US venture capital deal value in artificial intelligence booms to $6 billion

06 September 2018 Authored by Consulting.us

A new report from Drake Star Partners reveals that venture capital investment in the US AI industry has grown to $6 billion in 2017. Meanwhile, global investment in AI companies grew to over $12 billion, with heavy interest from tech corporations Google and Intel, and their related VC funds.

Artificial Intelligence is slated to revolutionize multiple facets of human society, from the way we get around (automated vehicles), how companies interact with customers (advanced chatbots), and how we work (machine learning factory robots and routine back office processes bots). There is already AI tech available that can do routine and repetitive tasks better than humans, and can learn and self-improve. But AI can go further than that. While AI can assist surgeons to do their jobs better today, there may be a future where super-precise surgical bots perform operations themselves. Artificial intelligence has the potential to replace more jobs than people expect, depending on the pace of technological advancement (and human reticence).

The revolutionary field is attracting the investment of heavy-hitting tech firms and VC funds who are looking to be on the vanguard of the productivity game changer. According to a new Artificial Intelligence Industry Update from global boutique investment bank Drake Star Partners, the global AI industry has received over $24 billion in investments over the past three years – with over half that value invested in 2017 alone. The US saw $6 billion in deal value in 2017, with a deal volume of 600. Investment in the US AI sector has strongly picked up its pace since 2012, when deal value was under $1 billion.US Venture activity in AIThe Drake Star report reveals that the most active VC funds in the space are Data Collective, Khosla Ventures, Intel Capital, New Enterprise Associates, Google Ventures, and Bloomberg Beta. Intel Capital has invested in (or acquired) dozens of AI firms, including Razer, CubeWorks, and Perfant, while Google Ventures has invested in firms ranging from Building Robotics to Zephyr Inc. Meanwhile, Bloomberg Beta has invested in firms like Deep Genomics and Aviso.

The most active corporate buyers in the space included tech heavyweights Google, Apple, Intel, IBM, Salesforce, and Facebook. In the past two years, Google bought Allmatter, Halli Labs, Kaggle, Dialogflow, Api.ai, and Moodstocks; Apple acquired Regaind, Lattice, RealFace, tuplejump, Turi, and Emotient; Intel bought XPS; Saleforce bought Coolan, MetaMind, and TappingStone; and Facebook bought Dreambit and FacioMetrics.

Venture capital investment in AI is booming as the projected revenue of AI companies is set to skyrocket. The report estimates a dizzying compound annual growth rate of 39.5% from 2016 to 2025 for the global AI market. From a total global revenue of $4.82 billion last year, AI companies are expected to post revenues of $37.99 billion in 2022, and $89.85 billion in 2025.Project Revenue of AI companies, globally“As AI becomes more advanced and more accessible to consumers, its demand and revenue are expected to increase drastically,” stated the report, co-authored by Drake Star CEO Greg Bedrosian and AVP Lyle Finkler. “Technology is shifting where companies now utilize the AI technologies of machine learning, deep learning, or augmented reality. As AI becomes more mainstream, its cost goes down and, therefore, its accessibility to the broader marketplace increases.”

Adoption and awareness of AI is growing, though insider surveys indicate the technology is some distance away from human-level machine intelligence. As such, AI is being adopted in a multi-tiered approach, with different-level capabilities as they become available: a customer service chatbot is still far off from the goal of a human-level machine AI. The report combined a number of relevant surveys to give a rough guess of how far off the technology is from full-human intelligence, with the guesstimates of 2022 for 10% human level intelligence, 2040 for 50%, and 2075 for 90%.

A key reason why investment in AI is booming is because of its potentially massive implications on worldwide GDP and productivity. The Drake Star report projects that China will gain 26.1% GDP growth due to AI by 2030 (or $7 trillion in GDP), while North America will gain 14.5% (3.7 trillion in GDP).Impact of future AI on worldwide GDPs in 2030Inevitably, the question comes to how many jobs could be lost from AI technology. An OECD report projects that about 14% of jobs are easily automatable, accounting for about 13 million US jobs. On the other hand, Bain & Company estimates up to 25% lost jobs in the US by 2030 due to automation. Other consulting firms give rosier pictures, but really, it’s hard to predict how many jobs will be lost because analysts don’t accurately know how far or how fast the technology will advance. That’s why various consulting firm estimates are all over the place – perhaps partly influenced by whether they want to craft an optimistic narrative or not. These are the kind of projections, after all, that terrify people and cause anxious governments to ponder basic universal income.

As the AI industry matures, the Drake Star AI report offers a few trends to look out for. The firm expects more verticalization of AI – like specific applications for healthcare, energy, etc. – as investors increasingly seek out firms that offer direct applications for their markets. Furthermore, Deep AI companies will continue to be the most valued firms, as finding teams of PhD-level researchers will remain difficult.

Meanwhile, mobile devices will field consumer-facing AI – as the iPhone X will come equipped with hardware to power machine learning algorithms in their Face ID, Animoji, and augmented reality apps. Finally, the report expects AI applications in VR to become more publicized as the platforms Magic Leap and Oculus Rift are released this year.

News