1 week Ago By Jesus Rodriguez
Mega financing rounds are the norm in this wave of generative AI, but have you ever wondered where the money comes from? One might assume that venture capital (VC) funds are driving the massive valuations of foundation model startups. After all, firms like Thrive Capital have been active in major rounds at OpenAI. However, that assumption would be misleading.
The traditional VC industry is simply too small to sustain regular rounds of tens of billions of dollars. The main source of capital for foundation model makers is coming from strategic investors, specifically the hyperscalers such as Microsoft, Google, Amazon, and NVIDIA. This phenomenon is unique to this wave of generative AI and is based on three key factors: Just this week, Microsoft and BlackRock announced a massive $30 billion fund focused on AI infrastructure.
The alliance combines Microsoft’s strategic view of the AI market with BlackRock’s global fundraising capabilities. This may be one of the largest tech investment funds ever raised with a single focus. Also this week, Salesforce announced plans to expand its AI venture investments to $1 billion, marking the most ambitious strategic VC initiative among SaaS providers.
The trend of strategic capital displacing financial VCs in foundation model markets is likely to accelerate as the scaling laws of these models continue to push forward. Ironically, it seems the VC industry is being disrupted by AI itself. Get your copy today to enjoy 200 pages of in-depth content on chunking, embeddings, reranking, hallucinations, vector databases, RAG architecture, testing, evaluation, and so much more.
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