Love it or hate it, artificial intelligence is here to stay. From automating tedious tasks to simplifying consumer demands, the transformative power of AI is finally having its moment in the sun, which, according to new research, could boost UK GDP by up to 10.3 per cent by 2030. This is the equivalent of an additional £232 billion, which makes AI one of the biggest commercial opportunities in today’s fickle economy.
London-based VC firm, MMC Ventures, commissioned a study on the state of AI in 2017, which identifies opportunities for early-stage tech start-ups in the sector, as well as challenges to overcome for sustained growth.
According to the report, there are 400 independent early-stage AI companies in the UK, which makes up close to half of the European total. This could be because of the depth of knowledge and networks spiralling out of UK universities, including Oxford, Cambridge, Imperial and UCL. From Cambridge University spin-out Evi, to Google-acquired DeepMind, the UK’s biggest AI start-ups started off as research projects.
Up until 2016, early-stage AI start-ups were ahead of the curve. Now, according to MMC research, AI is entering the mainstream.
“While hype around AI is at a peak, and some expectations may exceed results in the short term, we believe AI represents a paradigm shift in technology that warrants the attention it is receiving,” David Kelnar, investment director and head of research at MMC Ventures, said. “In 2017 AI reached an inflection point, driven by milestones in capability, investment, entrepreneurship and adoption. The implications for consumers, companies and society will be profound.”
Kelnar remains optimistic, but the research suggests a lot is yet to be done to raise the profile of AI tech.The number of AI companies founded annually in the UK has doubled in the last two years, compared to 2011 to 2013 figures. Since 2014, on average a new AI company has been founded in the UK every five days.
Even so, buyers are still not fully aware of the potential of AI tech, and as a result, many of these companies are yet to receive recurring revenue; around 40 per cent, according to MMC Ventures. That said, the research also reveals that the sector is maturing rapidly, especially compared to the rest of Europe.
The journey to monetisation for AI companies can be longer given technical challenges, long sales cycles in a B2B-driven market, and client integration requirements. The research suggests that raising capital for AI start-ups can vary. One in three growth stage companies raised a significantly larger post-angel rounds than is typical.
MMC Ventures’ portfolio features 11 AI start-ups, both for businesses and consumers, across a range of sectors. “The implications of AI include shifts in sector value chains, new business models, and changes in companies’ competitive positioning. For investors, today represents a time of unprecedented opportunity. We’re transitioning from a first wave of AI investment and activity, in research and core technology, to a second wave where focus is moving to vertical applications,” Kelnar added. “90 per cent of early stage AI companies in the UK are now applying AI to address challenges in specific business functions or sectors. The opportunity for these businesses and for investors, are immense as we move into the age of AI.”