900 million across the continent’s seven largest deals, its counterparts in the US netted a whopping $14.1 billion — which included OpenAI’s behemoth $10 billion round, the report stated.
Still, the EU and Israel compensate with their roster of AI talent, having produced 50% more AI publications than the US, according to the report. Researchers from the EU and UK have also contributed to 15% of all AI journal publications from 2010 to 2021, compared to the US’ 10%, according to a report from Stanford University.
Generative AI will become a run-of-the-mill tool
“Generative AI will unlock new verticalised applications built with smaller and dedicated models and industry-specific workflows,” the Accel report said. Typically, these startups — such as Harvey and Hippocratic AI — require niche datasets to train their models. Accel said sectors such as healthcare, legal, and drug discovery offer the most potential to use AI for specific use cases.
The report also predicted that generative AI-driven media creation will become commonplace, as tools that enable synthetic video, image, and voice generation become ubiquitous. Most notably, startups such as ElevenLabs, Synthesia, Stability AI, and Runway have soared to prominence for offering these services — and they will soon become mainstream across personal and business use cases, the report said.
Enterprises will also jump to incorporate generative AI more seamlessly into their automation tools, per the report. Companies can expect AI to streamline enterprise activities from document handling and communications mining, to content creation. Big Tech giants and other incumbents, such as Microsoft, UiPath, and Celonis, “are leveraging proprietary AI and third-party large language models (LLMs) to address a broader range of enterprise use-cases,” the report added.
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