These startups are reaching as much as $200 million in annual recurring revenue in less than two years and, as a group, increased the amount of funding they attracted by 110% to reach $8.2 billion in 2024, the Financial Times (FT) reported Monday (April 14), citing data from Dealroom.co and Flashpoint.

This category of AI startups includes companies like Perplexity, Synthesia,  ElevenLabs, Harvey and Sierra, according to the report. 

They also include coding app startups like Anysphere, Reflection AI, Poolside, Magic and Windsurf, formerly Codeium, that have raised hundreds of millions of dollars over the past year, per the report.

AI app startups are benefiting from soaring user numbers, competition among LLMs that is driving down the cost of using AI, the flexibility to switch from one AI model to another, and investors’ hopes that they will deliver productivity gains to customers without having to invest in building LLMs, the report said.

At the same time, some investors believe these companies face challenges, including their first annual renewal cycle with their customers and the possibility that larger companies could come along and offer similar applications, the report added.

It was reported in August that while generative AI is not yet making money in some fields, the technology has quickly proven its value in powering coding assistants.

The report said coding copilots have delivered clear time to value and value-add; at least one company said it would stop hiring people who code without AI; the demand for programming will go up as the task becomes easier; and software engineers have already integrated these assistants into their workflow.

Other AI applications and ways companies are harnessing LLMs include AI writing assistants, chatbots, virtual tutors and research aids, PYMNTS reported in May.

In addition, healthcare providers are exploring the use of LLMs for medical Q&A, doctor note summarization and drug discovery; banks are leveraging the models for risk assessment, fraud detection and personalized financial advice; and law firms use LLMs to assist with legal research, contract analysis and case prediction.

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Startups in the U.K. took in just £16.2 billion ($21.1 billion) last year, the Financial Times (FT) reported Sunday (April 13), citing data from Dealroom. That figure, the report said, is the lowest since 2020. At the same time, American tech startups raised more than £65 billion during 2024, a 71% increase over the prior year.

Now, the CEOs of several U.K. startups tell the FT that their wish to entice American investors has led them to incorporate in the U.S., even though they are based in London.

“Recognizing that most venture funding comes from the U.S., we set up as a Delaware corporation — the preferred and familiar structure for U.S. investors,” said Mati Staniszewski, co-founder of artificial intelligence (AI) company ElevenLabs, which was valued at $3.3 billion after completing a funding round in late January.

The report added that of the 70 U.K.-founded, venture-backed tech startups now based in the U.S., nearly a fifth of them were incorporated after 2020.

The FT also noted that this trend is happening as the British government is pushing the growing AI sector as a possible engine for growth.

However, young companies warn that trouble in finding capital was hindering British businesses from competing with their global peers. The report also points to the tradition of leading U.K. tech companies being purchased by much larger international investors, like the now-Google-owned-DeepMind.

Meanwhile, U.S. lawmakers say they want to make it easier for companies to get funded, with the House Financial Services Committee (HSFC) recently taking up 40 bills aimed at that goal.

“Our capital markets should work for everyone,” HFSC Chairman French Hill, R-Ark., said in a news release. “That means reducing barriers for startups to access funding, incentivizing investment in regional businesses, and reforming outdated regulations that improve access to growth capital to ensure a public offering is a more viable option again.”

Members of the committee argue that most venture capital (VC) funding is concentrated in just a few states, that just 19% of American households were defined as accredited investors in 2022, and that the number of public company listings in the U.S. has declined.

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For middle-market companies and especially those with $100 million to $1 billion in sales — which means that they are already well-established — the smaller players in their respective industries, particularly within the services verticals, are gaining currency as formidable competitors.

As detailed by PYMNTS Intelligence in the “Navigating Uncertainty: How Middle-Market Executives Adapt, Compete and Innovate,” 60 heads of product said that the development and tech-driven businesses they help steer are finding that the competitive landscape is shifting. 

Among middle-market firms, 42% consider innovation a primary or significant factor in their competitive strategy. But 13% of middle-market product leaders now see startups as their biggest competitive threat, a 2.6x increase from six months ago.

Among the reasons that these smaller players are able to pose new challenges: They may be outstripped by their larger brethren in terms of sales, but they also have the key edge of being nimble, and quite often they harness artificial intelligence (AI) to improve their operations and to innovate in new ways.

Large corporations remain the most frequently cited rivals for the middle-market companies, though the trend has been declining a bit, as the share of middle-market companies stating that these juggernauts are the biggest competitive threat has declined (in favor of smaller companies) from 33% to 27%. Rival middle-market businesses also saw a slight uptick in being named top competitors, rising from 12% to 15%. Private equity-backed competitors seen as a concern were lower among middle-market companies, inching lower from 10% to 6.7%.

