Radical Ventures: AI neolabs, many lacking products, markets, or revenue, raised $24B in the past two quarters, nearly 5x OpenAI and Anthropic pre-ChatGPT

The cost of building foundational AI models has fallen, allowing more entities to enter the market.

Venture capital investment in AI startups has surged dramatically over the past two quarters, with new "AI neolabs" collectively raising approximately $24 billion. This funding far surpasses the pre-ChatGPT investment rounds of major AI players like OpenAI and Anthropic, which raised nearly five times less. Many of these newly funded AI companies are characterized by a lack of established products, defined markets, or significant revenue streams. The investment climate suggests a strong speculative appetite for AI ventures, even those in nascent stages of development.

The $24 billion raised by AI neolabs in two quarters signifies a broad-based investor rush into the artificial intelligence sector, prioritizing potential over proven performance. This influx of capital, occurring at a time when building large-scale consumer or enterprise platforms is exceptionally difficult, suggests a shift in venture capital strategy towards incubating foundational AI capabilities. The sheer volume of funding indicates a belief that future value will be derived from AI development itself, rather than traditional product-market fit metrics alone.

This trend has significant implications for the competitive landscape, potentially leading to a more fragmented AI ecosystem with numerous specialized research labs. Companies that successfully leverage this capital to develop novel AI architectures or significantly advance existing ones could redefine industry standards. Investors and observers should monitor which of these neolabs transition from research-focused entities to product-driven businesses and how they impact the established tech giants.