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M&A in the AI space is on track for record year

Companies like Google, Twitter and Salesforce have been buying up artificial intellience companies

Financial trends and news by Steven Loeb
June 27, 2016
Short URL: http://vator.tv/n/463a

Artificial intelligence is one of the most talked about spaces right now, but something interesting is happening: rather than young startups raising a lot of money, its companies like Google, Facebook and Twitter, that are scooping them up at a very young age. Basically, the big players are already starting to control the space.

Even as funding has been declining for most of the last five quarters, the artificial intelligence space is on track for the largest number of M&A deals ever, according to data out from CB Insights.

So far, with half the year over, there have been been 24 mergers and acquisitions in the AI space in 2016, which would put it on track for 48 total. That would be a 33 percent increase from the 36 deals in 2015. The number is already higher than any year before 2014. 

The type of companies being acquired is also notable, both in terms of their age and how much they've raised.

Not only have the vast majority raised no more than $20 million, but very few also make it past four years after their first fund raising. Only two made it past eight years, and one, Nexidia, which was acquired by NICE Systems, made it past 10.

This all matches up with the way that funding has been going, as the space saw a big decline in Q1, dipping 18 percent quarter-to-quarter to $83 million raised. Though it should be noted that that happens to be the largest amount the space has since the first quarter of 2015, the downturn in funding is not new. In fact, Q1 was the fourth quarter out of the last five to see a decline in venture capital funding.

AI is also coming off a year where VC dollars fell by over 20 percent, dropping to $310 million invested, down from $394 million in 2014. It should also be noted that the reason that 2014 saw so much funding was the result of one company, Sentient Technologies, which raised $103.5 million, leading to a record $201 million quarter for the AI space.

Companies aren't raising much money, perhaps because they aren't getting old enough to raise those big, later stage rounds.

The biggest acquirers in AI

With all of these companies being gobbled up, its the big players who are staking their claim.

That included Google, which has made nine acquisitions in the space, including DNNresearch and DeepMind Technologies, followed by Twitter, which has made four, including Magic Pony last week. 

Apple, Intel, Salesforce and Yahoo are also making big moves, and making acquisitions.

One company that did not make that list, surprisingly, is Facebook, even though Mark Zuckerberg has announced some pretty big plans for artificial intelligence this year, including building his own JARVIS, to run his home based on his voice commands.

He also sees big potential in this technology for Facebook going forward. 

"At Facebook I spend a lot of time working with engineers to build new things. Some of the most rewarding work involves getting deep into the details of technical projects. I do this with Internet.org when we discuss the physics of building solar-powered planes and satellites to beam down internet access," he wrote.

"I do this with Oculus when we get into the details of the controllers or the software we're designing. I do this with Messenger when we discuss our AI to answer any question you have. But it's a different kind of rewarding to build things yourself, so this year my personal challenge is to do that." 

He recently demonstrated the good it can do by incorporating AI technology to help blind people get audio descriptions of photos on the Facebook app. 

(Image source: techinsider.io)


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