News & Insight
Looking beyond the AI hype
rtificial intelligence (AI) is the latest buzzword to enter mainstream vocabulary, a term that really refers to the use of machine learning (ML) to enable some form of intelligence in machines and processes to improves efficiencies, productivity, scalability and many other automated tasks. However, a new report from MMC Ventures suggests that 40 per cent of AI startups in Europe are not actually using AI. The HLaw team this week attended an AI startup event in London hosted by AI Seed, an early stage investor, to see if we could get beyond the hype.
I’ve seen many technologies in my almost 35 years in the technology industry, and the current AI hype matches only the dot-com boom of the late 1990s. Even the internet of things (IoT) and blockchain doesn’t match this level of hysteria, especially since AI has gone mainstream, with people having visions of robots and intelligent machines taking over from humans – this is the stuff of science fiction which lets the imagination run wild.
And startups are exploiting this just as we (yes, I was amongst them) did in the dot com boom era. In a survey of the activities, focus and funding of 2,830 purported AI startups in the 13 EU countries most active in AI, the MMC Ventures State of AI 2019 report published this month found that in approximately 40 per cent of cases there was no evidence of AI material to a company’s value proposition.
Despite this we shouldn’t underestimate the transformative potential of AI. According to a 2018 Deloitte study, 82 per cent of enterprise AI early adopters saw positive return-on-investment (RoI) from their production level projects in 2018. AI’s benefits can be applied to almost any walk of life, from developing innovative new products and services, to enabling efficacy and performing tasks more effectively, and scalability, since it’s not limited by the constraints of human capacity. These benefits will profoundly impact consumers, businesses and society. Whether its healthcare, transport, insurance or legal services, the automated capabilities enabled by AI can reduce cost and increase scalability of services.
The MMC report says that while AI-powered automation may displace jobs or certain occupations that involve routine, in other occupations, AI will augment workers’ activities. It also highlights the fact that biased systems could increase inequality and could undermine trust; there’s also the issue of trade-offs between privacy and security (consider AI powered facial recognition advances for example).
And then there is the uneven landscape in terms of regulation: in the UK and the EU, for instance, we have the EU GDPR (General Data Protection Regulation) that puts hard restrictions on what can and can’t be done with personal data; in the US data regulation is less restrictive and then in China, while there are hints of a process to create a data protection regime, at present there is seemingly no or little protection as regards data protection rights for the individual. A Chinese or US AI startup may then find itself with a competitive regulatory advantage over an EU competitor.
So, what’s the landscape of AI startups in Europe, according to MMC Ventures? Here’s a snapshot:
- Europe is home to 1,600 early stage AI software companies. In 2013, one in 50 new startups embraced AI. Today, one in 12 put AI at the heart of their value proposition.
- One in six European AI companies is a ‘growth’ stage company with over $8m of funding. Expect acquisitions to recycle capital and talent; startups competing with ‘scaleups’ as well as incumbents; and increasing competition for talent.
- The UK is the powerhouse of European AI with nearly 500 AI startups – a third of Europe’s total and twice as many as any other country in Europe.
- Germany and France are thriving European AI hubs. High quality talent, increasing investment and a growing roster of breakout AI companies are creating feedback loops of growth and investment.
Reading the report, you certainly get the impression of a healthy AI ecosystem in Europe, and HLaw saw a very tiny portion of it at the AI Seed event in London. As John Spindler, the co-founder of AI Seed said, “Machine learning [which is what most AI companies are actually doing] is incredibly difficult. We look for the people who re-imagine industries, then look for the model and then how they are bringing them to market.” He said that to have good deal flow, they need to be well plugged in to the AI ecosystem, and that their fund invests between £100k and £500k in AI startups.
Their portfolio companies that presented were Observe Technologies and Facesoft. Observe Technologies uses computer vision and machine learning to help fish farmers optimize feeding, eliminating wastage of fish feed. Their strapline is ‘artificial intelligence for aquaculture – using state-of-the-art algorithms to maximise a farm’s potential’. Co-founder and CEO Hemang Rishi said fish farming serves a third of the world, and half the cost of the $200 billion industry [his figure] is in feeding the fish. Of this, he said a significant proportion of this is wasted. With their AI, he said, “For the first time, you have traceability of your biggest cost.”
Facesoft uses AI and machine learning to ‘unlock the true potential of the human face’. Their CEO, Allan Ponniah, who also happens to be a consultant plastic surgeon, said AI for facial recognition has equalled human perception. The company has a huge machine learning team of 30 Phd’s from Imperial College, which is a key part of their differentiation, along with their proprietary data set of 2.5 million high-resolution 3D faces. While he talked about retail analytics and facial recognition for entry systems, the big unspoken market is security and surveillance – especially when you consider how it’s being used in China and the billions of dollars of funding for companies like SenseTime.
So how what does HLaw this about the AI landscape? Here’s a chat I had with Henry Humphreys to get his take on the companies, and also some of the data issues. Listen to the chat here:
If you’d like to discuss some of the key things you need to consider in the growth of your AI company, contact us at firstname.lastname@example.org.
This article was written by Nitin Dahad, Head of Content for Humphreys Law.
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