Artificial Intelligence and Machine Learning in a Startup Eco-System

By Jain Swanubhooti

Senior Research Associate

Grand View Research

July 11, 2019


Artificial Intelligence and Machine Learning in a Startup Eco-System

AI software is anticipated to create substantial societal value and business opportunities. Start-ups are focusing on the process and delivery of AI services and products with mature service offerings

Artificial Intelligence (AI) and Machine Learning (ML) technologies deliver intelligent functionalities to pre-existing solutions across various verticals including automotive, health care and business analytics. AI and ML collectively offer optimal solutions to the existing problem, and further imparting self-learning logic in the system to instinctively address any similar complications in the future. Statistic abilities of machine learning to develop capabilities and enhance the performance of models have delivered significant traction for the technology in start-ups across the world.

Companies are highly attracted to the investment opportunities for integrating machine learning in their services and products across the AI landscape. These unprecedented stages of investment are emblematic of the hype surrounding artificial intelligence and machine learning and have also accentuated the value that technology leaders believe AI and ML can bring to the world. While recent developments are centered primarily on the industries based on digital transformation, the growth of AI and ML would be considered as a game-changing phenomenon.

The recent surge in advancement of artificial intelligence and machine learning technologies has triggered exponential investment avenues across start-ups and aligned funding for AI research and development.

Further, the cybersecurity companies are progressively relying on machine learning to detect new malware, and for performance optimization of complex tasks. It is also to generate content such as original images, written or audio stories. Prone to such factors, artificial intelligence and machine learning are used to incur significant traction in start-up companies.

Growth of AI in Key Sectors:

Artificial intelligence and machine learning are used in several applications in various sectors including human resources, e-commerce, defense and security, sales and marketing, communication, legal and compliance and fraud detection, urban management, real estate, automotive, education, energy, entertainment, transportation, and health care and biotech. The following are investments made by top companies in AI based start-ups around the globe:

  • In November 2018, Qualcomm Technologies, Inc. announced the launch of the Qualcomm Ventures AI Fund. The launch of the fund is aimed at investing up to USD $100 million in promising startups that are transforming AI. Moreover, the company is promoting startups that are developing new technology for robotics, autonomous cars, and machine learning platforms.
  • In November 2018, Microsoft signed an agreement to acquire XOXCO, a software product design and development studio, based in Texas, U.S. XOXCO is also known for its bot development capabilities and conversational AI bots. Microsoft has already acquired numerous other AI startups in 2018, including Lobe Artificial Intelligence, Inc., Bonsai AI Inc., and Semantic Machines Inc.

As artificial intelligence and machine learning have started making impressions on numerous fields, beneficiaries of the AI and ML revolution attracted the entrepreneurs to invest in start-ups using the same technology. Mentioned below are some key sectors, wherein the adoption is considerably high in artificial intelligence and machine learning fields.

  • In the field of health care, elementary implementation of artificial intelligence technology for virtual assistance and chatbots deliver positive growth outlook in the years to come. Investments by start-ups within artificial intelligence and machine learning in the health care field are mainly focused on diagnosis, monitoring chronic conditions, robotic surgery, image analysis, drug discovery, fitness wearables, and more.

Developments in Health Care

  • In October 2018, Philips announced the launch of its start-up collaboration program, which involved the company’s innovation hubs present in the U.S., Eindhoven, Shanghai, and Bengaluru, primarily focused on the application of artificial intelligence in the health care field. 
  • In June 2019, Kang Health, an artificial intelligence start-up has received USD $12.5 million in funding for their application “K”. K is a HIPAA-compliant AI-powered health care app, which compiles anonymous information from consumers about chronic conditions and their medical background.
  • Incorporation of artificial intelligence and machine learning technologies that support warfare activities have accelerated associated start-up establishments. AI enabled start-ups are focusing on developing military and commercial robots, military autonomous systems that would enhance the productivity of the defense systems. For instance, French Armed Forces Minister, Florence Parly announced an increase in the country’s annual expenditure on artificial intelligence (AI) to USD $112.84 million as a part of the total investment of USD $2.062 million in public investment by 2022. This initiative was a part of France’s innovation to advance future weapon systems.
  • Manufacturing platform with the advancement of automation and robotics using artificial intelligence and machine learning contribute to value creation in this field. Production based start-ups are primarily focusing on finding an efficient solution to solve the complex tasks of mathematically planning and scheduling.

