VCs invested over $75B in AI startups in 2020

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Investment in AI is growing at an accelerated pace, according to a new report from the Organization for Economic Co-operation and Development (OECD). The group in Paris, France found that the US and China are leading the growing wave of funding, which together took 81% of the total amount invested in AI start-ups last year, while the EU and the UK increased their support but lagged significantly behind.

“The venture capitalist (VC) sector tends to pretend general investment trends, indicating that the AI ​​industry is maturing. As the AI ​​industry matures, the median amount per investment grows, there are more very large investments and relatively fewer investment transactions in the early stages. of the financing, ”reads the report.

The OECD study analyzed VC rounds in 8,300 AI companies worldwide and covered transactions between 2012 and 2020, documented by capital market analysis firm Preqin. According to the results, the global annual value of VC investments in AI startups grew from $ 3 billion in 2012 to almost $ 75 billion in 2020. Funding increased 20% last year alone, with startups based in the US and China gaining over 80% of all investment in 2020. The European Union followed with 4%, followed by the UK and Israel with 3%.

The report also found that growth in AI investment in US companies has been stable since 2012, reaching $ 42 billion by 2020. Chinese companies saw an increase in 2017 and 2018, followed by a decline in 2019 and represented $ 17 billion in 2020.

Companies that developed driverless vehicles and mobility technologies attracted the largest investment of all AI companies, drawing $ 19 billion in VC money during 2020 and $ 95 billion from 2012 to 2020. The second largest segment was healthcare, medicine and biotechnology, which accounted for 16% of the investment amount in 2020. VC funding rounds in these related industries doubled from $ 6 billion in 2019 to $ 12 billion in 2020 – probably as a result of the pandemic. AI business processes and support services will start in third place in VC investments in 2020, meanwhile – also likely due to the pandemic that motivated digital transformations and remote and hybrid workflows.

Potential and risks

The oversized investment in autonomous vehicles reflects investors ‘belief that AI has the potential to address workers’ lack of transportation. According to the American Trucking Associations (ATA), the sector had short 60,800 drivers in 2018. If the shortage is not controlled, ATA expects it to swell to more than 160,000 drivers nationally by 2028. In a worrying sign, Britain was forced to recruit the army to drive fuel trucks to gas stations due to lack of available drivers.

Momentum in life sciences is less stable, with Deloitte reporting that healthcare organizations vary significantly in their AI investments. But the company has embraced AI with open arms and leveraged it to automate expensive back-office and customer-facing tasks. Over a quarter of all AI business initiatives are already in production, and more than a third are in advanced stages of development, an IDC study found. And just over half of companies said they would spend $ 500,000 to $ 5 million on AI initiatives by 2021, up from 34% by 2020, according to the App.

But these sectors face challenges as AI systems come under greater control. While 22.7% of employees feel that AI will start to have a big impact on their industry within the next 1 to 2 years, 54% are either moderate or very worried that AI will disrupt their jobs negatively, according to a survey from 2021. Furthermore, AI is not a silver ball – as research reveals. In a recent report, only 10% of business leaders reported significant financial benefits from their AI investments. And an MIT task force predicts technologies such as that fully autonomous cars will not come for at least 10 years.


As an expanding cohort appears to be making money on the continuing boom in AI investment, the OECD report shows that there are plenty of runways. This is despite the fact that some start-ups are in no doubt about their use of AI technologies. In a study by MMC Ventures from 2019, 40% of alleged AI startups in Europe – 2,830 – showed no use for AI in their products.

A Forbes piece notes that over the past decade, overall funding and the average round for AI companies have increased at a reliable pace. In 2010, the average early round for AI or machine learning startups was around $ 4.8 million. In 2017, total funding increased to $ 11.7 million for first-round funding — an increase of more than 200%. And in Q2 2021, AI startups attracted a record $ 20 billion in funding, despite a drop in contract volume.


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