Generative AI and cleantech show growth despite overall VC downturn

A new report released today by Startup Genome and the Global Entrepreneurship Network on the current state of startups in 2024 has found a mix bag of results, with significant challenges in global venture capital funding but positive signs in areas including generative artificial intelligence and cleantech.

The 2024 Global Startup Ecosystem Report, based on data collected from 4.5 million companies across more than 300 entrepreneurial innovation ecosystems, incorporates insights from independent research and policy work to provide an analysis of global startup trends, funding dynamics and ecosystem performance.

The top result, and one that isn’t surprising, is that there was a notable decline in global VC funding in 2023. Series A funding plunged 46% last year, but there were signs of a recovery in the first quarter of this year.

The number of exits in 2023 fell 47% compared to 2022 and 86% compared to 2021. The number of new unicorns, companies with an on-paper valuation of over $1 billion, fell by 58% from 2022 and 87% from a peak in 2021.

Generative AI and cleantech bucked the trend. Generative AI accounted for 20% of all VC funding in 2023, triple the amount in 2022, and cleantech startups raised 2.5 times more funding in the second half of last year compared to the first half of 2020. Notably, European cleantech startups outperformed the U.S. and China in Series A funding growth over the last two years.

Silicon Valley remained at the top of the global ecosystem rankings for startups, followed by New York City and London. Tokyo entered the top 10 for the first time and Seoul moved up three spots to ninth place. In the emerging-ecosystems rankings, Madrid and Barcelona ranked in first and second place, with other regions rising in the rankings, including Jakarta, Metro Rhein-Ruhr and the Great Lausanne Region.

Despite the mixed results, the report does point to positives ahead, noting that even with the challenges of decreased funding and global economic instability, early-stage startups are showing resilience. Entrepreneurs continue to innovate, particularly in AI and cleantech, positioning these sectors for growth.

“Thankfully, along with our economies, global startup ecosystems are on the brink of a new growth cycle,” the report notes. “A slight yet significant uptick in investments in the first quarter of 2024 suggests that we may have reached the bottom of the recent funding downturn.”

The report added that “History tells us that those who invest during or immediately after a downturn reap the highest benefit. Now is the time to start building, capitalizing on the unique opportunities that arise in times of transition.”

Image: Startup Genome/Global Entrepreneurship Network