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AI “Start-Ups” Will Raise More Funds in 2017 Than The Last 10 Years Combined

As you know, there’s a ton of “AI Overhype” in the media these days. Is it just a bunch of blah blah chasing the new new thing?  Don’t follow the words, follow the money.

2017 is the year AI start-up funding exploded, but not in the way you may think. 

Take a look at this chart from Venture Scanner.  Extrapolating out the July 2017 numbers, we’re looking at $13-14B of funding this year: 3 to 4x leap from last year and way more than the ~$10M raised 2007-2016.

content_ai_q3_2017_funding_by_year.jpg

Now, here’s where it gets interesting – take a look at this funding, but by the year the company was founded.  More than 50% goes to more established, already-successful companies started between 2010-2014 (back when AI was still mostly an academic R&D project).

content_ai_q3_2017_vintage_year_funding.jpgYou may ask, “maybe there was a couple of mega-deals that skews the data?” Nope. 25 solid start-ups with $50M+ raised (see the list below). You’ve got key-making kiosks using AI to “think like locksmiths.” And you’ve got digital lenders using AI to analyze 10,000 data points beyond a simple credit score.  The Class of 2012 represents a great portfolio operating in diverse industries ripe for disruption.

My guess is that none of these entrepreneurs in 2012 set out to build an “AI start-up;” they simply built great data-driven businesses. And with great data, they could easily “add on” AI. As such, we can say that 2017 is the year AI start-up funding exploded; however, most of it went to “older” data-driven start-ups.

 

3 questions come to mind:

  1. Like AI, what technologies are under the radar today but will be “over the radar” in 5 years? Some say it’s quantum computing.
  2. Is 2017 the beginning or the end of the hockey stick growth pattern?
  3. The sexy AI-first companies get all the attention. AI-second companies already have scale, cash flow, data, and living, working applications. Why wouldn’t we look more at the huge potential impact of these companies first?

Final notes to myself:

  • Is it funny to anyone else that these companies are counted as AI Start-Ups?  You could argue that they’re neither AI-first nor a start-up ;).
  • As I go forward digging into all this, I’ll try to be clear about whether a company is using AI as a platform (I’ll call it AI-first) or AI as a product (AI-second?).

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2 thoughts on “AI “Start-Ups” Will Raise More Funds in 2017 Than The Last 10 Years Combined Leave a comment

  1. Really interesting stuff, excited to see what else you find from your research. Right now in the video industry AR and VR are the hot button words, wonder how much cross over there is between these industries.

What do you think?