AI Investments Dip as Investors Become More Discerning

Senior Editor for EnterpriseTech, George Leopold, utilized SDR’s Q2 Technology Report as a reference for an article giving advice to artificial intelligence (AI) startups. The article specifically addresses the free flow of capital that has been headed into the AI space, seemingly without many investors making detailed assessments and truly understanding the opportunity.

Leopold points to SDR’s observation that AI investments have dropped 19 percent compared to the first quarter of 2017 as a reason for technology startups to be wary of depending too much on the buzzword of the field they are working in (i.e., “machine learning”). He goes on to point out new data protection regulations such as the European Union’s General Data Protection Regulation going into effect May 2018, which could affect the industry.

AI InvestmentsTighter data regulations “will restrict automated individual decision-making,” SDR stated in its report.

Despite the challenges showing up in the AI field, for those within the industry there is some hope. One area where machine-learning startups are showing results is by creating a measure of transparency about how AI algorithms actually work and what they can accomplish. Furthermore, the increased data protection regulations have encouraged a growing list of information management vendors to offer frameworks for meeting the EU’s compliance deadline.

Leopold concludes, “Some machine learning startups are making headway in the market and continue to attract bullish investors. Those attracting the most venture capital are directly addressing ‘transparency hurdles’ within the machine learning models so users can figure out how they work.”

From SDR’s perspective, we’ll continue to monitor AI investments and M&A activity. Now that investment criteria is beginning to become more discerning, the pressure is on AI firms to perform.


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