AI Startups Break All Records during the Q1 of 2020

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AI Startups Break All Records during the Q1 of 2020

AI startups in the U.S. have raised $6.9 billion in the first quarter of the worrisome year of 2020 – a record-setting pace amidst the coronavirus crisis

AI startups have outpaced the overall U.S. venture capital market in the very first quarter of 2020. However, experts say that the COVID-19 pandemic will have a severe impact on global funding across all industries and sectors for the remaining months of the year.

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The National Venture Capital Association has confirmed in its report that around 285 AI-related startups in the U.S. have raised a total of $6.9 billion in the Q1 of 2020. If the growth continues at this pace, AI funding will easily cross the $19.98 billion record raised together by 1,509 companies in 2019, confirmed the PitchBook-NVCA Venture Monitor Q1 2020.

These figures indicate the latest sign of the enormous impact that technologies such as machine learning and artificial intelligence have on the range of industries. As data collection methods and algorithms mature and grow, venture capitalists are more willing to place their bets on startups they believe in, and see as big winners in the emerging era of digital transformation.

Throughout 2019, AI startups have enjoyed a strong momentum even though the broader venture capital market slowly declined. In contrast to the growing AI funding, the overall venture capital market remained roughly flat in the initial months of 2020, even before the COVID-19 lockdowns became hurdles to the business operation.

The amounts raised in the last couple of years represented big leaps over the average annual investments for the previous decade. Admittedly, this momentum will be sharply curtailed in the second quarter of 2020 as the venture capital will suffer a massive hit, just like all other sectors of the economy.

Looking at the current state of affairs, venture investors have not stopped taking interest in startups entirely, but have definitely become more conservative in their approach. Their focus has shifted primarily to their existing portfolio companies to ensure that there is, enough cash flow and business continuity.

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New deals are happening even during the virus attack, but mostly the ones that were already in the pipeline before the pandemic hit. Investment pace is likely to slow down if shelter-in-place orders continue to be in effect. The venture capital industry cannot function without the in-person meeting with the founding teams.   So it is primarily the deals in the pipeline that are receiving investments currently, while all the new ones are stalled till life returns to normal.