Q3 2020 Deep Dive on the Artificial Intelligence (“AI”) Sector from the Eyes of an International Investor
We are pleased to present the latest installment in our series of industry deep dives, following our Foodtech, Industrial Tech, Wellbeing, Digital Health, Future of Work and Fintech reviews. In our Artificial Intelligence Report, we explore how AI has evolved to become a technology that is ubiquitous across industries and identify the key players shaping the sector. We also share our views on the potential impact of AI on a broad array of use cases and discuss where we see the technology as particularly well suited to disrupt traditional value chains and business processes.
At White Star Capital, our AI-enabled portfolio companies includes startups such as KeyMe, a company that bridges the physical and digital worlds to offer a convenient way to copy keys; Meero, the world’s leading managed marketplace for professional photography; Red Sift, an open platform that allows for deployment of self-service autonomous applications for cybersecurity; Mindsay, a SaaS company developing an AI-powered assistant that helps companies in large B2C-oriented industries, such as travel and retail, optimize customer support and increase customer conversion; and Mnubo, which provides big data and analytics for the Internet of Things (acquired by AspenTech in July 2019).
Today, most experts agree that AI and related technology systems will enhance human capabilities and empower them over the next 10 years. Pre-prints and scientific papers on AI have grown by a factor of 4x between 2014 and 2018. The number of AI projects undertaken by organisations is expected to more than double every year through 2022¹. Key advances such as federated learning and reinforcement learning are showing great promise and techniques such as neural architecture search are playing a key role in making machine learning available to the masses. Once a buzzword, AI is now on the roadmap of most tech-oriented businesses, and we believe that this growth in importance over the last few years is mainly due to 3 catalysts:
- The significant growth in the amount of data created and stored — around 40 trillion gigabytes of data (40 zettabytes) are currently populating the digital universe vs 1.2 zettabytes in 2010 (a 33x increase)²
- The increased computation capabilities of processing units — computation cost fell from $1.80 per GFLOPS3 in 2011 to $0.03 in 2020 (a 98% decrease)³
- The increasingly digital nature of businesses, regardless of sector of operation
While AI is now an established and highly sought after sector, we believe that we are still in the early innings of the space. New opportunities are arising with the development of emerging frameworks, advances in hardware and an increasing number of use cases enabled by structural shifts such as the industry 4.0 and the digitization of everything, a phenomenon accelerated by the COVID-19 pandemic. Some highlights from our report include:
- Funding in AI has grown 40% YoY since 2011 as AI use cases gained in adoption across most industries, with North America and Asia leading from a deal value perspective
- There are now 69 VC-backed unicorns globally with the vast majority being spread across the US and China. Europe on the other hand has attracted a growing level of funding, and is now home to 5 new AI unicorns since 2019
- Globally, the AI ecosystem is maturing with the US and China showing sustained growth in funding for deals at the Series B stage and beyond, and Europe seeing an uptick in numbers of mega rounds
- Valuations have been growing at an impressive pace across the globe, with Asia seeing the steepest increase, especially at the Seed and Series A stages, while Europe valuations in the AI ecosystem are between 50% and 70% lower than the rest of the world
While we are still far from artificial general intelligence and artificial super intelligence, numerous narrow AI use cases already have had a profound economical and societal impact on the world. At White Star Capital, we believe that the Age of AI is now and look forward to continuing supporting the companies building it.
Please have a read and share widely!
If you have any questions or feedback on our report, or are an entrepreneur building an AI-enabled solution, please email email@example.com
About White Star Capital
White Star Capital is a global multi-stage technology investment platform that invests in exceptional entrepreneurs building ambitious, international businesses. Operating out of New York, London, Paris, Montreal, Toronto, Tokyo, and Hong Kong, our presence, perspective, and people enable us to partner closely with our Founders to help them scale internationally from Series A onwards.
Note: While AI is a technology, the appellation sector is employed throughout the report for aggregation purposes. This nomenclature englobes companies that are using AI in a meaningful enough way to represent this characteristic as a primary defining element of their business operations