Author: George Hammond, Financial Times; Compiled by: Baishui, Golden Finance

U.S. startups have raised more money than they have since 2021 due to investors’ optimism about artificial intelligence, but the venture capital market has already been significantly inclined to fund a handful of large private tech companies.

According to PitchBook data, more than $30 billion has been invested in emerging groups this quarter. Another $50 billion in financing is underway as venture capitalists work on a series of major deals involving OpenAI, Safe Superintelligence and defense tech startup Anduril.

The craze for artificial intelligence has prompted investors to invest at the fastest pace since the market peak in 2021, during which time $358 billion poured into tech groups, leaving many companies with unrealistic valuations.

But Venture Capital Group believes that this investment cycle will be different. “Artificial intelligence is a transformative force that can make these companies better,” said Hemant Taneja, CEO of General Catalyst, one of Silicon Valley’s largest venture capital firms.

“The way to think about this is ‘Can these businesses reasonably grow 10 times from their current levels?’ The answer to all of them is yes, so they are priced at reasonable prices,” he added.

PitchBook data shows that U.S. financing jumped to about $80 billion in the last quarter of 2024 after a two-year downturn. This is the best fourth quarter since 2021. But Kyle Stanford, research director at PitchBook, said that just six large transactions (including OpenAI, xAI, Databricks, etc.) account for 40% of the total.

"It's a very elite group of companies that dominate venture capital," he added.

The investment levels in the first quarter of this year will be similar based on transactions already completed and those expected to be completed in the coming weeks – which will make it the best first quarter to raise funds since 2022.

In the past two weeks alone, fintech companies Stripe and Ramp have announced funding rounds with valuations of $91.5 billion and $13 billion, respectively, while artificial intelligence startups Anthropic and Shield AI have signed $61.5 billion and $5.3 billion in deals, respectively.

Visiting companies are also making a series of large-scale investments. OpenAI is in talks with SoftBank to raise $40 billion at a valuation of $260 billion, which will be the largest everThe round of financing exceeded the $10 billion investment in Databricks at the end of last year.

Anduril, founded by Palmer Luckey, is negotiating to raise at least $2 billion at a valuation of more than $30 billion, more than double the valuation in a round of funding last summer, according to two people familiar with the matter.

These more mature companies have annual revenues of hundreds of millions or billions of dollars and are growing rapidly. General Catalyst's Taneja, who has invested in Anduril, Anthropic, Ramp and Stripe, says that makes them a relatively safe option.

"Artificial intelligence's money-making path is very vague, with a lot of capital eventually concentrated on industry leaders with customer bases and large markets," he said.

But the enthusiasm for artificial intelligence has also driven the growth of young companies that have no revenue or even products.

Safe Superintelligence, founded last year by OpenAI co-founder and former chief scientist Ilya Sutskever, raised $1 billion in 2024 at a valuation of $5 billion and is currently in talks to raise new capital at a valuation of $30 billion or more, according to two people who are directly aware of the deal.

The ongoing huge financing marks a significant divergence from traditional venture capitalism, which aims at emerging companies and is dominated by a “power law” where the best startups in the portfolio will compensate for the losses of the remaining companies that failed.

"We have always believed that the 50x return of [the venture fund] will come from seed investments they exited at the time of their IPO," said Stanford of PitchBook.

In an untested experiment, this logic is now applied to more mature companies that are orders of magnitude larger and more mature, which Stanford calls “pseudo-VC firms.”

This includes Josh Kushner’s Thrive Capital, General Catalyst and Lightspeed Venture Partners, all of which have invested in several major rounds in recent weeks. All three companies are registered investment advisors, which enables them to invest in a wider range of asset classes and hold these companies once they go public.

Stanford University said the three companies also raised more than $5 billion in funding each, giving them “are sufficient size to invest in startups worth $1 billion and hold them for 15 years until they are worth $50 billion, investing in a variety of ways in the process.”

Sebas, the author of the book "The Law of Power",Tien Marabi believes that even the most expensive startups can expand 10 times, and this belief “has made fund managers pour into big-name companies with enthusiasm and say ‘Who cares how much I paid? I’m a genius and can enter the industry.’”

Marabi warned that while a mature company is less likely to go bankrupt, it is less likely to increase its valuation by ten or a hundred times. “The effective habits in early stage investment need to be adjusted when entering larger rounds of financing.” Stanford said the large round discussed today represents “a completely different venture capital style than I have ever experienced.”

The peak period of venture capital in 2021 was characterized by rising financing scale and valuation: According to PitchBook, there were about 854 transactions of $100 million or more that year. This year, total investment is close to 2021 levels, but the market is becoming increasingly unbalanced.

"If you are OpenAI or Anduril (a well-known brand with high growth), then your positioning is very favorable. Money is right next to you... If you are on the other side, like most companies, money isn't there," Stanford said.

"Maybe it will end up reaching the 80 billion [that raised this quarter], but $40 billion of that is just a round…even the outliers for 2021 are trivial compared to that.”