AI Start-Ups Attracted Over 21 Percent of The World’s Venture Capital in 2020

Source: Roland Tricot, “Venture Capital Investments in Artificial Intelligence,” OECD Digital Economy Papers, September 2021.

Commentary: Artificial intelligence (AI) is increasingly grabbing the attention of entrepreneurs. While 2020 saw labor disruptions driven by the COVID-19 pandemic, it also brought a host of digital solutions using AI to innovate through the challenges of the pandemic and beyond.

AI technology has certainly enjoyed greater attention amid the pandemic, but a recent OECD report shows that the demand for AI isn’t just a passing trend. In 2012, AI start-ups attracted just about 3 percent of the world’s venture capital investment. Four years later, AI start-ups’ share of global VC investment had grown by more than 10 percentage points to 15 percent in 2016. The next four-year period saw a similar surge, with AI’s share of VC investment exceeding 21 percent in 2020. In that year, the OECD reported that global venture capital investment came to $340 billion, $75 billion going to AI start-ups.

This 28-fold increase from 2012 to 2020 was driven primarily by investment growth in the United States and China. The United States leads AI-related VC investment in both the number of deals and total dollars invested, whereas China’s growth in dollars invested mainly comes from a few very large investments. This trajectory shows that AI start-ups have steadily progressed over the years and that the global supply of AI technology is capable of growth and innovation to match today’s rising demand.