Artificial Intelligence is riding the hype curve, again! Pervasive digitization and connectivity, advances in processing power and low-cost storage are making possible what once could only be imagined. AI is penetrating every aspect of business with organizations seeking to build knowledge from data to gain competitive edge, sway customers and increase profits. This created high demand for AI expertise, tools and solutions as organizations ponder their AI strategy. But what to do about AI? How to build an investment thesis based on facts?
At Xona Partners, we have been engaged in artificial intelligence research since the mid-1990’s. In recent years, we have helped organizations develop their AI strategy and solutions, and investors in due diligence and deal flow sourcing. We distilled our observations on AI M&As into 5 fact that technology investors must consider when making investments in this space. This applies to technology companies looking to develop or acquire AI-based solutions, or financial investors looking to make investments in AI startups. The following 5 facts will help guide their strategy:
Fact 1: This is not the first AI hype cycle. Similar (or more) happened in the 1960s and later in the 1980s. Learning from history is critical.
Fact 2: The roadmaps of leading industry players are driving AI investment and acquisitions. Today, these are the Cloud players. Insight into their plans have at least 90% impact on the evolution of AI startups.
Fact 3: Academia drives AI trends in startups success. To glimpse the future, look at what academia is doing!
Fact 4: Most acquirers did not execute on strategies successfully. In successful acquisitions, strategy was very clear ahead of time with a 5-year execution horizon. The most successful acquirers bridge their acquisitions with their internal development and market segment.
Fact 5: Investing or acquiring is almost too late by Round A: AI companies have high growth path or are acqui-hired.
Additional information is in our brief – The Five Facts of AI Investments. Contact me for a copy.
If considering making an investment in AI – whether developing AI-based solution for your organization, or making a financial investment, feel free to reach out to me or one of the Xona Partners for further discussion.