DeepSeek Shakes Up AI Landscape But US Still Dominated Venture Funding In January
Global venture funding totaled $26 billion in January, with healthcare and AI again emerging as the top sectors for startup investment, Crunchbase data shows.
And while the launch of China-based DeepSeek’s open source model R1 rattled the public markets in late January, last month’s venture funding numbers show the U.S.’ AI startups have continued to raise significant sums — at least for now.
AI startups including Anthropic, ElevenLabs and Hippocratic AI raised billions of dollars last month, and the U.S. startup market overall continued to dominate, receiving more than 60% of total global venture funding in January.
Venture funding has been highly volatile month to month in recent years, in part due to massive raises by U.S.-based AI companies.
In January, Anthropic raised another billion dollars in funding, led by Google, adding to the $13.7 billion it has already raised. Meanwhile, OpenAI is reportedly raising $40 billion at a $340 billion valuation, an unprecedented sum for a private venture-backed company.
Other model companies also raised hundreds of millions in funding in January. New York-based AI audio model developer ElevenLabs raised $180 million; London-based video generation model developer Synthesia raised $180 million; and Palo Alto, California-based Hippocratic AI, which makes AI for healthcare, raised $141 million.
However, the largest funding in January was not to an AI company, but a $3 billion round for augmented reality startup Infinite Reality, based in Connecticut.
Venture funding to AI labs in China, the second-largest market for AI models, paled compared to U.S. funding to the sector, based on an analysis of Crunchbase data. The DeepSeek development, however, shows that competition and innovation going forward could come from many different places — and not necessarily from the AI giants backed by Silicon Valley.
Healthcare led, AI followed
While AI grabbed the headlines, healthcare-related startups actually led venture investment totals in January, raising $9.4 billion. That represents 36% of the total venture capital raised during the month.
By comparison, AI-related companies garnered $5.7 billion, accounting for 22% of overall funding.
US led
The U.S. venture market’s dominance continued in January with the country receiving 60% of global funding.
The figure underscores an upward trend for the U.S. in which it’s progressively attracted a larger share of the global venture pie in recent years. Last year, the U.S. received 57% of overall global capital as Asia’s venture market slowed significantly and Europe flattened. Just a couple of years ago, the U.S. received just under half — 48% — of total venture spending.
Better models, cheaper energy
Venture capital funding alone can’t foot the bill for AI model development, chip innovation, data centers and energy output, although a lot of innovation will continue to be funded by VCs.
And venture capital funds the technology and healthcare companies that leverage the foundational AI models to build services for enterprises and consumers. As we saw when barriers to entry were lowered with cloud and mobile technology, a startup ecosystem benefits by becoming more competitive and innovative. We expect to see the same as new AI architecture brings costs down for the industry as a whole.
“DeepSeek R1 is a great model that is mostly the result of excellent engineering work. It helps level the playing field between open source and frontier models, which is great for application platform companies like us (and less great for expensive foundation model players),” said Douwe Kiela, founder of Mountain View, California-based Contextual AI, a company that supports enterprises with AI trained on their own data.
The U.S. currently has huge structural advantages — not to mention the bulk of venture funding. But as DeepSeek — which didn’t raise venture funding and reportedly rivals OpenAI’s capabilities but at lower costs — has shown, other regions can also foster groundbreaking advancements.
Those advancements and lower costs stand to benefit the tech ecosystem as a whole, particularly the application layer companies that are built on the expensive foundation model AI companies.
Cheaper and more effective models are good for startups and the investors that fund them. We are still early in this investment cycle, so expect more breakthroughs and large rounds as founders, researchers and big tech companies chase this opportunity.
Source: https://news.crunchbase.com/venture/ai-healthcare-deepseek-january-2025-funding-recap/