Drilling Down Into Service Industries

The competitive shift is most keenly felt in service industries like real estate and finance. In those fields, 16% of leaders now view small businesses or startups as their main competitors, up from 11%.

There’s awareness among all middle-market firms that innovating — in a bid to joust with the smaller challengers — has the beneficial effect of improving their own fortunes. The data shows that, in particular, heads of product prioritizing tech-driven strategies report 54% fewer instances of high uncertainty. 

Innovation leads to product differentiation and better perceptions of their brands in their respective marketplaces. In just the past half year, the share of middle-market firms citing technological advancements as a competitive challenge has risen fivefold.   

Innovation Is Key to Competitive Strategy

We found that the firms that make innovation a primary or significant factor in their business development roadmaps are likelier to emphasize industry shifts (36%) and customer demand for more advanced solutions (24%), enabling them to pivot faster and reduce uncertainty. 

But the road to tech-driven innovations is no straight line. With technological advancements also emerging as a greater challenge — rising from 3.3% to 20% — middle-market firms must balance policy compliance with innovation to avoid falling behind in a complex business landscape.

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City Attorney Hydee Feldstein Soto’s office filed a civil action against the company, alleging it drove up the prices of its rentals by more than 10% and up to more than 50% in some cases, in violation of Los Angeles’ anti-gouging law, according to a Tuesday (Feb. 4) press release. The law is automatically triggered when the city declares a state of emergency during a natural disaster.

“It is not only unconscionable for Blueground to take advantage of Angelenos when they are at their most vulnerable, it is illegal and must stop immediately,” Soto said in the release. “Our prosecutorial offices at the state, county and local levels are united in this effort to fight price gouging and hold accountable individuals and businesses who prey on our residents during this unprecedented emergency.”

Several Blueground rental properties’ prices rose on or after the emergency was declared Jan. 7, per the release. For example, one apartment that had been advertised for $2,000 per month on Dec. 31 was being offered at $3,120 Jan. 7, a 56% increase. The price was reduced to $2,730 days later — still 36.5% above the pre-emergency rent — before the listing was removed from Zillow.

Reached by PYMNTS, Blueground provided the following statement:

“Blueground strongly denies the allegations made by the Los Angeles City Attorney. We operate in full compliance with California law, including the ‘Anti-Gouging Law’ that was recently triggered upon the declaration of a state of emergency during a natural disaster.

“From the moment the State of Emergency was declared, our team has diligently worked to ensure full compliance with California’s Anti-Gouging Law and has continuously monitored our pricing to maintain compliance. It is important to clarify that the Zillow rates mentioned in the complaint referred to dates outside of the State of Emergency. Most of these listings were for future dates, many of which fall during peak travel season, and were not subject to the emergency pricing restrictions.

“We are heartbroken by the devastation caused by the recent wildfires in Los Angeles and the surrounding areas. We are working closely with the City Attorney’s office to provide additional information and to clarify any concerns, and will continue to revisit our pricing model until the housing crisis in LA subsides.”

The city’s suit is asking for a permanent injunction blocking Blueground from charging more than 10% throughout the duration of the current state of emergency, restitution for consumers who were charged illegal rent, and civil penalties, according to the release.

Blueground offers customers fully-furnished turnkey rentals, advertising on its website and sites like Zillow and Airbnb. This sort of housing “could be a desirable option for those who are suddenly and unexpectedly in need of temporary housing,” the release said.

The city also filed criminal charges against a homeowner and her real estate agent for price gouging, accusing them of illegally increasing rent by 38% during the fires, per the release.

The fires’ toll on Los Angeles, both financial and emotional, will be felt for years, presenting another challenge to the state, where insurance companies have been boosting their rates or exiting the market entirely.

“People are going to have to think through how insurance works, where they want to live and how they want to live because the cost of living in certain areas is continuing to increase,” One Inc CEO Ian Drysdale told PYMNTS last month.

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These startups have raised the billions of dollars they need to continue growing and to enable employees to cash out stock options, without an IPO, the Financial Times (FT) reported Thursday (Jan. 10).

Examples include Databricks raising $10 billion in December, SpaceX raising $1.25 billion in November and OpenAI raising $6.6 billion in October, according to the report.

After raising funds like that, the country’s largest startups have the flexibility to delay their potential IPOs beyond 2025, even as smaller startups are expected to go public this year to take part of the improved markets, per the report.

This trend has been driven in part by the willingness of some venture firms to invest many times more than the $100 million that used to be the most a firm would invest in a single startup, the report said.

