City AI firms bucked the VC downturn, raised a whopping $483.6M in 2022

Generative AI is technology that can learn as it goes. But unlike tools that simply learn to respond to more and more complex prompts, generative AI tools actually create new, original work. Late last year San Francisco-based OpenAI brought the tech to wide attention when it released ChatGPT, a chatbot so accomplished that use cases began to proliferate. Programmers are using ChatGPT to research and write code, and students leverage the tech to do their homework. Publishers almost immediately replaced some writers. Last week OpenAI released an updated version: GPT-4. Engineers have been at work on the technology for 25 years, but few products have been released to the public, and none have had the popularity and promise of OpenAI’s chatbot.

Though the space is undoubtedly trendy, it is finding a path to commercialization fast. Pitchbook estimates the market will be worth $42.6 billion by year’s end and will hit $98.1 billion by 2026.

Part of the success of the technology so far comes from partnerships between AI tools and large firms, such as Microsoft, which has committed $10 billion to OpenAI and incorporated ChatGPT to improve its Bing search engine. The Seattle-based software giant has taken an undisclosed financial stake in New York City-based Paige, which uses artificial intelligence to identify the pathology of cancer based on slides of patients’ tissues. Alphabet, Google’s parent company, put $400 million into Anthropic, which has created what it says is a safer chatbot than OpenAI’s. (Sam Bankman-Fried also invested.) This week Google debuted Bard, its generative chatbot, for testing by external users.

The speed of adoption has been unheard of, wrote Ali Javaheri and Brendan Burke, authors of the Pitchbook report. “ChatGPT reached 100 million monthly active users faster than any technology productivity app at two months, surpassing TikTok’s nine months to achieve the same feat,” they wrote.

Financial District-based Asapp, a customer experience company that automates call centers, raised two of the top three local rounds in the past several years. In May 2020 the company closed a $185 million round. A year later it brought in $120 million. Paige is also at the top in terms of fundraising, bringing in $150 million in July 2020 and $125 million in March 2021. The most recent company to fundraise was Runway, a multimedia and design software automation company that can generate images and video content that brought in $50 million in December 2022.

Two Sigma is at the top of the heap among city firms funding the boom, followed by Remarkable Ventures, HBS Alumni Angels New York, Partnership Fund for New York City, Coatue Management and Betaworks Ventures.

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