What trends are showing about the types of startups getting funding

Y Combinator has two "batches" per year: one held in the winter (roughly between January and March) and one in the summer (usually between July and September). One obvious trend has been the rise of startups working on AI. ChatGPT's launch in November 2022 was exciting to investors and entrepreneurs, not because it was a new product but rather because it heralded a new wave of innovation in AI.

Data from its past few batches confirms the popularity of AI. By our count, around 64% of startups backed by Y Combinator in its winter 2024 batch contained the phrase "artificial intelligence" or "AI" in their company descriptions, up from 49% in summer 2022, just before ChatGPT launched.

Startups are working to incorporate AI into a wide range of domains, many focused on office work productivity. One company is building tools to help people scan through legal documents; another is assisting employees in managing investor relations. One startup, Avail, even hopes to use AI to turn movie scripts into videos.

Y Combinator also provides data on which sectors their companies are working in. By far, the most common startups currently receiving funding from the accelerator are business-to-business companies. In the latest batch of winter 2024, 158 out of 235 (67%) Y Combinator-backed startups were focused on B2B—a steep increase from the winter 2022 batch, when only around half of the companies were oriented toward B2B. This change coincides with the rise of AI: Many founders are betting that, in the short term, there will be more opportunities for companies to take advantage of AI than individual consumers.

Fintech has seen an especially big decline in recent years. The decline is partly a result of investors and entrepreneurs shifting their focus to AI, but another part is the bursting of the cryptocurrency bubble in 2022. The price of bitcoin has recently soared again, hitting an all-time high of exceeding $73,000 on March 12, 2024, but consumer interest, as indicated by Google search data, remains below where it was in 2022.

The pace of technological advancement has been so accelerated over the past two years that it can be difficult to remember the current wave of AI development is still in its infancy. Many cutting-edge technology companies still do not have clear visions of where their products are ultimately headed. Moreover, it will take years, if not decades, for more traditional companies to implement these new advancements. This suggests startups working to deploy AI today will have plenty of problems to solve.

Story editing by Shannon Luders-Manuel. Copy editing by Paris Close.