Record Number of VC Funds Target AI
Roughly 550 startups whose core activity is artificial intelligence attracted over $5 billion in venture capital funding in 2016, a report by CB Insights reads. It appears that AI startups will receive the lion’s share of VC funding in the next years judging by the rate of growth of VC financing in this tech industry segment. During the time of 2012 to 2016, the number of deals rose from 160 to 658 a year while funding hit a record high of $5.02 billion last year as compared to just $589 million in 2012.
(Image Source: CB Insights)
The chance is good that if you are an AI startup backed by an accelerator or incubator, you are looking for VC funding and eventual IPO as well. VC investors are more than willing to pour their money into promising AI and machine learning companies and there are funds specializing even in backing startups that already enjoy growing customer base and have firmly set their foot in the market.
Corporate VC Funds Trail Other Investors
It also appears that AI-focused venture capital investors have higher risk tolerance compared to other VC funds which are already more selective when investing in tech startups. Nonetheless, every large company seems to have set aside funds to invest in AI – from Toyota to Google to Salesforce among many others. On the other hand, the most active VC investors are not exactly funds set up by large corporations but VC vehicles that specialize in innovative tech. Facebook and Microsoft, for example are not on the list of the most active investors in AI through their respective VC funds.
MOST ACTIVE VC INVESTORS 2012-2016 (Excluding robotics and AR/VR)
New Enterprise Associates
Plug and Play Ventures
General Catalyst Partners
Norwest Venture Partners
Bessemer Venture Partners
First Round Capital
(Source: CB Insights)
Machine learning technologies, smart robots, natural language processing, and computer vision platforms attract most of the total VC funding for companies working in the AI field. Other promising technologies in which VC funds are investing include recommendation engines, virtual assistants, computer vision apps, speech recognition, and gesture control. Categories such as context aware computing, video content recognition, and speech-to-speech translation get the smallest portion of investments.
(Image Source: Venture Scanner)
The Average AI Fund Has Dozens of Startups on Its Portfolio
Let’s return to the most active VC investors in AI.
- Data Collective has a portfolio comprising over 160 companies.
- Intel Capital currently invests in some 38 companies working in the field of AI.
- Khosla Ventures have a diversified portfolio covering various tech categories.
- New Enterprise Associates boasts active portfolio of over 300 growing businesses in the technology and healthcare sectors. Over 210 NEA-backed companies have gone public.
- Google Ventures have invested in nine AI startups so far with Cloudera being the most prominent one.
- Andreessen Horowitz invests in companies covering the entire spectrum of innovative technologies, AI including.
- Accel Partners have invested in some five AI companies but the number will grow over time.
- SV Angel have not disclosed their portfolio on their official site.
- Slack Fund. Once a startup themselves, Slack now run a fund designed to support teams building products on top of Slack.
- Plug and Play Ventures is investing from $25,000 to $500,000 into over 100 ground-breaking companies every year.
- Horizons Ventures have invested in a total of 81 companies, some of them AI startups.
- General Catalyst Partners have managed to date some $3.75 billion in funds invested through eight investment vehicles.
- Norwest Venture Partners have about 110 active tech companies on their portfolio.
- Bessemer Venture Partners are investing amounts ranging from $100,000 to $75 million in innovative companies. Some 117 startups backed by BVP have placed an IPO.
- First Round Capital usually invest from $500,000 to $750,000 in a single startup while their follow-on capital makes 74 percent of the total investment funds at their disposal.
- 500 Startups will provide $150,000 in seed funding in exchange for 6% of equity.
- Bloomberg Beta have $150 million under management through two investment funds amounting to $75 million each.
- FundersClub have invested in about 260 startups with their portfolio being valued at over $7 billion.
As we've discussed, these are some of most active VC investors in AI at the moment. However, many other VC funds are eager to invest in your AI startup whether at an early stage or as growth funding.
The last article of this AI funding series will discuss whether you really need VC or accelerator backing to nurture an AI startup. Bootstrapping is a viable option especially when complemented by some underrated resources that can help you grow your startup.
By Kiril V. Kirilov