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The best way to avoid a downturn is to create an AI startup


As we see unicorns are cutting staff and the prevalence of down rounds is peaking, it may seem that the startup ecosystem is brimming with bad news and little else. That’s not exactly the case.

While AI, and especially the generative AI subcategory, is hot as hell, not all of the company’s focus is on the handful of names you already know. Sure, OpenAI is capable of raking in nine- and 10-figure rounds from a killer row of tech investors and mega-cap companies. And emerging companies like Hugging Face and Anthropic can’t stay out of the news, proving that smaller AI-focused startups are more than thriving.

In fact, new data from Carta, which provides cap-table management and other services indicates that AI-focused startups are outperforming their larger peer group in both the seed and Series A stages.

The dataset, which indicates that AI-centric startups are raising more and at higher valuations than other startups, indicates that perhaps the best way to avoid a downturn today is to build in the space for artificial intelligence.

What the data says

According to Carta data related to the first quarter of the year, seed funding for non-AI startups in the US market using its services fell from $1.64 billion to $1.08 billion, or a drop of about 34% . That result is indicative of other data we’ve seen related to venture capital totals in the first quarter of 2023; the data points down.

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