The Bay Area has long held the title of attracting the most venture capital funding in the country, and that naturally includes the hot market for artificial intelligence startups. After all, San Francisco is home to some of the biggest players in AI, including ChatGPT creator OpenAI.
But the Greater Los Angeles area is increasing its presence in this space. The region broke a record in the third quarter, capturing $1.8 billion in venture capital investments for AI startups with a total of 31 deals, according to a new report from research firm CB Insights. Los Angeles ranks as the second-largest market for AI investment, up from the second quarter, in which it ranked behind Silicon Valley, New York and Boston.
The big boost came primarily from a single deal: a $1.5 billion funding round for Costa Mesa-based defense technology company Anduril Industries, according to the report. The deal, announced in August, was led by Founders Fund and Sands Capital. The round valued the seven-year-old company at $14 billion.
Anduril, which makes autonomous weapons systems including underwater drones, said it would use the additional investment “to increase recruitment, improve processes, upgrade tools, increase the resilience of its supply chain.” supply and expand its infrastructure. The company, co-founded by entrepreneur Palmer Luckey, signed over a billion dollars in public contracts with the United States and allied governments. His company and other technology companies serving the defense industry are expected to get a helping hand of the new Trump administration.
For years, Los Angeles has strived to become a major hotbed for innovative technology, even going so far as to market the area as “”Silicon Beach.” Some hope that AI can help make Southern California a technology destination, particularly with applications in areas such as manufacturing, entertainment and healthcare.
“LA is definitely becoming a serious tech hub,” said Ivan Nikkhoo, managing partner of Navigate Ventures, adding that the area has many schools offering engineering talent and plenty of networking events. “All the elements are there.”
While Los Angeles is the epicenter of entertainment, where AI is expected to have serious ramifications, much of recent technology investment has focused on other sectors, including healthcare.
Los Angeles-area startups that raised significant capital during the quarter included Regard, a company that offers an AI-powered clinical insights platform for doctors. The company raised $61 million. Another healthcare-related company, Pearl, which creates artificial intelligence tools to help read dental patients’ X-rays, raised $58 million, which the company says is the largest investment ever in dental AI.
Pictor Labs, a west Los Angeles-based startup out of UCLA’s engineering school, raised $30 million in the third quarter, bringing its total venture capital investment thus far to approximately $49 million. Pictor Labs uses AI to quickly digitally analyze tissue samples. The startup claims it could save pathology labs significant time and resources, as well as reduce labs’ toxic reagent footprint.
“This shows our investors’ strong interest and support for AI-based solutions, particularly in the healthcare sector,” said Yair Rivenson, Managing Director of Pictor Labs. The funding will help grow the company’s 24-member workforce and accelerate its product development, Rivenson said.
AI startups globally saw the number of deals increase to 1,245 in the third quarter, up 24% from the previous quarter, indicating that investor interest remains strong in this category, according to CB Insights. Overall, risky transactions were down 10% from the previous quarter, the research firm said. In the Los Angeles area, venture capital investments bucked national trends, increasing 38% from the second quarter.
The U.S. market captured 68% of global venture capital funding in AI companies, with Silicon Valley absorbing about half of that amount.
Hollywood studios are in discussions with companies such as OpenAI to potentially license video footage to train AI models. And last month, Los Angeles residents got a glimpse of what that might look like during a generative AI film competition in Culver City.
The so-called Culver Cup competition, organized by Amazon’s AWS Startups and Los Angeles-based technology company FBRC.ai, featured eight films created with AI tools. THE winning film was a story that explored how food helped an elderly woman with dementia remember her life with her late husband. The judges noted that the best films centered on truly human stories.
AI is particularly controversial in Hollywood, where entertainment industry unions have fought hard for protections against digital automation that could kill jobs.
“People are really afraid of what they don’t know,” said Todd Terrazas, co-founder of FBRC.ai. “Having this type of showcase allows us to show people what is possible today with these tools. »
Terrazas said he has noticed more investment in AI startups in the region over the past two years. Los Angeles has an advantage over other cities’ AI communities in entertainment, media, aerospace, manufacturing and gaming, he said.
“I think it’s really about building on our strengths with industries that are important here in Los Angeles and doubling down on creating new startups,” he said.
There will also be a International AI Film Festivalscreening of around twenty short films, which will be held at the Los Feliz Theater next month.