Databricks, a data and artificial intelligence firm, said Dec. 17 that it was raising $10 billion of expected non-dilutive financing in a Series J funding round and had completed $8.6 billion at that point.

The round is “substantially oversubscribed,” Databricks Co-founder and CEO Ali Ghodsi said at the time in a press release.

“These are still the early days of AI,” Ghodsi said. “We are positioning the Databricks Data Intelligence Platform to deliver long-term value for our customers, and our team is committed to helping companies across every industry build data intelligence.”

OpenAI said Oct. 2 that it raised $6.6 billion in funding that valued the company at $157 billion and positioned it to accelerate its mission of developing and deploying AGI for the benefit of humanity.

The ChatGPT creator said it plans to use the new capital to bolster its leadership in frontier AI research, expand computational capacity and enhance its suite of problem-solving tools.

It was reported Jan. 2 that the number of active U.S. venture capital investors has fallen since 2021 as cautious financial institutions shift their money to Silicon Valley’s biggest startups.

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In the latest data from the U.S. Census on business formation, November marked a month of optimism, it seems for retail. At a high level, business applications for tax IDs, adjusted for seasonal variation, reached nearly 449,000 last month. 

Tax IDs are among the first steps in making a business more than a concept. The 449,000 number marks an increase of 5.5% compared to October 2024. Projected business formations, that is, the estimate of new startups that will result from the applications, reached almost 28,000. This is a 3.6% jump over October.

The application gains are a month-over-month increase that has not been seen in about 3½ years.

Retail Leads the Pack

Among industries, retail trade amounted to over 86,000 business applications, a 16% uptick from October. This sector accounted for 19% of all business applications in November, followed by business services (13%) and construction (10%). Overall, applications grew in 18 out of 19 sectors, the exception being mining, which was virtually flat (-0.2%)

Together with business applications, the Census Bureau also provides projections on the likelihood that a business application turns into an employer business and the consequent number of startups that will derive from these applications. This forecast results in a potential 28,000 business for the year following November, 3.6% more than forecast in October.  This is also a multiyear high. Again, retail was the leader here, as projected formations compared to October were up 12%.

Payments Are Keys to Success

Among the considerations for these merchants — whether staying local or whether they intend to cross borders and tap markets internationally — lies payments choice. 

PYMNTS Intelligence found earlier this year that more than two-thirds of consumers said they’d choose their merchants based on the ease and convenience of the shopping experience overall. That includes payment options, which sway the choices of 16% of individuals we surveyed. The urgency of payments optionality — especially in the digital realm — is underscored by the fact that, as recently as October, we found that  70% of consumers consider the availability of their preferred payment method to be very or extremely influential when choosing an online store.

Main Street small businesses recognize the importance of selling online. In a recent dive into the business models of these smaller firms that are the mainstays of the U.S. economy, the data show that 66% of retail trade firms have a website, higher than the overall 57% across all industries that we surveyed. 

Not surprisingly, digital payment modalities are gaining favor. In past coverage, we noted that fewer than 60% of small businesses accept digital wallets. But half of all users, including 78% of Generation Z, would stop patronizing merchants that do not accept this payment method.

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In discussions at the Eurogroup in Luxembourg, finance ministers supported proposals to finance the scale-up of European unicorns, the EIB said in a Monday press release.

“The EIB Group is itself already a Capital Markets Union instrument,” EIB Group President Nadia Calviño said in the release. “The Action Plan discussed with ministers will help European innovators scale up their businesses and contribute to channel savings into productive investments, boost innovation, create jobs and lead Europe toward a more robust growth model, ensuring that European companies born in Europe, stay in Europe.”

One part of the Action Plan calls for the EIB Group to improve market integration for green and digital bonds by continuing to play a leading role in the market through issuance and scaling up bond acquisition, according to the release.

The EIB Group also plans to help “close the financing gap” and keep innovative scale-ups in Europe by scaling up its support for the EU venture capital and private equity markets, the release said.

The third element of the Action Plan involves the EIB Group mobilizing large-scale investments for EU policy priorities, per the release. This could include, for example, working on a financing platform for housing.

These efforts aim to solve the capital markets fragmentation that has been an impediment to European competitiveness and to develop cross-border capital markets that function well, according to the release.

“The EIB Group is uniquely positioned to support the development of a European Savings and Investments Union, as it is the only truly pan-European financial institution, with operations in every member state and every region of the EU,” the release said.

It was reported in April that EU nations need private investments of 650 billion euros (about $706.5 billion) per year through 2030 to shift to renewable energy and a more digital economy.

At the same time, investors currently find the U.S. market to be better organized, less complex and more liquid.

