AI Unicorns

and the Third Wave of AI Startups

Since 2014 we have seen a huge focus on startup investment for companies working in the field of Artificial Intelligence, and for obvious reasons. But the first wave of AI startups are now in the later stages of startup growth and this is focusing the VC sector on the later stage investments as they are lower risk. While the second wave of AI startups have still been able to secure seed funding over the last few years, the opportunities for AI startups over the next few years looks more challenging.

While the changing focus of the VC sector on later stage funding for AI companies is understandable, it risks missing early investment in the future AI unicorns that will come from the third wave of AI startups and entrepreneurs.

One can easily relate this to the difference between Yahoo / Altavista with that of Google. Google could be considered a third wave Search Engine startup, many years behind the leader of the time, Yahoo. But history should teach us that late entries into a market can become the dominant player over time. There is no reason to doubt that we will see something similar happen within the AI space.

I am concerned that the VC sector will risk missing investing in the future AI unicorns because they are too focused on the developing the first and second wave companies, that will end up being the Yahoo’s of the AI world anyway. Many AI startups now are focused on platforms and applications, helping large businesses implement simple examples of AI. This focus on getting the startups to revenue generation, will naturally means they will be more interested in implementation of existing techniques rather than pushing the research and advancing the field of AI.

Obviously I am not saying all first and second wave AI startups are going to be longer term poor performers, but we have already seen many first wave startups being bought by larger companies to help build their own capability and focus on their own specific applications. DeepMind is probably one of the few exceptions to this, as they still have a major focus on pure research.

However, what needs to be understood is that we still at the very early stages of AI development, as my Continuum of Intelligence shows, there are many levels of progress needed to produce a truly super intelligent capability, and this will take a number of waves of investment in many different AI companies to achieve this. Mark Cuban has suggested that the world’s first trillionaire will be an artificial intelligence entrepreneur. I believe this will come from a company that is part of the third or fourth wave of AI startups, receiving seed funding in the next few years.

Over the next decade we will see many major advances in AI capability, much of this will come from the AI companies that are currently leading the way, but we should expect to see advances from companies that have not even started their journey yet.

We are only at the beginning of this journey of AI discovery. Lets hope the VC sector with its focus on later stage companies does not stifle the AI entrepreneurs of the future.

Thank you for reading and I wish you all a very happy 2018 !