Despite VCs investing $75 billion in Q4, it’s still tough for startups to raise money, data proves

After two years of relatively weak investment activity, it appears that VCs are once again pouring capital into startups at pandemic-era levels. But a closer look shows that they are not.

In the fourth quarter of last year, investors invested $74.6 billion in US startups, significantly more than the average of $42 billion invested in each of the previous nine quarters. PitchBook data was released on Tuesday.

While these funding levels were previously only seen at the peak of the ZIRP cycle (late 2020 through 2021), the reality is that this recent surge in venture capital funding is disproportionately benefiting a select few companies. In fact, $32 billion, or 43.2% of Q4’s investment activity, went into a few giant deals:

Data bricks: In December, the data analytics company raised $10 billion at a $62 billion valuation.

OpenAI: ChatGPT producer provided 6.6 billion dollars At the beginning of October, it was worth $157 billion.

xAI: Elon Musk’s xAI, which developed a generative artificial intelligence core model called Grok, is now 6 billion dollars from investors in December.

Waymo: A self-driving car maker that operates robotaxi services in San Francisco, Los Angeles and Phoenix $5.6 billion Series C In November, the parent company, led by Alphabet, merged with a who’s who of Silicon Valley venture firms.

anthropic: A generative artificial intelligence model developer rose in November 4 billion dollars From Amazon.

Without these megadeals, investment activity in the fourth quarter would have been equal to the average of $42 billion over the previous two years. This sharp concentration of venture capital investment highlights the widening gap between a few well-funded companies and the broader startup ecosystem.

It remains to be seen whether the high levels of venture capital investment seen in the fourth quarter of last year will continue in 2025. However, most venture capital funding will probably continue to flow to a small group of the most promising AI companies.