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Expect an even hotter AI venture capital market in the wake of the Microsoft-Nuance deal
Microsoft’s huge purchase of health tech AI company Nuance led the technology news cycle this week. The $19.7 billion transaction is Microsoft’s second-largest to date, only beaten by its purchase of LinkedIn some years ago.
For the AI space, the sale is a coup. Nuance was already a public company, but to see Microsoft offer a firm premium over its public-market value demonstrates the value that AI technology can have to wealthy companies. For startups working in the AI space, the Nuance deal is good news; the value of AI revenue was repriced by the acquisition’s announcement — and for the better.
In light of the megadeal, The Exchange dug into the AI venture capital market. What’s happening on the startup side of the coin in the artificial intelligence and machine learning (AI/ML) space?
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
To get a handle on the situation, we’ve compiled Q1 2021 and historical venture capital investment data via PitchBook, spoken to an active venture capitalist with a focus on AI-powered startups, and heard from a couple of startups recently featured on CB Insights’ list of leading AI upstarts for their take on the recent news.
The picture that emerges is one of strong investor interest and the expectation of even more in the wake of the Microsoft-Nuance tie-up. For AI startups, it’s a great time to be in the market.
This morning, we’ll start with a look into recent venture capital activity in the AI/ML market and its historical context. Then we’ll talk to Zetta Ventures’ Jocelyn Goldfein and a few companies in the AI space. Let’s go!
A venture capital rush
According to historical data compiled by PitchBook, venture capital investment into U.S.-based, AI-focused startups is enjoying a strong start to the year. Per the group’s provided dataset, from the start of 2021 through April 12, or the first 101 days of the year, 442 deals in the space were worth $11.65 billion.
In 2020, the same query for U.S.-based startups working in the AI and ML space — the line between ML and AI is blurrier than ever — turned up 1,601 rounds worth $27.49 billion.
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Raising in a recession
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week’s episode was a testament to making do, as we’ve had to cancel some trips, juggle a few guests, and get up and running as a podcast that have guests dial in without losing our stride. So, this week Danny and Natasha and Alex were joined by Unshackled VC’s Manan Mehta.
And it went pretty ok, aside from a hiccup or two, expect Equity to still feature guests as often as it makes sense, even if we’re currently locked out of our own studio. Anyhoo, a combo of local recording, remote video setups, and Chris handling the dials meant that we were able to talk over all the good stuff:
- Hashicorp raises $175 million at a $5 billion valuation. It was nice to see a round so large take place when the rest of the sky in tech was busy falling onto itself.
- Deepgram raises $12 million. Alex covered this company’s funding, winding up pretty excited about the technology itself.
- Edtech startup Teachable exits after good GMV growth. Nice exit for this New York City-based startup, and we chatted about the early-stage edtech market, which was good fun.
- VC firms offer group therapy for founders due to the COVID-19 outbreak. It marks another data point in the small, but growing, cohort of venture capitalists thinking about mental health services beyond an investment opportunity.
- Remote Year, which helps you work while traveling the world, lays off 50% of staff. It’s one of an incoming flurry of layoffs we’re expecting to see from travel-related startups.
- Danny advised founders to announce their rounds now to reassure their employees and customers that they are ready for the coming recession
- And finally, what’s up with Airbnb’s direct listing timing? We tried to sort that out before we ran short of time.
All told there were some laughs, and we spent a good few minutes before mentioning COVID-19. It was good fun to have the crew on for a classic Equity episode, and a big thanks to Manan for coming aboard under less-than-optimal circumstances.
Equity drops every Monday at 7:00 AM PT and Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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Deepgram open sources Kur to make DIY deep learning less painful
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The top 8 startups from Y Combinator Winter ’16 Demo Day 2
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