Interest in AI Startups Exploded in 2017

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Artificial Intelligence (AI) technology startups seem to be in the news all the time. Is that hype, or are AI startups truly seeing major interest from investors? Using our research platform, we can conclude that interest in AI absolutely exploded in 2017. 

We come to this conclusion from the following takeaways, each of which tracks a different metric for interest in AI startups:
- AI funding grew exponentially in 2017
- The number of AI deals is increasing
- Investor interest in AI is growing

We’ll illustrate these takeaways with a series of graphs to show the extensive growth in AI. 

AI Funding Grew Exponentially in 2017

Let’s start off by looking at AI funding trends over the past 6 years. Here is the annual amount of AI startup funding, stacked by quarters. 

Q4 2017 AI Funding - Annual Funding

AI funding has been on an upward trend over these past few years, with a rapid explosion in 2017. Total funding in 2017 was over 3 times the size of 2016 funding. The Compound Annual Growth Rate (CAGR) in funding grew by a whopping 85% in the timeframe of interest (2012-2017). 

This funding growth is substantial news on its own, but are there other metrics showing a growing interest in AI? Let’s see what the total number of deals looks like. 

AI Deal Numbers Are Up Over 5 Years

The following graph shows us the annual number of AI startup funding deals, stacked by quarters. 

Q4 2017 AI Funding - Funding Count

Over the past five years, this graph shows an increased interest in AI via the number of deals in that startup ecosystem. Whereas the rapid growth in funding occurred in 2017, the rapid growth in deals occurred in 2014. The six-year CAGR on the number of deals stands at 23%. 2017 is also the highest year on record, beating the previous high in 2015 by around 2%. 

So, we’ve seen that total funding and the number of deals are expanding, how about investor interest? 

Investor Interest in AI is Growing

To gauge how investors are feeling, let’s look at the total number of AI investors who participated in each financing round. For example, if 5 investors participated in funding one company, and 4 investors participated in funding another, the total investor interest metric would be 9. 

Q4 2017 AI Funding - Investor Participation

This graph clearly shows increased investor interest over the past few years. The six-year CAGR is 31%, and the 2017 total is 21% larger than in 2016 (the previous annual high-water mark). 

Conclusion: Interest in AI is Exploding

In summary, we’ve seen significant growth in the total amount of AI funding. At the same time, the total number of AI funding deals has been steadily growing. Moreover, the investor interest in AI seems to be on a linear upward trend line. Taken together, we can say the AI sector is experiencing a rapid growth in interest over these past few years. It’ll be interesting to see if this trend continues into 2018, or if we travel into the “trough of disillusionment”. 

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