AI Startup Funding Experiences 592% in Growth
Q2 was a record quarter for Artificial Intelligence startups. AI companies raised $7.4 billion in funding, up from $5.2 billion in Q1. Investors continue to show faith for AI startups in Q3, including a $100 million in funding for Scale AI and $51 will for Uniphore. Scale AI and Uniphore are only 2 of 488 artificial intelligence who received funding in Q2.
The Unicorn Track
Scale AI, a startup launched in 2016, is one of the companies who had a stellar funding round. With its $100 million Series C, Bloomberg predicts Scale AI will become a Unicorn, with a valuation of more than one $1 billion, within the year. The company focuses on labeling datasets that can be used to train other AI system, Lyft and Waymo are two of their biggest customers.
Uniphore and its $51 million Series C funding are focused on changing the way the call centers operate. Despite the years of focus on Customer Satisfaction (CSAT), Customer Experience (CX), the world of call centers has been slow to use AI except for the occasional chatbot. Uniphore wants to change all of that, by using AI to audit call quality and use the data to create proactive approaches to improving CSAT.
Yet there is still room for even more growth.
AI funding has grown 592% in the last four years. Q1’15, AI funding topped out at only $1 billion. Investing in AI didn’t start to take off until 2016 when AI technology began to make significant improvements in the area of machine learning. Before that, the idea of AI was a bit of a gamble, with investors crossing their fingers that the hype would live up to the claims. Because of this, we’re now seeing a majority of AI startups in late-stage funding rounds.
KPMG, in its Q2 Report, feels the same way. “Artificial intelligence and machine learning is not necessarily new conceptually. However, only in the past decade or so have advances in computing begun to yield significant advantages to harnessing the power of intelligent algorithms in automating key processes…the field is appealing enough it has not yet dissuaded VCs from pouring more money into it, and maintaining a healthy clip of dealmaking thus far in 2019.”
Beware of Imposters
The term AI has become such a buzzword in the VC and tech world, that there’s been an influx of startups claiming to be AI companies when they’re implementing little to no AI in their products. It’s a tricky time where anyone using an algorithm can claim to be an AI startup.
Will this overuse of AI as a catchphrase scare investors off? The growth in Q2 and in to-date in Q3 indicates no. Investors may become more diligent in performing research into what companies will reap the reward. Robert Downey Jr.’s firm, Downey Ventures, is gaining a reputation in the business for sending large teams into startups to perform a full audit and investigation before investing. The AI life insurance company, Ethos, joked that there weren’t enough chairs in their offices for Downey’s team.
The year of 2019 will be a year mature growth when it comes to AI funding. With companies continually creating technology breakthroughs that weren’t possible just three years ago, and funders investing more significant amounts in proven AI companies.
Look for Q3 funding to surpass Q2’s $7.4 billion.