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Research Briefs from cbinsights.com – February 27, 2018
Around 42% of the AI companies acquired since 2013 have had VC backing.
Big corporations across every industry, from retail to agriculture, are trying to integrate machine learning into their products. At the same time, there is an acute shortage of AI talent.
A combination of these factors is fueling a heated race to scoop up top AI startups, many of which are still in their early stages of research and funding.
Nearly 120 AI startups exited for the first time last year, of which 115 were acquired.
Already this year, there have been 8 acquisitions. Amazon acquired AI cybersecurity startup Sqrrl. Oracle followed suit by acquiring cybersecurity company Zenedge.
AI startups are acquisition targets not only for big tech companies, but also for traditional insurance, retail, and healthcare incumbents.
In one of the largest M&A deals in artificial intelligence, Roche Holding acquired NY-based Flatiron Health for $1.9B in Feb’18. The only other disclosed $1B+ AI exit was Ford’s acquisition of auto tech startup Argo AI in 2017.
Google is the top acquirer of AI startups, with 14 acquisitions under its belt (excluding Kaggle, a data science community that hosts machine learning competitions).
The timeline below shows the M&A activity of corporations that have made 4 or more acquisitions since 2010. (Note: The exact dates for Apple’s Novauris and Amazon’s Orbeus acquisitions are not known. They are plotted on approximate dates of acquisition.)
In 2013, Google picked up deep learning and neural network startup DNNresearch from the computer science department at the University of Toronto. This acquisition reportedly helped Google make major upgrades to its image search feature.
In 2014 Google acquired British company DeepMind Technologies for some $600M (Google’s DeepMind program recently beat a human world champion in the board game “Go”).
It also recently acquired conversational commerce platform Banter. Google previously made another major acquisition in natural language processing — startup API.ai — in 2016, powering some of Google Assistant’s capabilities.
Apple is close behind with 13 acquisitions.
Apple was one of the earliest players in the space. It acquired Siri in 2010, popularizing AI assistants. For comparison, the technology behind Amazon’s Alexa can be tied back to the startup Evi Technologies, which Amazon acquired in 2013.
Apple’s M&A activity slowed down for several years following the Siri acquisition, before picking up in 2016. Apple has been rather secretive about how it plans to integrate the AI startups it has acquired into its products. Its most recent acquisition was Pop Up Archive, which could be a potential addition to iTunes. Prior to the acquisition, the startup was developing tools to search and organize audio files. It used machine learning to convert speech to text, and crowdsourced the task of fixing transcription errors.
A notable exception in the big-tech-dominated top acquirers chart above is the Meltwater Group, a social media monitoring company. It is also the only private company on the chart.
Meltwater is strategically using AI to monitor digital media and analyze brand sentiment and competitor activity.