Generative AI
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Introduction to Generative AI
AI is nothing new. For decades it has been in use in data-driven and analytical workflows, with increasing sophistication. But creativity and ideation were considered human skills, far from the capabilities of artificial intelligence.
Since the emergence of Generative AI (GenAI) with the “GPT moment” in November 2022, this assumption has been turned on its head.
GenAI uses Large Language Models (LLMs) trained on large data sets of content media (text, images, audio, video) to create new text, audio, images and more.
During a rapid emergence, Generative AI startups have attracted huge funding from investors, with over $48B in funding raised in 2024 alone. That’s 20 times the amount raised in 2020, and almost as much as all venture capital raised in Europe in 2024.
Generative AI has been taking up an increasing part of global VC.
The US is the clear leader in Generative AI VC funding, even when looking beyond OpenAI.
GenAI immediately sent shockwaves in adjacent markets.
NVIDIA stock price surged over 800% from November 2022 to the end of 2024, becoming one of the world's most valuable companies. While companies such as Chegg (education tutoring) lost over 2/3 due to their business model being disrupted by GenAI.
Median round sizes
Generative AI startups are showing a significant premium at every stage, from Seed to Series C+.
For instance, in 2024 their Seed and Series A rounds are more than 80% larger than the average for tech startups. Notably instead, AI only shows a small premium versus the average tech startup.
VC by stage
Below we break venture capital into three distinct stages:
- Startup stage ($0-15M rounds)
- Breakout stage ($15-100M rounds)
- Scaleup ($100M+ rounds).
This provides more consistent and timeless segmentation of the startup & venture capital landscape (more so than self-reported round labeling, which are applied inconsistently, especially between business cycles).
Early stage
Explore early-stage funding rounds for Gen AI startups globally here on the platform.
Breakout stage
Explore breakout stage funding rounds for Gen AI startups globally here on the platform.
Scaleup stage
Explore late stage funding rounds in to Gen AI startups globally here on the platform.
Key segments
Model makers
Model makers have raised over 50% of GenAI funding, followed by applications.
Explore on the interactive landscape below our own mapping of Generative AI startups on the platform.
While OpenAI leads the pack in terms of funding for large language models (LLMs), other players like Anthropic, X.ai, Inflection, Moonshot AI, Mistral AI, Aleph Alpha, Adept, and Cohere are also well-funded.
This significant investment highlights the high training and deployment costs associated with these complex general models.
Verticalized model makers are starting to emerge, such as Hippocratic.ai, which came out of stealth with a $50M seed round for its health-focused LLM. Industries poised for specifically developed LLMs include health, fintech, and legal tech.
Explore 70+ foundational generative AI models makers on the platform.
Applications
Applications are the second most funded segment of Generative AI after model makers. Use cases range across all media types (text, image, video, speech/audio/music, code, and 3d assets).
Most applications have been built around text, such as copywriting, customer relations assistants/chatbots and knowledge & search. Other notable segments include code generation, image generation, speech generation and game design.
Applications are split between those built on proprietary models and applications built on third-party models.
Most of the applications are built on third-party models, such as Jasper and Typeface. However, several startups are building applications based on their proprietary GenAI models. Examples include Character.ai, Runaway and Descript.
Building on proprietary GenAI models can provide a hedge against competition as applications will likely take advantage of gathered data and user interaction to fine-tune proprietary models. Others may build layers of model fine-tuning on top of third-party models.
Explore 800+ GenAI application startups on the platform.
Operation layer
The huge increase in GenAI usage across multiple use cases, both in consumer and enterprise adoption, has created the need for dedicated infrastructure from prompt engineering to MLops (training, deployment, optimization and monitoring) to data and embedding.
Some of these solutions are being added as add-ons on previous MLops offerings, such as in the case of Scale AI.
Others respond to new GenAI needs, such as Vector databases, which already raised an all-time-high $210M in 2023, led by Pinecone and Weaviate.
Explore 90+ GenAI operations startups on the platform.
Computing layer
The rise in computing demand for generative AI is bringing huge attention to dedicated chips, Language processing units (LPUs) and tensor processor units (TPUs), such as Groq, as well as GPU data centre clusters (such as CoreWeave, Voltage Park and Lambda).
Explore 10+ GenAI operations startups, as well as 100+ AI chips startups.
Top Investors
Many top-tier investors have been building up their Generative AI portfolios though notably, Andreessen Horowitz and Sequoia have made nearly 50% more Generative AI investments than anyone else so far.
Ycombinator is by a large margin the most active accelerator for GenAI startups, with over 100 startups supported, including GenAI startups such as OpenAI, Jasper and Replit.
Top countries and cities
Since 2019, the US has been the top country globally for Generative AI funding, with a large lead, followed by China and the UK.
Israel, Canada, France and Germany have also all raised over $1B in GenAI VC funding.
Top cities
The Bay Area has been the main hub for Generative AI, attracting over $42B in just over 5 years.
Even without OpenAI's $12.3B funding, the Bay Area still attracted 7x the funding of the next hub - New York. London is the leading global hub outside the US.
Beijing, Paris and Tel Aviv have also attracted over $1B in GenAI VC funding.
AI chips: the pillars of GenAI
The GenAI wave is increasing demand for AI chips and processors for training and deploying LLMs at scale. NVIDIA has surged to a $2.7 trillion market cap, a 750% increase since the start of 2023, and has become the third most valuable company globally (NVIDIA is the leader in AI chips)
However, even Nvidia is two to three months behind on new order fulfilment for cloud server chips. Training costs and computing power availability are becoming a constraint for startups and companies wanting to train and deploy LLMs.
Globally, AI chips funding started ramping up in 2017-2018 and peaked in 2021.
However, 2022 was the most active year ever by number of rounds, showing some new early-stage innovation coming up.
China has been by far the leading geography for AI Chips investments.
However, despite the clear unmet and growing demand for AI chips and the limitations in semiconductor computation capacity, AI chip startups have, in some cases, not yet lived up to their promise.
Once heralded to great excitement, UK AI chip startup Graphcore had their valuation written down to zero by Sequoia Capital in April 2023, after having lost a major deal with Microsoft in late 2022. Graphcore has raised $682M in total VC funding and was valued at $2.8B in Dec 2020.
Also, most Big Tech (Tesla, Microsoft, Meta, Alphabet and Apple) are trying to develop their own AI hardware to reduce their dependence on NVIDIA and improve AI profitability. For more on Big Tech (Magnificent 7) strategies and CV activity see our full report.
Partners
Roosh is an investment group based in Kyiv, London, and Paris. It scales remarkable businesses globally, backing founders, funders and forward-thinkers to grow companies and co-create the technologies that will enrich the world. The group invests in companies focused on capitalization (Roosh Ventures) and profitability (Roosh X).
Roosh Ventures has already backed stars such as Deel, TheGuarantors, Oura, Pipe, Alma, Playco, Dapper Labs, Arkis, and 35+ other companies.
Roosh’s team of over 100 experts across Europe have decades of experience and is composed of successful founders, venture capitalists and operators, including Co-founders and General Partners Den Dmytrenko, Serhiy Tokarev and Kyle Ukho.