When it comes to LLM agents, Y Combinator’s sitting at the top of the investor heap.
Per PitchBook, YC is the leading investor in LLM agents by all-time number of investments. YC has 38 investments to date in the space, a new report says. Sequoia Capital came in second, with its 16 investments in the growing space. Rounding out the top five: Index Ventures, Plug and Play, and Amplify Partners and Pioneer Fund tying for five.
LLM agents aren’t chatbots exactly—you have to communicate with a chatbot in order to complete tasks, whereas an LLM agent is able to complete tasks on its own. (That’s not to say there’s no human oversight for AI agents, just less.) It’s an exceedingly broad and incredibly nascent category in which LLM agent startups can be doing radically different things, from healthcare to financial services. In the trailing 12 months, there have been 156 deals in the space, up 81.4% year over year, the recent PitchBook report shows. Median deal value is also up by 46.9% year over year, to about $3 million. Though there are a few numbers that are down—$8.2 billion in capital invested in the LLM agent space over the trailing twelve months is a 27.2% year-over-year decline—the market is decidedly bullish, said PitchBook emerging technology analyst Ali Javaheri via email.
“The number of Y Combinator investments is worth paying attention to, there’s clearly a lot of interest in this space and there’s a potential for a lot of early-stage startups with bespoke applications or tooling to capture market share,” Javaheri said via email.
In other words, opportunity abounds. And many of these metrics make a whole lot of sense when you consider that many of the buzziest AI startups in one way or another fall into the LLM agent category as defined by PitchBook. OpenAI fits into this group, as do Cohere (valued in July at $5.5 billion) and Adept (which in June struck an ‘acqui-hire’ deal with Amazon).
PitchBook also outlines the sectors where LLM agents are likely to see application, including software development, marketing, legal services, education, and (yes) customer service. And there are no shortage of noteworthy companies falling into these buckets, from coding-focused startup Cognition (in April valued at $2 billion) and legal AI startup Harvey (in July valued at $1.5 billion).
But while LLM agents are set up to improve efficiencies in all kinds of use cases and industries, they also have limitations, says Javaheri.
“The biggest limitation is the lack of reliability in handling complex tasks due to errors in planning and tool usage, which reduces their success rates,” he told Fortune via email. “Improving robustness through retries and multi-agent systems will be key to overcoming these challenges.”
I guess my question really is: How far can this go? It seems likely that LLM agents are going to be indefinitely part of our lives in some way, but it’s early days for what that will look like. And I think it’s going to test something that I’ve wondered about a lot: What tasks will we be comfortable outsourcing to LLM agents? For my part, I’m happy to use the LLM’s help booking a flight, but if I’m experiencing credit card fraud, I want to speak to a human.
And I suspect many of you out there have a different answer to this question, and I’d be curious to hear it.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Nina Ajemian curated the deals section of today’s newsletter.
VENTURE DEALS
- Twelve, a Berkeley, Calif.-based carbon transformation company, raised $200 million in Series C funding. TPG Rise Climate led the round and was joined by Capricorn Investment Group, Pulse Fund, Fifth Wall, existing investors DCVC, Munich Re Ventures, Emerson Collective, and others. Twelve also raised $400 million in funding from TPG Rise Climate.
- finally, a Miami, Fla.-based AI-powered finance and HR platform, raised $50 million in Series B funding from PeakSpan Capital.
- Pyka, an Alameda, Calif.-based electric aviation technology company, raised $40 million in Series B funding. Obvious Ventures led the round and was joined by Piva Capital, Prelude Ventures, Metaplanet Holdings, Y Combinator, and others.
- Motion, a Toronto, Canada-based advertising analytics company, raised $30 million in Series B funding. Inovia led the round and was joined by Threshold Ventures and existing investors Headline, Abstract Ventures, and Sugar Capital.
- Arcade, a San Francisco, Calif.-based generative AI marketplace, raised $17 million in funding. Reid Hoffman and Brit Morin led a $5 million round and were joined by Heretic Ventures. Arcade raised an additional $5 million in funding from Ashton Kutcher. Other investors participated in the funding.
- FluoRok, an Oxford, England-based fluorochemical manufacturing and licensing company, raised £7.7 million ($10.3 million) in funding. BGF led the round and was joined by Green Generation Fund, Volta Energy Technologies, Excellis Holding, existing investors Oxford Science Enterprises and University of Oxford, and angel investors.
- Letta, a San Francisco, Calif.-based AI memory systems developer, raised $10 million in seed funding. Felicis led the round and was joined by Sunflower Capital, Essence VC, and angel investors.
- Ayrton Energy, a Calgary, Canada-based liquid organic hydrogen carrier technology developer, raised $6.8 million in seed funding. Clean Energy Ventures and BDC Capital led the round and were joined by Antares Ventures, EPS Ventures, SOSV, and others.
- GenLogs, a Washington D.C.-based freight tracking technology developer, raised $6 million in seed funding. Autotech Ventures and Steel Atlas led the round and were joined by Venture53, TitletownTech, Plug and Play Ventures, and others.
- Reframe, a New York City-based desktop computing platform, raised $5 million in seed funding. Primary Venture Partners and Eniac Ventures led the round and were joined by Founder Collective and Operator Partners.
- Phacet, a Paris, France-based AI solutions provider for businesses, raised €4 million ($4.5 million) in seed funding from Motier Ventures, Aglaé Ventures, Emblem, angel investors, and others.
- Karman Industries, a Long Beach, Calif.-based electric industrial thermal energy technology developer, raised $4 million in pre-seed funding. Riot Ventures led the round and was joined by Space VC.
- Cariqa, a Berlin, Germany-based EV charging marketplace, raised €1 million ($1.1 million) in pre-seed funding from Anthemis, Vento Ventures, Hatcher+, and others.
PRIVATE EQUITY
- Vista Equity Partners acquired a majority stake in Gnosis Freight, a Charleston, S.C.-based supply chain platform for shipping containers. Financial terms were not disclosed.
- ZEMA Global Data Corporation, backed by FTV Capital, agreed to acquire Morningstar Commodity Data, a Chicago, Ill.-based commodities and energy data and insights provider. Financial terms were not disclosed.
IPOS
- StandardAero, a Scottsdale, Ariz.-based aerospace engine aftermarket services provider, plans to raise $1.1 billion in an offering of 46.5 million shares priced between $20 to $23 on the NYSE. The company posted $4.8 billion in revenue for the year ending June 30, 2024. Carlyle backs the company.
FUNDS + FUNDS OF FUNDS
- KKR, a New York City-based private equity firm, raised $4.6 billion for its new fund focused on middle market consumer, financial services, health care, industrials, media, software and tech-enabled services companies.
- Miura Partners, a Barcelona, Spain-based private equity firm, raised €475 million ($528.9 million) for its fourth fund focused on healthcare, education, business services, consumer goods and industrial niches.
- Heritage Holding, Boston, Mass.-based private equity firm, raised $220 million for its first fund focused on business services, healthcare, technology, telecom & IT services, industrial services and special situations industries.
- Pangaea Ventures, a Vancouver, Canada-based venture capital firm, raised $85 million for its fifth fund focused on materials science, chemistry, and biology hard tech companies.
PEOPLE
- Bridge Growth Partners, a New York City-based private equity firm, added Howard Elias as a senior advisor. Previously, he was at Dell Technologies.
