USD 18 Billion Rush Into Artificial Intelligence Startups By July 31, 2019
Overall VC funding amount is shrinking worldwide this year. How does the "capital winter" affect AI-related sectors?
It has been 13 years since Geoffrey Hinton jointly published a thesis with his colleagues introducing his great breakthrough - a new neural network algorithm called “deep learning”. Before that, the research of neural networks was once thought of the fraud, because millions of expenditures from governments and private companies supporting such research programs resulted in nothing paying back.
Such progress leads to the fast-growing and booming of artificial intelligence in multiple industries, with thousands of AI startups towering and becoming unicorns. AI is widely regarded as a new tech revolution in the 21st century that probably subverts the traditional production procedures and human’s daily life as the internet did. The global business value derived from artificial intelligence (AI) was projected to total USD 1.2 trillion in 2018, according to Gartner.
The concept of AI revives and becomes a hot-button target in the investment market, which potentially carries tenth times return in the future. It is reported by Wuzhen institute, a Chinese non-profit research company, that 15,916 AI enterprises in the world have emerged attracting investment around USD 78.48 billion by the end of 2018, in which the U.S., China and the U.K. rank top three.
However, bubbles are likely to blow up when the global economy declines. There’s a wide-spread saying that 2019 is a watershed of AI investment market that many companies have to go through a tough period owing to the difficulty of fundraising.
What’s the truth?
We choose Crunchbase to be the data source and explore the market situation in 2019. The results are as below:
1,258 AI-related deals happened in 2019, as of July 31, in a total of an amount of USD 18.07 billion. Considering the deferred updates, the number of deals must be more than that – today is the fifth day since July 31.
1,957 AI-related deals happened in the same period of 2018, in a total of an amount of USD 12.13 billion.
While the number of AI-related deals decreased in 2019 compared with a year before, the amount of the total investments is a 1.4-times jump. We can’t tell the AI investment market started to shrink in this year, but the truth is that capitals tend to gather in more promising tech companies and the average funding amount is up.
Which markets are exuberant?
Unsurprisingly, the U.S., China, and the U.K. are still three leading markets as mentioned above, but the order changes in 2019. The U.S. ranks first, as expected, with 488 deals. However, the U.K. climbs to second place with 131 deals, leaving China behind, where 111 deals occurred. The followers include Canada, Germany, France, India, Switzerland, Spain, and Sweden.
Among the top 10 active investment markets, China and India are unique in terms of GNI (Gross National Income) per capita: The number in China and India is USD 9,470 and USD 2,020 respectively, while the other eight countries’ number is almost above USD 40,000, which is four times of China and 20 times of India. Why?
China and India are benefit from massive domestic consumption markets supporting by over 1.3 billion population. And the governments of the two countries fiercely promote AI development by providing preferential policy and capital support. Besides, after years of growth, China and India have built up solid industrial infrastructures and nurtured a bunch of technical talents.
Moreover, venture capital companies are optimistic about the cutting-edge technology and helped many tech startups survive in their very beginning when they faced with such intense competition. Even in 2019, a period to be considered as “Capital Winter”, venture capital companies are also confident with new-born AI companies. Among 1,258 deals, 66% are in the early stage (Seed – Series A), in which 43% are in the Seed round.
Who are the superstars?
Counting the deal size merely, we make a list of Top 50 dealmakers in AI investment in the world by the end of July 31, 2019, showed below. Among the 50 dealmakers, 25 from the U.S., 13 from China, 5 from France and 3 from the U.K. The deal amount ranges from USD 40 million to USD 750 million.
Three Chinese enterprises rank the top three absorbing millions of dollars. The top one Megvii, a Chinese facial recognition leading company, dramatically raised USD 750 million in its Series D round of financing in May. The five-year-old company had planned to go public in Nasdaq or NYSE, giving up eventually because the trade war between the two global economic titans escalated. Currently, Megvii is preparing an initial public offering in Hong Kong, according to the people familiar with the matter.
Horizon Robotics, a Beijing-based AI chips designer, closed D series funding of USD 750 million in January. The three-year-old company designs AI chips for autonomous vehicles, smart retail stores, surveillance equipment, and other devices. Yu Kai, former Head of Baidu Institute of Deep Learning and an early developer of Baidu’s autonomous driving program, laid out the largest scale deep learning accelerator.
MiningLamp, a big data solutions provider, raised USD 297.3 million in its Series D round of financing, led by Chinese internet giant Tencent. The company combines the deep learning algorithm with graph knowledge aiming at realizing cognitive intelligence. The CEO, Wu Minghui, founded his first company “Miaozhen Systems” when he was studying in the Peking University, and Miaozhen Systems has grown to be one of the leading marketing data and technology solution provider in China.
We also make a list to show the top 20 active investment companies by the number of deals as below. The top one, Y Combinator, mainly provides seed funding for startups and participated in 25 AI-related deals by July 31, 2019. Last October, Y Combinator officially entered the Chinese market with the registered name “YC China” and setting its office in Beijing. Lu Qi, the formal vice president of Yahoo and formal president of Baidu, joined in YC China as chief executive officer.
SOSV, ranking the second, is a multi-stage venture capital investment company. SOSV has funded over 700 startups to date. In the past seven years, the company invested in 19 AI startups. The third one Plug and Play has the same investment performance as SOSV. Plug and Play is an early-stage investor focusing on great teams leading emerging growth companies. Except for investment business, the company also runs accelerator programs to ensure that their startups and corporate partners make the most meaningful connections for their business.
Startups are defined as companies that were founded within less than 10 years dated the time being evaluated and are not publicly traded.
Only regular funding series such us angel, seed, and Series A through pre-IPO are taken into consideration. No initial public offering, debt financing, crowdfunding or other types of financing activity be analyzed.
Data only contains disclosed financing series and hence, the actual financing volume may be greater. The deviation from the real investment will not affect the conclusions made above.
2019 World Innovators Meet (WIM2019) will be held in Beijing on December 6-8 with a true sophisticated AI/IoT Forum.
Check out here to join and keep up with the AI heavyweights from China!