The global Venture Capital (VC) investment in Artificial Intelligence (AI) was close to its peak, reaching US$22.3 billion in 2021. According to ABI Research, a global technology intelligence firm, this is just US$0.4 million shy of the historical high of US$22.7 billion recorded in 2019. Compared to the US$15 billion recorded in 2020, the market made a remarkable recovery, with a 48.5% year-on-year growth.
“COVID-19 greatly accelerated the speed of digital transformation in enterprise. Businesses are looking for solutions to work processes automation, customer care, due diligence, transcription and translation, and sales and marketing enablement tools. At the same time, COVID-19 led to the Great Resignation of 2021, where over 47 million Americans voluntarily quit their jobs. The massive job-changing wave led businesses to rethink their internal business processes, redeploy employees for high-value tasks, and retain valuable institutional knowledge,” said Lian Jye Su, Research Director at ABI Research.
“It’s no surprise that startups led the funding in 2021,” Su says. These include UiPath and WorkFusion in enterprise automation, 4Paradigm, Databricks, Dataiku, DataRobot, and H2O.ai in data science and AI development platforms, and AI chipset vendors like SambaNova Systems, Groq, ECARX, Horizon Robotics, Enflame, and Hailo. “In essence, businesses need to identify their AI strategies, whether to buy, build, or both. Businesses looking to buy their AI solutions will look to UiPath and WorkFusion; those looking to build their own custom AI will lean toward the data science and AI development platforms. In some cases, having the right AI solution is not enough. Businesses are also looking for the most optimal AI hardware, and this is where AI chipset startups come into play,” explains Su.
While the strong rebound indicated bullish market sentiment on the prospect of AI as a disruptive technology, the rebound is even more impressive considering the VC market exit of well-known startups taken into account. In 2021, no less than eight significant startups exited the VC market, including Affirm, Babylon, Darktrace, Exscientia, Recursion, SenseTime, SentinelOne, and UiPath. These startups have a strong value proposition, clear core competencies, and sustainable business models. With the exit of these startups, however, the total VC funding for AI in future years may see lower, or even negative, growth.
“These startups have demonstrated the full potential of AI to businesses. They also serve as examples for the younger AI startups. While the AI market is getting more crowded, it is still essential for aspiring startups to hone their value proposition, identify the right niche, develop core competency, and well serve customers,” concludes Su.
These findings are from ABI Research’s Artificial Intelligence Investment Monitor 2021 application analysis report.
