Investment in artificial intelligence startups is on a tear as venture capitalists and corporate investors scramble to stake out a leadership position in what could be the driving trend in technology for decades to come.
The financial interest in AI, machine learning and related technologies is hardly new. CB Insights has tracked some $ 18.4 billion invested in 2,541 AI-related startups since 2012.
But the trend is only accelerating. In the latest MoneyTree report from PricewaterhouseCoopers LLP and CB Insights, which showed otherwise mostly stagnant startup funding, AI and machine learning companies shined, reaching an eight-quarter high of $ 820 million invested in 90 companies.
A flurry of significant investments in a number of AI-related companies this past week underscored the point. On Wednesday alone, for instance, AI-powered analytics software provider CognitiveScale Inc. raised a $ 15 million round, voice AI startup Snips raised $ 13 million and, to top it off, machine learning consultancy Element AI Inc. got an unusually large $ 102 million early-stage investment just eight months after the company was launched. Then on Thursday and Friday, two other AI-powered companies, Conviva Inc. and Codota Ltd., announced fundings too.
«You get these spikes around waves of technology, and people are realizing that AI and machine learning are one of those cresting technologies,» said Matt Murphy, a managing director at the venture capital firm Menlo Ventures. «The science has moved far enough along that it's now ready for practitioner mode.»
In a sense, the term AI has become almost meaningless by now, because nearly all software, cloud and Internet services and apps depend on AI in some way to make their products smarter. «AI is the new electricity,» said former Baidu Inc. Chief Scientist and machine learning guru Andrew Ng .
Some of the pile-on is opportunistic, too. Companies have noticed that the terms themselves are getting more attention in the press, so suddenly there are a lot of website promo video. Five years ago, companies that did business intelligence relabeled themselves as «big data» companies, and now big data companies are refashioning themselves as AI companies. «VCs invest in packs,» said Stuart Frankel, chief executive of Narrative Science Inc., a seven-year-old company that raised $ 11 million in April for its natural language generation services. «There are activities being recharacterized to take advantage of the market opportunity.»
In turn, the investment amounts are getting bigger as competition for deals and a continuing scarcity of talent extracts a premium. That's not necessarily a good thing, because many of the companies have proven neither the technology nor a specific market opportunity. Only in a few years, when those companies look for later-stage financing, will it be apparent whether they have a viable business.
Still, there's no denying that direct investment in AI companies continues to accelerate. It's all driven in turn by the hunger by consumers for smarter devices and apps and by enterprises looking to upgrade their internal operations and create new opportunities to extract value from their data. Although the advances in AI and machine learning are most obvious in services such as image recognition in photo and social media apps and in smartphone voice recognition, enterprises are fully on board too.