Developments in Manufacturing

  • Drshti is an Indian start-up, which is highly concentrated on bringing AI innovations in the manufacturing space. Manufacturers use Drishti to drive sweeping improvements in quality, tractability, productivity, and anchor true digital transformation. This start-up raised USD $10 million to cover factory workers using AI and action recognition.
  • In January 2019, London based start-up Flexciton raised USD $2.8 million in funding to modernize the manufacturing industry with AI based production planning and scheduling.
  • In an era of digitalization, the introduction of artificial intelligence and machine learning has carved a different scope for BFSI in the global economy. A new breed of start-up companies is using AI to offer a list of operations for banking and financial services. Further, the rise of chatbots in the BFSI sector is rapidly diversifying the face of the banking industry. In a BFSI start-up investment scenario, the investors are keen on the development of cybersecurity and e-commerce. For instance, Citibank’s product portfolio includes a strategic investment for start-ups’ continuous and rapid data evolution. This will further advance AI start-ups to capitalize on the research and development field.
  • IT and telecommunication start-up platforms are significantly growing with the implementation of AI and ML to optimize, manage, and monitor the network operations. In developing countries, governments are opting to prepare an ecosystem where the connectivity is seamless, artificial intelligence is conventional, and designed to improve the aspects of e-governance. This will further nurture the innovation in traditional industries, enabling new business models and growing start-ups.
  • The landscape of the retail sector is experiencing a seismic shift with the growing usage of AI. Sales and CRM applications, customer recommendations, manufacturing, logistics and delivery, payment services, and others are some of the functions operated by artificial intelligence and machine learning. IT start-up companies are using artificial intelligence in providing solutions to retailers to improve inventory management.
  • Focal System is a San Francisco based start-up that helps retailers avoid running out of supplies, inventory management, optimize checkout lines, and enhance the shopper experience. Focal Systems’ solutions are comprised of powerful devices in retail stores that leverage computer vision and machine learning technologies.

Key illustrations of Start-ups in AI/ML:

  • Argo AI, LLC:

Argo AI tackles the most challenging applications in robotics, computer science and artificial intelligence with self-driving vehicles. It deploys and develops the latest advancement in machine learning, computer vision and artificial intelligence to manufacture efficient and safe self-driving vehicle.

  • Kreditech Holding SSL GmbH:

Kreditech Holding SSL GmbH is aiming to provide improved credit services and convenience for digital banking services using artificial intelligence.

  • ACRON OakNorth:

ACRON’s platform supports automated process implementation that leverages machine learning.

  • SoundHound Inc.:

SoundHound Inc. is an artificial intelligence platform that enables business owners and developers to deploy it at any place and retain control of their brand and users while innovating.

Geographical Scenario of AI/ML Start-ups:

With strong leadership in the artificial intelligence field, U.S. accounts for the prominent share in private and public investment fields. American tech startups are profoundly active in artificial intelligence research and development fields. Further, prominent market players such as Google Inc., Baidu, Apple Inc., IBM Corporation, and Microsoft Corporation among others are involved in acquisitions and mergers with startups using the AI/ML.

Europe’s artificial intelligence market is highly fragmented, there are many leaders and start-up companies using artificial intelligence to scale up their returns. The European Commission and the European Union announced an initiative for investing in startups using AI and ML including an investment worth USD $22.56 billion; the investment is made by the European Union, private sector and member states. Also, there is a growing investment on the horizon in 2020 under the research and innovation program.

Future Growth Perspective for AI Startups:

Artificial intelligence and machine learning will be able to spark future growth for venture capitalists, investors, pioneering entrepreneurs, and forward-thinking corporations. Artificial intelligence is anticipated to provide significant innovations both for corporations and consumers. In the automotive world, AI startups are focusing on developing technology for driverless or self-driving cars.

With the convergence of other transformative technologies such as big data analytics, and Internet of Things, artificial intelligence has the potential to generate a new basis for economic growth. All developed regions are expected to gain more than others in relative terms. Silicon Valley is among the global hub for artificial intelligence startups.

Artificial intelligence developments are fostered by data availability, so data-driven sectors already have a head start. In addition, startups will require a larger investment than their peers in a different field, due to the high fixed cost. These high costs are a result of data collection and aggregation, human resources and computing power. For instance, despite the increase of the investment in the market, Europe’s artificial intelligence startup funding remains limited.

With the investors demanding a rapid return on investment, corporations need a strong defender to justify portfolio diversification and venture strategies. The proliferation of digital technologies, subsequent investment in the artificial intelligence field, and the rising demand for advanced solutions are expected to drive the growth of artificial intelligence and machine learning in the coming years.

Article Summary:

AI software is anticipated to create substantial societal value and business opportunities. Start-ups are focusing on the process and delivery of AI services and products with mature service offerings. The start-up companies are providing solutions for various end use industries, thereby creating a wave of digitalization. The global economic potential of developed and developing countries are changing with the age of digitalization.

Author’s Bio:

Jain Swanubhooti has worked as a Sr. Research Associate in Information & Communications Technology (ICT) at Grand View Research Inc. since April 2019. She has experience working on many projects in Information & Communication Technology (ICT) including artificial intelligence, video streaming, smart electricity meter, digital utility and others. Swanubhooti is a management consulting professional. She holds a Bachelor’s degree in Engineering from Medicaps University from Indore, India.