Sector Snapshot Key Trends in Dealmaking Artificial Intelligence

Sector Snapshot: Key Trends in Dealmaking Artificial Intelligence | 7 During the more beneficent exit climate of 2021 to early 2022, multiple late-to-growth-stage AI businesses went public and generated the largest single spike in exit value. However, M&A continues to drive the bulk of exit counts. The paucity of exits thus far in 2024 for AI companies speaks to the difficult exit environment for venture-backed businesses overall, but parsing trends through the end of 2023 hints at some rapidly shifting trends in the sector. The average of capital raised prior to going public dwindled from a peak in 2019, while the median time between the final private VC round and going public steadily rose by approximately 18months. In tandem, these trends suggest that AI companies and their backers are pushing into various frontiers of AI applications without raising asmuch as in the past, as these niche plays (as opposed to computation) do not require vast sums of capital. Key areas of AI that are likely to see significant innovation and competition going forward are the overall AI cloud stack across enterprise use cases and company sizes, specialized agents with attuned risk mechanisms, andmore, while tech incumbents battle for AI-empowered predominance in their core business lines. Thus, once market uncertainty and volatility ebb – which may not occur for some time – M&A will likely remain the prime driver of exits going forward as some deep-pocketed companies turn to acquisition of innovative products and services. Buyouts continue at a steady trickle, while M&A remains paramount AI &ML VC exit count by type *As of 02/20/2024. Source: PitchBook. Acquisition Buyout Public Listing 2013 2018 2015 2020 2023 2014 2019 2016 2021 2024* 2017 2022 600 500 400 300 200 100 0 *As of 02/20/2024. Source: PitchBook. As the IPO boom has faded, so too, have AI exits AI &ML VC exit value ($B) by type Acquisition Buyout Public Listing 2013 2018 2015 2020 2023 2014 2019 2016 2021 2024* 2017 2022 $250 $200 $150 $100 $50 $0 Declining averages for VC raised showcase a focus on less expensive solutions Median and average venture capital raised ($M) by AI &ML companies prior to IPO Median Average *As of 02/20/2024. Note: 2024*, 2020 and 2019 all have population sizes that are non-normative. Source: PitchBook. 2020 2023 2019 2021 2024* 2022 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0