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US Startup Funding Faces 30% Drop in 2023 Amidst AI Boom

US startup funding experienced a 30% decrease in 2023, with investors contributing $170.6 billion, down from $242.2 billion in 2022. The decline is attributed to challenges in the venture capital sector amid rising interest rates.

Despite the overall decline, AI transactions captured significant attention, with one in three dollars spent in the US going to AI firms. Notably, large language model training, particularly by OpenAI and Anthropic, accounted for 10% of the entire deal value in 2023.

In Q4 2023, there was a slight increase in deal activity, hinting at potential market stability. However, 20% of startups raised capital at a lower value than in previous rounds, indicating a widespread reset of late-stage company valuations.

As 723 unicorn companies face cash shortages, there's uncertainty about their ability to raise funds in 2024. Venture capital firms, holding over $270 billion in idle capital, face a decrease in fundraising, impacting startups' funding prospects.