AI Sector Maturing As Funding Shifts to Later Stage
Last quarter we saw that Artificial Intelligence (AI) funding grew exponentially in 2017. This quarter we are going one level deeper on our AI research platform to examine its funding by round. From our analysis we can conclude that the AI sector is maturing.
This conclusion comes from two takeaways:
- Funding amounts are shifting to mid and late-stage events
- Later-stage funding counts increased while early-stage funding counts dropped
We’ll explain these takeaways with some graphics that show AI funding activity by round.
To help set the stage, the graphic below illustrates AI funding amount over time. As you can see, the sector’s funding exploded in 2017.
AI Funding Amounts Shifting to Mid and Late-Stage Events
We’ll start off by examining the annual AI funding amounts. The below graph shows recent AI funding amounts in different rounds.
We see that AI funding amount for all stages grew from 2012 to 2017. Most notably, Series D funding grew the most.
Let’s look at the AI funding amount by round as a percentage, which shows changes independent of the total size.
From 2012 to 2017, Seed and Series A funding amount percentages dropped. During the same period, Series B, C, and D funding amount percentages increased.
Specifically, the Seed round funding amount dropped from 15% to 3% from 2012 to 2017. The Series A funding amount dropped from 40% to 20%. On the other hand, the Series B funding amount increased from 26% to 30%. The Series C funding amount increased from 15% to 25%. The Series D funding amount increased from 4% to 20%.
Taken together, these two graphics show that the AI funding amounts in Series B, C, and D increased from 2012 to 2017. The funding amount as a percentage graph also shows that the Seed and Series A funding dropped.
So we have seen the funding amounts graphs indicate a shift to mid and late-stage events. Would the funding event count graphs show the same trend? Let’s examine them in the next section to find out.
Later-Stage AI Funding Counts Grew; Early-Stage Funding Counts Dropped
Let’s now look at the annual AI funding event counts. The below graph shows the AI funding counts in different rounds over recent years.
The above graph shows that Seed round events grew from 93 in 2012 to its peak at 275 in 2015. It then fell from 275 events to 195 events in 2017. On the other hand, the funding event counts for all the other stages grew from 2012 to 2017.
Specifically, Series A funding events grew from 40 to 176. Series B funding events grew from 12 to 84. Series C funding events grew from 4 to 35. Series D funding events grew from 2 to 21. Late Stage funding events grew from 0 to 9.
Let’s now look at the AI funding count by round as a percentage, which can show shifts more clearly.
This graph shows that from 2012–2017, the Seed round funding count percentage dropped. In the same years, the funding count percentages for all the other stages increased.
Specifically, the Seed round funding count dropped from 62% to 38% from 2012 to 2017. In contrast, the Series A funding count increased from 26% to 34%. The Series B funding count increased from 8% to 15%. The Series C funding count increased from 3% to 6%. The Series D funding count increased from 2% to 4%. And the Late Stage funding count increased from 0% to 2%.
Combining these two graphics, we can see that the AI funding count for the Seed round dropped from 2012 to 2017. The funding counts for all the other stages grew by various degrees during the same period.
Conclusion: The AI Sector Is Maturing
In conclusion, we have seen that AI funding amounts have shifted to mid and late-stage events. AI funding counts also saw an increase in mid and late-stage events and a drop in Seed events. These observations led us to conclude that the AI sector is maturing. Investors seem to be placing heavier bets into more well-established AI companies.
What are your thoughts on this? Let us know in the comments section below.
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