Business Blog: AI generates nearly 1 in 4 new startups

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The Daily Pitch: VC, PE and M&A

January 2, 2025

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Nearly 1 in 4 new startups is an AI company

(Jenna O'Malley/PitchBook News)

AI startups account for nearly a fourth of first-time VC funding, reflecting a mass pivot among founders that is raising concerns among investors that the technology is increasingly being used as a marketing tool to raise capital.

"The real challenge is cutting through the 'AI washing' to identify founders who aren't just using AI as a buzzword," one seed investor said.

M&A 2024: Rebounding from rates and regulations

(Sakchai Vongsasiripat/Getty Images)

The M&A market navigated a year of delicate recovery in 2024, marked by private equity's resurgence and regulatory hurdles.

With new FTC leadership on the horizon, dealmakers anticipate opportunities in 2025.

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A rough year for Europe's PE-backed IPOs gave just a handful of winners

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Private equity exits have been tough in Europe. IPO activity in the region was down 25% to €64.1 billion (around $66.7 billion) in 2024, but PE-backed IPO activities saw a steeper drop of 33% to €41.8 billion.

However, a handful of companies outperformed, buoyed in part by overall stock market performance in the region.

Digital health startups defy the skeptics

VC funding for the digital health industry hit $2.2 billion in Q3, the highest level since early 2022, according to our recent Emerging Tech Research.

The surge is thanks to seven deals of $100 million or more—the largest of which was Flo Health's $200 million Series C, at a $1.2 billion valuation for the consumer-facing women's health platform.

Publicly traded digital health companies have faced skepticism from investors, but IPOs could still make a resurgence. Diabetes startup Omada Health confidentially filed for an IPO in 2024.

A key area of innovation is smart rings: Oura hit a $5 billion valuation in 2024 amid swift growth.

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Enterprise SaaS market extends recovery

Startups in the enterprise SaaS industry collected over $17 billion across 640 deals in Q3—one of the highest quarterly hauls for the sector in the last couple of years, according to our recent Emerging Tech Research.

Companies specializing in enterprise resource planning continue to receive a large slice of VC funding, accounting for over 40% of the overall sector's quarterly dealmaking.

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