Raising Capital for AI Companies

Morgan Lewis partner Benjamin David Novak and associate Evan J. McGillin provided an update of the current financing market for artificial intelligence (AI) companies including an overview of market terms and transaction structures for these types of financings, highlighting the company-favorable and investor-favorable ends of the market.

Key Takeaways

2023 was a breakout year for investment in generative AI startups, with equity funding topping $21.8 billion across 426 deals. The year’s five largest rounds all went to companies focused on core generative AI infrastructure.

Consider this when raising capital:

• Choose an appropriate financing structure before negotiating terms
• Be deliberate when negotiating terms
• Be mindful of deviating from the range of market
• Be very cautious of SAFEs (“Simple” Agreements for Future Equity), particularly if you are the investor

QUESTIONS?

Please contact Annette Barket. For CLE questions, please email CLE Credit Request.