Americas dominates VC funding in Q3, as AI, defence-tech thrive

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Venture capital investment globally during Q3 2024 continued its trend of moderation, with the Americas securing the largest share of funding, revealed KPMG’s latest Q3’24 Venture Pulse Report.

An amount of $1.5bn was raised by US-based Anduril Industries, a developer of autonomous weapons systems, leading a series of significant raises that included $1bn from Safe Superintelligence Inc and $900m from Canada-based Clio.

The report showed that Asia emerged as the second-largest recipient of venture capital, highlighted by a $788m from Mynt.

Other substantial raises included $688m from China’s Baichuan AI, $415m from ICLeague, and $362m from Singapore’s Silicon Box, as well as $36m from India’s Zepto.

In Europe, the quarter was relatively quiet, although several AI-focused firms secured funding above $100m.

Noteworthy deals included $484m for Germany’s Helsing and $386m for France’s Voodoo, a gaming company.

Additionally, space-tech attracted attention, with Isar Aerospace raising $279m and D-Orbit securing $166m in Italy.

As of the end of Q3 2024, the number of early-stage unicorns — companies valued at over $1bn — has already surpassed the total for all of 2023.

This surge, despite ongoing macroeconomic and geopolitical uncertainty, is largely attributed to activity within the AI sector.

Numerous early-stage AI firms have achieved unicorn valuations following their initial significant raises, reflecting a sustained focus on AI investment amidst a cautious approach to other sectors.

AI dominates VC investment landscape

AI continued to dominate global VC funding, with the largest deals across the Americas, Asia, and Europe. Core AI firms drew significant investments, including $1bn for Safe Superintelligence in the US and $688m for Baichuan AI in China.

Other raises included Moonshot AI at $300m and Sakana AI at $200m in Japan. The quarter also saw substantial funding for AI-powered defence-tech firms, such as Anduril Industries and Helsing.

Investors displayed interest in startups with ancillary offerings related to AI, including those aimed at reducing the energy consumption associated with various AI solutions.

Defence-tech investments rise amid geopolitical tensions

The defence-tech sector attracted considerable funding in Q3 2024, buoyed by geopolitical tensions. Both Anduril Industries and Helsing benefited from increased investor interest in software and non-hardware solutions for defense applications.

Historically, VC investors have been hesitant to invest in this space, but changing dynamics have prompted a reevaluation of potential opportunities.

Q4 2024 trends

As the VC capital landscape moves into Q4, investment activity is expected to remain soft, particularly until the conclusion of the US presidential election in November.

However, there is cautious optimism for a rebound in exit activity by 2025, with mergers and acquisitions potentially leading the way.

“I have some cautious optimism that 2025 could be a better year for the global IPO markets. After a very dry couple of years, IPO activity could finally see a resurgence.

“While we probably won’t see a lot of core AI companies going out yet — in part because many are still working to figure out the optimal business models, and are quite well funded — we could see companies in a wide range of other sectors looking to exit — including health and biotech, fintech, and energy and cleantech,” said Conor Moore, global head, KPMG Private Enterprise, KPMG International

AI is anticipated to remain a hot investment area, although a market correction may occur as investors seek tangible value from AI implementations. Regulatory developments regarding AI are also expected to gain prominence, as governments work to establish guidelines around safety, privacy, and ethical use.

Meanwhile, interest in alternative energy solutions, which had seen a decline in investment recently, may surge again as global energy demand continues to rise, potentially outpacing supply.