Funding an AI Startup in 2025
- Stephanie Pflaum
- May 29
- 6 min read
Updated: Jun 4
Technology’s hottest trend can be summarized in two words: artificial intelligence. AI startups racing to innovate and deploy new solutions across a broad range of industries and applications have dominated investors’ attention and money.
In 2023, higher interest rates and inflation contributed to a decline in deals and dollars invested in tech businesses overall, though AI startups in the U.S. still claimed one of every three dollars invested that year, thanks to several megadeals. Some reports, however, said the flow of money into artificial intelligence was slowing, and newer AI startups were finding it harder to win over VCs.
Well, 2024 turned out to be another record-breaking year for AI investments, which grew 80% from 2023.
Halfway through 2025, AI is on everyone's minds and the rate of adoption is accelerating at breakneck speed. The "space race" of a new generation is on, and that got us wondering: What's the state of AI fundraising in 2025?
To answer this question we looked at AI investment trends over the last couple of years.
How Much Money Is Invested in AI Startups?
SaaS startups dominated VC investments until AI and machine learning (ML) technologies took center stage just a few years ago. According to a report by the Organization for Economic Cooperation and Development (OECD), AI attracted a 21% share of global venture capital investment in 2020, reaching $75 billion. This marked a steep ascent from less than $3 billion back in 2012, merely 4% of the funding market.
S&P Global Market Intelligence data shows investments into AI businesses (both the total number and value of deals) peaked in 2021 before sharply declining in early 2022, when money became more expensive and investors shifted strategies.
By the last quarter of 2023, there were only 180 private equity and venture capital-backed AI deals, totaling $4.11 billion — a stark contrast to just two years prior, when $13.50 billion was invested through nearly 500 deals. S&P totals exclude the recent mega-investments by Google, Amazon and Microsoft.
These were the five largest funding deals of 2023:
OpenAI, $10B: After Microsoft’s $1 billion investment in OpenAI, numerous reports estimate that its second investment was a cool $10 billion — the largest AI deal in history.
Anthropic, $4B: With nearly $7 billion in total funding, Amazon-backed San Francisco-based Anthropic raised $1.25 billion, with the right to initiate another $2.75 billion.
Anthropic, $2B: Anthropic also claims the No. 3 spot, with a separate investment from Google raising close to $2 billion.
Inflection AI, $1.3B: It’s building the largest AI cluster in the world, and it raised a huge $1.3 billion round from Microsoft, Reid Hoffman, Bill Gates, Eric Schmidt and Nvidia, which valued Inflection AI at $4 billion.
Metropolis, $1.1B: The AI-enabled parking startup raised $1.7 billion in debt and equity.
With megadeals included, AI companies won a significant portion of invested capital in 2023. Pitchbook reported that AI and ML companies captured $68.7 billion (35%) of VC investments in the U.S. that year, a sharp increase after hovering around 20% for the prior five years.
The total money invested in AI reached a record-breaking $110 billion in 2024, of which venture capital played a significant role. A full 42% ($80.7 billion) of venture capital raised in the U.S. went to AI startups last year.
Unsurprisingly, foundational models and generative AI appear to be the engines driving all VC activity, with generative AI companies raising $47.4 billion in 2024, and foundational AI technology overtaking AI applications with the most growth (and a giant slice of funding) over the last two years.
In 2025, AI startups continue to attract substantial funding and record-breaking investments. Notable examples include:
Databricks: Secured a $10 billion Series J round, co-led by Thrive Capital, marking one of the largest private AI investments to date.
Anthropic: Raised a $3.5 billion Series E round led by Lightspeed Venture Partners, emphasizing the focus on safety and alignment in AI models.
Cognition AI: Achieved a $4 billion valuation after a funding round led by 8VC, highlighting the growing interest in AI-driven coding solutions.
The global AI market was valued at nearly $235 billion at the end of 2024. Market research firm IDC predicts that the global artificial intelligence (AI) market, including generative AI, could reach $631 billion in 2028.
