Infobit: M&A and Venture Capital

Our friends at Samira Advisors provided us an infobit on M&A and venture capital in AI and deeptech.

Artificial Intelligence (AI) is a rapidly growing sector attracting investors from around the world. The latest trends in Series A funding for AI companies reveal some interesting insights about this evolving industry. In this blog post, we will take a closer look at the numbers and what they mean for the future of AI.

According to recent reports, Series A funding for AI companies has increased dramatically from 2020 to 2021. However, funding remained relatively flat from 2021 into 2022. Despite this, there are predictions that Series A funding for AI companies will continue to grow beyond its current level. North America and Asia account for more than 75% of all Series A investments, with Asia receiving around 1/3 of the total funding and North America, with 50% of the total amount, receiving even more. The US saw a particularly strong increase from 2020 into 2021. Meanwhile, Europe saw a steady increase over the past three years. We predict that this amount will rise, due to political action on European level and a stronger focus of US VC’s on Europe. Unfortunately, Africa, South America, and Oceania remain negligible in terms of Series A funding for AI companies.

The valuations for Seed and Series A funding for AI companies are also changing. In the US, Seed valuations in AI companies have tripled in the last ten years. In Europe, they have more than six-folded. The valuations are constantly higher in the US than in Europe, but year-to-date, this has changed. The reason for this is that valuations crashed quicker in the US than in Europe. However, the numbers might change by the end of the year. Valuations in AI are comparable to those of other technological sectors in the last years, but this is about to change significantly in favour of AI. Series A valuations in AI companies in the US have tripled in the last ten years, while in Europe, they have doubled since 2015. Series A valuations decreased in 2021, but significantly less than in other technological sectors. The more “deep-tech” the companies are, the more stable the valuations. However, valuations in subsequent rounds (Series B and later) plunged partly to extremely low levels. The extent and duration of this trend are currently ongoing, and the final outcome will be clearer in the upcoming months.

Europe is the third-highest attractor of publicly announced Seed Funding capital in the AI space. Series A funding for EU AI start-ups in the last year amounted to roughly 1.427 billion USD, with EU AI start-ups companies attracting around 943 million USD. Germany was able to attract the largest percentage of the funding with roughly 419 million USD, while Austria was able to attract around 33 million USD in funding. According to funding statistics, there is no outstanding AI Hub in Europe, with 34% being allocated to non-EU member countries and 19% to the rest of the EU. Differences in the numbers of funded firms are smaller than the numbers for total funding. 49 EU AI start-ups announced receiving funding in the past year, with Germany leading this count in the EU with 12 firms funded. Austria has a slightly bigger share on a per deal basis, which leads to the conclusion that valuations are a bit lower than in other countries. There is a huge gap from Series A to B and subsequent stages compared to other technological sectors. Numerous AI companies are already exited at a Series A level.