Given the competition in tech and the maturity of the market, artificial intelligence is finally coming out of the shadows. If AI is driven by investments from tech giants, it’s also driven by very young organisations. Startups have carved themselves out a niche on this new market, and it’s not causing friction with the bigger companies. On the contrary, the number of merger/acquisitions, such as fund raising rounds, are on the up. Scroll down for a detailed account of this growing market.
High increase in buyouts
The venture capital company CB Insight has been looking at the changes in the market since 2013. The results are conclusive: in the first year, 22 merger/acquisitions took place, increasing to 39 in the following period. By 2015, the figure was up to 45. In just four years, the figure has quadrupled: in 2016, 80 merger/acquisitions were recorded. 2017 was the best year to date, with 115 operations recorded.
For an overall picture of the phenomenon, it’s worth knowing that 271 European startups raised funds in 2017 – three times more than in 2015. Startups in AI have certainly got the wind in their sails.
What are the most popular companies and technologies? Right now, it’s machine learning, natural language, and computer vision. Whilst this winning trio is based on the buyouts from the big tech companies, it’s also being seen across all operations.
Google, Apple and Twitter are particularly interested in machine learning and its sub-entity, deep learning. The tech was already of interest to the top search engine in 2013, demonstrated by its acquisition of DNN Research and Deepmind. Apple equipped itself with three specialist startups in 2016, namely Perceptio, Turi and Tupplejump.
So why such a strong interest in machine learning? ML is a quick, efficient and long-lasting way of improving service offers. The market is particularly fond of this solution, as demonstrated by the number of fund raising rounds that have nearly doubled in a year, going from 49 in 2015 to 85 in 2016.
Second place on the winner’s podium goes to natural language. Such success can be explained by the competition between Facebook and Apple for Siri. With three acquisitions each, these technologies have made their way into the ranking. Virtual assistants were increasingly more popular and these operations will probably increase exponentially in 2018.
Third place goes to computer vision. Moodstock was bought by Google in 2016 for a sum of $600m and Zurich Eye is now working for Facebook.
Major players in merger and acquisition
Unsurprisingly, the biggest buyers in 2017 were Google with 14 acquisitions, Apple with 13 buyouts, and Facebook with 6 operations. This trio is ahead of Amazon, Intel, Microsoft, Meltwater et Twitter. How can the interest of these three Californians be explained? Artificial intelligence can respond to a set of strong, shared goals: dominate new uses, improve services and get ahead of the competition. AI is also very useful to them as it represents a lever of growth in data capture and processing, a creative source of value for these companies.
Whilst the most pioneering companies appear at the top of the list, other businesses are slowly joining the race to artificial intelligence. The transport industry is notably dominated by Ford, which bought Argo AI last year for $1bn. The buyout wasn’t a first, however, as the company also bought SAIPS in 2016. Both startups are specialised in the creation of artificial intelligence for driverless cars.
Uber’s VTC also stands out with the acquisition of Geometric Intelligence and Otto, two companies focused solely on driverless cars. As for Salesforce, the business entered the race with the acquisition of 4 startups between 2015 and 2017.
But there are some surprises. General Motors invested more than $150m in the buyout of Bit Stew Systems and Wise.io. These two companies were added to the portfolio to reinforce GM’s proprietary platform, Predix. The aim? To compete with IBM’s Watson in cognitive intelligence. Contrary to perceived ideas, investments don’t automatically fall in line with the core market.
In the domain of artificial intelligence, the future is promising. If we believe in the best VCs, the new players emerging now are concentrated on computer vision and robotic process automation. Amongst the leaders are Nauto (computer vision and predictive analysis for drivers), Zebra Medical Vision (eHealth) and Kyron Systems.
If we go by the latest acquisitions of the top 3, we estimate that 2018 will be marked by an improvement in virtual assistants and natural language. At the end of 2017, Apple bought Init.ai whilst Google bought the Xively tech at the beginning of 2018. As for Facebook, the social media giant is building up the Messenger team with Ozlo, a startup specialised in natural language.