Are AI Startups Still Hot in 2025?
AI may be attracting more of today’s limited pool of investment funds, but a handful of companies raising massive rounds may be obscuring a harsher fundraising environment for AI startups.
There's an important data point that tells us more about today's funding environment: startup funding overall in 2024 declined 12% from the prior year. So, while some AI startups are raising massive sums of money, many more are having a hard time raising any capital at all.
AI is still hot, but investors are pickier.
Crunchbase predicted a slowdown in AI fundraising in 2024, after observing a trend that showed investors were losing interest in marketing or sales platforms that just “wrapped AI” around their platform. Though their prediction was ultimately wrong, the AI fundraising game has changed in 2025.
For startups that operate in or provide artificial intelligence or machine learning tools, platforms, research, and algorithms, the market has become extremely competitive. Simply claiming you have an AI product or platform no longer guarantees you a meeting with an investor.
It’s important your AI startup can demonstrate a clear path to profitability and real-wold applications.
Investors want to see tangible use cases and the value your AI tech will create. Does the AI amplify a core differentiator? Does it scale the value you deliver by reducing costs, improving quality, or enhancing efficiency for users?
Today’s hot-yet-selective fundraising environment is more likely to favor AI startups that can show market validation, revenue generation, and both manageable cash burn and acceptable churn. Founders should consider spending time building the business before raising venture capital, which will make it easier to impress AI investors in a hyper-competitive market.
Building an AI Business Without Venture Capital
AI is evolving rapidly — algorithms are getting more efficient, less computing power is needed, and open source is expanding — which means it’s becoming cheaper to build an AI business. Though you may need growth capital at some point to scale, it is possible to turn your idea into a business with recurring revenue, a strong customer base, and sustainable growth without VC money.
Seamless.AI is a Lighter Capital portfolio company that did just that.
Brandon Bornancin started Seamless.AI to disrupt an entire industry. Seamless.AI organizes the world’s contacts and makes them universally accessible and useful — it makes creating profitable relationships and new revenue seamless.
By 2022 the company had exhibited solid traction but hadn’t unleashed its full potential. Bornancin went looking for funding alternatives that would enable the business to accelerate growth — without giving up equity — and prime the business for long-term success. He discovered Lighter Capital's non-dilutive financing.
With $2 million in funding and within just one year, Seamless.AI tripled its revenue, retained its equity, and drove the company valuation up twentyfold. Bornancin tells his story in the video below:
How To Get Funding for Your AI Startup
As Bornancin puts it, non-dilutive debt funding is a faster, more cost-effective way to grow an early-stage AI startup. It’s a founder-friendly funding option readily available to qualified startups that need extra fuel, particularly in a fickle VC funding environment.
Venture capital is one of the first funding sources many founders go to, but giving up too much equity too soon can result in owning 5% of the company — or losing it entirely. Non-dilutive funding minimizes early-stage equity dilution so founders can maximize their growth and ownership value upon exiting.
AI startups that have reached the $200K ARR milestone can use non-dilutive funding to gain additional traction and make the business more attractive to potential investors.
Here are 10 good reasons to consider non-dilutive funding for your AI startup:
Funding does not affect equity or ownership.
Approval is fast and objective.
Funding doesn’t require valuation negotiations, pitch decks, or presentations.
Personal guarantees aren’t required as collateral.
Your business doesn’t have to be profitable.
How you use your funding is entirely up to you.
You decide how to grow, how fast to grow, and when to exit.
Flexible revenue-based payments can make managing cash easier.
Funding is tailored to your revenue, so deployment and repayment are manageable.
Funding scales easily with the business as it grows.
Got Revenue? Get Capital to Grow. Keep Your Equity.
Lighter Capital has provided financing to 500+ tech startups, totaling over $350M through over 1,000 rounds of funding. Apply in minutes to get up to $4 million in non-dilutive growth capital — no pitch decks, presentations, or business plans required.
