A recent deep dive by Silicon Valley Bank into enterprise software customers has surfaced a dramatic transformation in the startup landscape, driven by the rise of artificial intelligence. Artificial intelligence companies are burning through their funding at twice the pace compared to a decade ago, with many depleting their initial investments in just three years. This acceleration is not just about higher costs; it underscores how artificial intelligence developments require immense infrastructure investments from inception, pushing the classic ´grow efficiently, extend runway´ venture model to its limits and demanding rapid scaling for survival.
Enterprise funding patterns are feeling the ripple effects, as large, artificial intelligence-focused deals now consume a disproportionate share of total capital. While artificial intelligence startups represent only a small percentage of mega-rounds by deal count, they attract roughly half of the money raised in these transactions. At the same time, venture capital itself faces bifurcation: mid-sized funds and mid-market startups are squeezed out as LPs pour capital into artificial intelligence-specific funds. As a result, securing funding—especially for non-artificial intelligence ventures—has never been more competitive or complex, requiring clear value propositions and capital-efficient growth strategies.
Graduation rates for Series A have fallen dramatically, raising the bar for early-stage companies and pushing many founders to either strategize for earlier exits or risk becoming ´Zombiecorns´—unicorns stagnating with poor economics and no clear path to liquidity. The research also found that, due to current burn rates, around half of enterprise software startups in the US will need to raise capital or seek an exit within the next 12 months. With the public markets currently inaccessible, early-stage M&A is becoming more common, as larger players snap up teams and tech before they reach traditional milestones. Ultimately, artificial intelligence is not just altering product categories, but is fundamentally restructuring how startups are built, funded, and exited—threatening those who fail to adapt while offering fast-track opportunities to those who do.
