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The Big One: Startup funding rebound not here yet
Those hoping for a startup funding rebound in 2024 were out of luck last quarter.
The number of venture-capital deals in the first quarter fell to the lowest level since 2017. There were just 2,882 venture deals in U.S. startups last quarter, a 16% decline from the previous quarter and down 28% from the same time last year, according to venture-capital data firm PitchBook.
Startups raised a total of $36.6 billion in venture capital last quarter, which was 8% behind the previous quarter and 29% off from the first quarter of 2023.
Funds raised by venture-capital firms also experienced continued declines. VC firms raised just $9.3 billion last quarter, which is only 11% of the $81 billion raised in all of 2023. Last year was already a slow year for venture-capital firms raising funds after VCs raised $184 billion in 2021 and $188 billion in 2022.
Tiger Global, one of the most active venture-capital firms, announced this week it raised $2.2 billion for its latest fund, well short of the $6 billion it set out to raise when the fund was announced in 2022. Its previous fund, which closed in 2021, totaled nearly $13 billion.
PitchBook noted the downward trend in VC fundraising "portends to (limited partner) hesitancy toward VC, and should predict a more difficult dealmaking environment down the road."
READ MORE: Venture-capital deal activity falls to lowest level since 2017
Startups to Watch
- Seattle-area rock-clearing startup TerraClear has raised $15 million. The startup makes a rock-picking robot and cage that attaches to farm equipment like tractors. Led by former Navy Seal Trevor Thompson, the startup's machine can pick up 400 rocks per hour, Seattle Inno reports.
- Flowintell is an Orlando, Florida, startup developing an innovative endometriosis test using menstrual blood. An endometriosis diagnosis is traditionally only detected via laparoscopic surgery, which can be expensive and invasive. The at-home test recently won first place and $40,000 at the Crummer Venture Plan Competition, Orlando Inno reports.
- Houston-based Hello Alice raised new funding this week that takes the company’s valuation to $130 million. New investors for the company include celebrity restaurateur Guy Fieri and streamer Tyler "Ninja" Blevins, as well as Mastercard. The startup helps small businesses access credit, loans and grants, Houston Inno reports.
- Austin, Texas-based Hapax AI created an artificial-intelligence chatbot for banks primarily developed with banking regulations and compliance in mind. Bankers use it to ask questions about how newly developed rules might apply to their existing policies and practices. Recently out of stealth mode with $2.6 million in pre-seed funding, the startup is already working with 20 small- to mid-sized banks and credit unions, Austin Inno reports.
- Miami-based Sustainable Skylines uses drones to tow banners for aerial advertising campaigns often seen on beaches. The drones, powered by hybrid-electric engines, can be used to replace small aircraft that traditionally tow those banners. That helps reduce the carbon footprint associated with aerial advertising. It recently partnered with aviation resources firm USI to create a certification program that trains aviators to create more jobs for aerial-drone advertising, Miami Inno reports.
Artificial intelligence abounds at Y Combinator
Y Combinator continues to ride the artificial-intelligence wave, and the accelerator has seeded close to two dozen startups developing AI assistants in its current winter batch, Bay Area Inno reports.
Nearly two-thirds of the startups selected for YC's winter batch are using AI, with generative AI comprising the largest subcategory.
The next largest subcategory is AI assistants, which has 22 companies in the current batch, up from eight in the previous winter batch and 15 last summer.
READ MORE: Startups building AI assistants pop in latest YC batch
Another shakeup at OpenAI
OpenAI CEO Sam Altman is no longer the owner or a managing partner at the eponymous "startup fund" he has been associated with for over two years, Bay Area Inno reports.
The OpenAI Startup Fund is also technically not owned by OpenAI either, but when the fund was started in 2021, Altman was initially listed on business registration documents filed with the California Secretary of State and the Securities and Exchange Commission.
When the fund closed on $175 million in commitments last year in May, Altman was still listed as a general partner, according to a filing. By early 2024, Altman was removed from a new filing that listed Ian Hathaway and Bobby Wu as general partners.
It's unclear why Altman was removed from the fund, but side bets in startups have landed him in trouble in the past. Part of why Altman was let go as the head of Y Combinator was because he personally invested in startups he discovered through the incubator, according to the Washington Post.
Weird and Wired: Robot lawyers
Ohio attorney Troy Doucet filed a federal lawsuit last week that was drafted in four minutes by generative artificial intelligence under software guardrails built by his tech startup.
The company, AI.law, helps lawyers save time by automating much of the process of drafting legal documents. Its first case is against Columbus, Ohio-based collection agency Revco Solutions Inc. and OhioHealth Corp., regarding the hospital bill for the birth of the Doucets' daughter in 2021.
"I can't express to you how fundamentally different ... the legal industry is going to look in five years or 10 years," Doucet said. "AI will entirely change everything."
READ MORE: This attorney just filed a federal lawsuit drafted by his AI startup
