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Dramatic increase in VC funding for AI startups

AI media generation startups got close to 90% more venture capital (VC) funding in the first quarter this year. While big tech giants are making content generation a cornerstone of their AI initiatives, startups are raising record sums to bring AI-generated visuals to enterprise clients, financial data firm PitchBook says in a report. 

“These software startups solve specific business needs—from helping retailers edit product shots to allowing sales teams to create personalised videos for prospects.”

Deal value for AI visual media, a subsegment of generative AI, increased nearly 90% in the Q1 to $402.7 million from the previous quarter’s total of $212.7 million, according to PitchBook data. 

“It’s the highest quarterly total in recent years. Deal value spiked in mid-2023”, the report notes. 

PitchBook says that big tech’s push into the field threatens consumer-facing startups that rode a wave of adoption for the technology in recent years.

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“Apple recently unveiled Apple Intelligence, a localised generative AI assistant capable of creating unique emojis, art and images of personal contacts. At Google’s I/O presentation in May, it unveiled Veo, a video generation application running on a specialised model, as well asImagen 3, a text-to-image generator.”

“Consumer-focused AI media generation startups have recently faced headwinds as competition proliferates.” 

Legal concerns have also plagued the space. Stability and Midjourney, popular text-to-image creators, face lawsuits from artists who claim the startups used their work to train their respective models. Both companies deny wrongdoing, PitchBook reports.

“While some are concerned about what big tech’s entry into the space could mean for their bottom line, other content-generation startups have welcomed the competition.”

“For us, this is good news,” says Yair Adato, CEO and founder of Bria, an image generation startup geared toward advertising and other commercial use cases. “Companies like Apple are increasing awareness of the potential for AI media generation, which helps companies like Bria.” 

Adato said that startups have an important role to play in keeping the AI ecosystem open and accessible. 

“Big tech companies having a monopoly on AI models and technology cannot go unchallenged.”

“The day when enterprise and developer teams do not have access to the source code of foundation models will be the day innovation dies.” 

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