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Data from Carta, a provider of services to private companies, reveals that 254 venture-backed clients went bankrupt in the first quarter of 2024, a rate more than seven times higher than in 2019. Notable casualties include Tally, a financial technology company valued at $855 million, and desk rental company WeWork, which had raised $16 billion in debt and equity.

The rise in startup shutdowns comes as funding for early-stage AI startups slows, leading to concerns of a tech bubble burst.

The Financial Times reports that the funding slowdown is leading to a wave of failures, leaving venture capitalists on the outside looking in. This trend threatens other startups attempting to develop their own AI large language models and raises concerns that VCs cannot compete with Big Tech companies in terms of investment.

The European Business Review argues that the coming wave of AI startup failures is a natural part of the technology’s evolution, clearing the way for innovation and paving the road to broad adoption. The report suggests that the most robust and viable AI companies, those that have identified specific problems and built practical solutions, will continue to thrive. Furthermore, the failures create opportunities for other companies to acquire talent and innovative technology.

However, the report also highlights the limitations of AI, including the difficulty of scaling due to hardware limitations and the need for significant processing power.

The Wall Street Journal adds that many AI startups raised funds on a big vision without tangible examples or detail, leading to a struggle to develop AI large language models.

PYMNTS Intelligence’s research shows that despite big budgets and ambitions, most large companies are struggling to employ AI in meaningful ways, with a significant gap between the perceived potential of AI and its actual application in the corporate world.

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The companies are seeking applications from FinTech startups that meet one or more of the following qualifications: led by a founder who identifies as underrepresented, committed to serving underserved segments in North America, has demonstrated passion and commitment to inclusion, and/or has demonstrated resilience in their paths in the FinTech space, they said in a Monday (Aug. 12) press release.

Applicants must have a minimum viable product and be based in and conduct business within the United States or Canada, according to the release.

Those who are selected for the accelerator program will gain exclusive access to Visa’s network and resources, receive mentorship from industry leaders, and be considered for pilot projects and strategic partnerships with Visa, the release said.

The six-month program will culminate with a showcase at a Plug and Play summit in Silicon Valley in June 2025, per the release.

“We introduced the Visa Inclusive Fintech Accelerator to drive greater innovation and progress by championing diversity,” Vanessa Colella, global head of innovation and digital partnerships at Visa, said in the release. “We are so proud of our first cohort and all they accomplished and are thrilled to begin our search for the program’s second cohort to uplift more diverse FinTech founders and their brilliant ideas.”

The initial cohort of the Visa Inclusive Fintech Accelerator was announced in January and included 21 startups, according to a Jan. 16 press release.

Among the FinTech solutions being developed by these startups were ones for money movement, consumer banking and lending, and social and creators, according to the release.

Also in January, Visa Canada said it would support the entrance of Plug and Play into the Canadian FinTech market, enabling Canadian FinTechs to access Visa’s global network; join exclusive, interactive events; and connect with new partners.

Visa is a founding sponsor of Plug and Play, which is headquartered in Silicon Valley and operates from more than 60 locations on five continents.

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The loan is the second investment of this type FundPark has received this year, Bloomberg reported Monday (June 24).

It comes from HSBC’s $3 billion “new economy” facility, which is focused on technology and healthcare in Hong Kong and mainland China, said Hay Yip, FundPark’s chief strategy officer and chief of staff, per the report.

Most of the loan — $200 million — comes from HSBC, and the remainder comes from other partners. It follows another $250 million loan from senior lender Goldman Sachs and other partners in January.

FundPark provides working capital to companies, primarily small- and medium-sized eCommerce firms in China.

There is a working capital revolution happening now that “is increasingly driven by innovation and made more necessary by the macroeconomic backdrop, particularly for those middle-market firms generating annual revenues between $50 million and $1 billion,” PYMNTS wrote last month.

As more companies seek out and put outside capital to work, they are learning that today’s working capital solutions are offering them the cash flow requirements necessary to meet the day-to-day needs of their businesses, along with the flexibility to scale and thrive in the long term.

“The tightening of monetary policy and inflationary pressures have suddenly made a lot of these corporates realize they need working capital for two reasons,” Chavi Jafa, head of commercial and money movement solutions, Asia Pacific, at Visa, told PYMNTS. “One, for short-term working capital to make sure that they don’t have any operational disturbances. And two, for strategic long-term investments into newer technologies and digital solutions.”

“In a lot of emerging economies, [we are seeing] a leapfrogging of technology and digital-first solutions, and it’s this corporate segment that tends to drive a lot of the growth in digital economization — they need that working capital to invest,” Jafa added.

When compared to traditional working capital solutions that include overdraft facilities and working capital loans, today’s alternative offerings, such as virtual cards, have become increasingly important for organizations in search of sustainable growth.

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