Why AI is an interesting field for VCs investment?

Nowadays, AI seems as a buzzword, however, I believe that it is one of the most important means for evolution of technology, starting from manufacturing and ending on HealthCare.

Why AI? To answer that question, I used a technique called ,,5 WHYs”.

“Just as electricity transformed almost everything 100 years ago, today I actually have a hard time thinking of an industry that I don’t think AI will transform in the next several years.”

Andrew Ng

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1st WHY: AI Startups market

Regarding AI Startups market from 2013 to 2019:

• 3600 AI startups;
• 70+ countries;
• $66B raised by AI Startups;
• 1031 Unique investors;
• 11 Unicorns;

$4,300 M raised most well-funded companies ByteDance from China

+27 deals made by most active investors Google Ventures

Source: CBinsights

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2nd WHY: Data

World population generates more and more Data that is necessary to use AI. In every minute of the day in social media people generate :

• 527,760 photos sent on Snapchat
• 120 professionals on LinkedIN
• 4,146,600 users watch videos on YouTube
• 456,000 tweets are sent on Twitter
• 46,740 photos public on Instagram

Data is the new oil. Without data, the biggest tech companies, such as GAFA (Google, Amazon, Facebook and Apple) would not exist.

Photo by Andrew Neel on Unsplash

3rd WHY: Investments

AI is currently an attractive VCs’ investment — last month SoftBank launched new $108 billion fund investing in A.I. Most important facts:

• Microsoft is investing $1 billion in OpenAI to create brain-like machines;
• The top 100 AI companies have raised $11.7B in equity funding across 367 deals;
• Most well-funded: China-based ByteDance (known as Toutiao) has raised $4.3B so far. It uses artificial intelligence for personalized news recommendations;
• Active investors: Data Collective has backed 14 startups on the list, including Vicarious Systems, Trifacta, and Recursion Pharmaceuticals. Intel Capital has invested in 20 of the startups, followed by GV, which backed 8 companies. Other top investors include The SoftBank Group and Lux Capital;
• AI-focused startups have seen a 14-fold increase since 2000;
• Just 15% of organizations use AI today, however, that number will raise up to 31% by the next year;
• Annual VC investment into US startups developing AI systems has increased 6 times since 2000;
• Worldwide spending on artificial intelligence (AI) systems is predicted to reach $35.8 billion in 2019, an increase of 44.0% over the amount spent in 2018, according to the IDC Worldwide Semiannual Artificial Intelligence Systems Spending Guide.

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4th WHY: GAFA M&A

“The Race For AI: Google, Intel, Apple In A Rush To Grab Artificial Intelligence Startups. Around 42% of the AI companies acquired since 2013 have had VC backing. Big corporations across every industry, from retail to agriculture, are trying to integrate machine learning into their products. At the same time, there is an acute shortage of AI talent.”

Source: CBinsights

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5th WHY: MIT invests in AI

MIT is investing $1 billion in AI college in order to educate more AI developers and researchers, since the demand for these specialists is high. Regarding LinkedIn report, there is a shortage of more than 150k data scientists in the US. MIT also highlights the ethical considerations and criticism regarding AI.

“Importantly, the college isn’t just about training AI skills. Instead, it will focus on what MIT president L. Rafael Reif calls “the bilinguals of the future.” By that, he means students in fields like biology, chemistry, physics, politics, history, and linguistics who also know how to apply machine learning to these disciplines. (Presumably, Reif feels safe borrowing the term “bilingual” because, in the future, AI will be doing all the translation anyway.)”

Photo by Ian Stauffer on Unsplash

Conclusion

To summarize, AI market is very interesting field for VCs to invest in, due to several reasons:

• market growth year to year (1st WHY);
• World-wide generation of more data than ever before (2nd WHY);
• focus on the AI fields by the biggest players like SoftBank (3rd WHY);
• focus on acquiring AI startups by the biggest technology companies like Google, Amazon or Facebook (4th WHY);
• the best technology universities like MIT invest $1 billion to develop AI course (5th WHY)

Now, the biggest challenge for VCs is to understand how and where to use AI effectively.