Corporate AI Venturing Booms

By Kaloyan Andonov and Toby Lewis, GCV Analytics

There are few areas generating more buzz than artificial intelligence at present. This in turn is driving a boom in corporate venturing in the sector. Since 2011 funding rounds of AI startups with corporate participants have increased significantly from merely a couple per year to over twenty back in 2014. The capital committed in such deals has also significantly increased – from $27m in 2011 to over $280m in 2015.

The top corporate investors in AI startups are Bloomberg Beta, GV, and Rakuten Ventures, holding four or five AI companies in their portfolio each. Others like Intel Capital, Qualcomm Ventures, Tencent, Softbank Capital and Comcast Ventures have also acquired stakes in such emerging enterprises. In-Q-Tel, the venturing arm of the CIA, is among the major government-related investors in the field.

The largest deals backed by corporates in AI have been China-based healthcare analytics company iCarbonX raising RMB1bn ($154m) in a series A round led by internet company Tencent. The round also included biotechnology producer Vcanbio Cell & Gene Engineering Corporation.

Other businesses to have raised large rounds from corporates include US-based Sentient Technologies, which secured $103.5m in a series C round co-led by US-based conglomerate Access Industries and Tata Communications, a subsidiary of India-based conglomerate Tata,and Fractal Analytics, an India-based analytics provider backed by loyalty and marketing analytics firm Aimia, which secured an investment of up to $100m from Malaysia’s sovereign wealth fund, Khazanah Nasional Berhad.

Other big bets in the sector include US-based machine intelligence software provider Ayasdi, backed by Citi Ventures, the venturing unit of the US-based bank, and GE Ventures, the venturing unit of the US-based industrial conglomerate.

Specific trends are tending to drive the biggest investments in the sector. Innovations in Machine learning/Deep learning and Virtual Personal Assistants make up 60% of all corporate-backed AI venture capital deals.

To an extent the sector’s scale is less well understood than others. About 30% of AI-related corporate-backed deals go undisclosed. This percentage is higher than the average number of undisclosed deals across all industries, which is about 20%.

Most of the funding rounds that are disclosed or partially disclosed tend to be Series A, B and C, indicating the sector is still likely to raise even bigger sums at the later stage. In a more general point, artificial intelligence is beginning to enthuse the business models of all types of start-up development, and so every venture capital firm and corporate venturing unit is taking a keen interest in the sector, even if they are not investing directly in specific companies.