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Artificial Intelligence in London, Top 20 Startups
COVID-19 and China
London skyline. Image credit: Pete Linforth/Pixabay

In terms of technology, AI integrates multiple scientific disciplines including mathematics, computer science, information tech, linguistics, psychology and so on. From the beginning of the 2010s, big data and AI have been trending up to unleash revolutionary changes in many industries. Universities have set up data science programs and investors are pouring tons of dollars into AI-related startups.

The US and China have long been the focus of AI development as these two countries have the most AI unicorns and investment activities. Among the top 20 most valuable AI unicorns, the US takes 9 and China takes 7 while the UK and Japan take 3 and 1 respectively. While the US and China outshine the rest in a global scale, the UK is the supernova in Europe, acting as the womb of the most regional AI startups. AlphaGo’s maker – one of the most famous AI game players – DeepMind, which was acquired by Google, was founded in the city in 2010. The London-based company represents one of the highest levels of AI worldwide.

At of the end of 2019, over 4,500 investment activities in Europe were disclosed in total and 1,589 of them landed in the UK. Most European AI startups find their home in the west part of the continent, and the UK, France and Germany are named the most favorable countries for AI startups in this region.

AI-related investments in the UK represented nearly 1/3 of the total deal count in Europe. London, Bristol and Cambridge together make the UK the wealthiest land for AI startups since it has attracted a total funding value of USD 4.5 billion. Adding up to USD 3.3 billion, London contributed nearly 75% of the total AI investment money flushed into the country.

In 2019, the AI sector encountered an investment recession worldwide thanks to declining investment frequency. However, the total deal value of related investments tells an opposite story. For London, 2019’s investment deal count for AI dropped to 180 from 2018’s 233, but the aggregated value piled up to USD 1,511 million from USD 649 million.

The nearly tripled total was pumped up by Babylon Health’s Series C financing series of USD 550 million, recorded in the third quarter of 2019. The increase in total deal value can also be attributed to the weight of financing activities shifted to medium and late stage. In 2014, 76% financing rounds were at seed/angel stage but the percentage dropped to 54% in 2019, while the weight of Series A, B and C rounds increased from 12% to 32% during the same period. The shifting-to-later-stage investment pattern reveals a healthy trend: companies that received seed or angel investment years ago made their way to become Series C players.

EqualOcean used the Crunchbase database to compile a list of AI startups which have raised more than USD 120 million in funding. Enterprise Services and Healthcare put the most companies on the map, followed by Financial Services, Security and other sectors. Babylon Health, the online health information service provider, is the most funded AI unicorn among all.

In 2018, healthcare expenditure in the UK took up to 9.8% of the total GDP while China reached 5% and the US 16.9%, as recorded by OECD. The demand of healthcare services yields business opportunities for AI startups as well. In the top 20 most-funded unicorns, 5 of them are from the broad-healthcare field: they provide services for healthcare institutes, patients, labs, or biopharma R&D.

Enterprise services is another big chunk for AI applications in the top 20 list. Companies in this sector either provide customer solutions or marketing strategies using machine learning and employ big data to develop the platform or software for clients.

While China’s AI companies, like SenseTime (商汤科技) and CloudWalk (云从科技), are well-developed in the public security area, security is not the major field for European counterparts. Indeed, security-related AI techs heavily adopt computer vision tech, which is the foundation of facial recognition. The technology has long been a disputed topic because of privacy concerns. The European Union proposed this month banning the use of facial recognition in public spaces.

The two security-related companies in the top 20 list are Tessian and Onfido. Tessian eyes on the enterprise cybersecurity while Onfido intends to secure the personal ID use in the digital world. As cloud services spread over the world, increasing internet interactions bring potential risks to both the business world and daily life. In the Global Risks Report 2019 by World Economic Forum, "Data fraud or theft" and "Cyberattacks" were listed in top 5 global risks in terms of likelihood.

To sum up, AI sectors in London thrived in enterprise services and healthcare areas, looking at the deal value of investments. Surprisingly, computer-vision-related AI companies like those dedicated in autonomous driving and public security are less popular than in China or the US – and political risks attached to such technologies might be concerns for founders aiming to start businesses in Europe.

As more AI companies are entering Series B or C financing rounds, the shrunken seed and angel investments indicate that new players in this area are less attractive to investors and the difficulty in founding a new business is emphasized. Since AI prevailed in the 2010s, people are seeking more real returns from data science breakthroughs related to deep learning.

Editor: Luke Sheehan
ANALYST
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