Chinese AI startups overtake US peers for venture capital investments

Chinese AI startups raised $5 billion in venture capital funding in 2017 and overtook their US counterparts, according to analyst firm ABI research.

Photo credit: CGTN

This shows that investors are confident with the technologies developed by Chinese startups, their business strategies, and market potential.

The overall investment values for AI startups increased year-on-year by a staggering 150% globally in 2017, growing from $4 billion in 2016 to $10.7 billion in 2017.

Contrary to their US counterparts who raised $4.4 billion of investment from 155 investments, Chinese startups raised $4.9 billion from merely 19 investments, indicating a sharp focus by the investors on mature AI applications with strong commercial viability and successful use cases.

In addition, the influence of the Chinese government plays a key role in attracting investment in AI startups.

“The bullish sentiment shared among Chinese investors is a clear sign that China is going all-in in artificial intelligence (AI). The government of China is setting clear policy guidelines for the future development of AI and startups are responding with cutting edge AI technologies across many industries,” said Lian Jye Su, a principal analyst at ABI Research.

In contrast, Europe seems to have long-term strategic objectives as far as AI investments are concerned. Startups in the region have diversified interests across different industries and verticals, mainly for use cases such as cybersecurity, digital ID, public safety, healthcare, and IoT.

The US, on the other hand, takes a more balanced approach between short-term investments that could translate into immediate commercial opportunities and long-term transformative technologies targeting key sectors such as automotive, agriculture, finance, cloud robotics platform and insurance.

Among all the Chinese startups, Bytedance walks away with the highest funding. The creator of Toutiao, a personalized news aggregation app, and Douyin, a personalized video clip app, has raised over $3 billion in investment and is enormously popular among Chinese youth, due to its content personalization and curation algorithms.

Another sector that received a lot of attention was facial recognition. SenseTime and Face++ managed to raise significant funding due to the adoption of facial recognition technologies by various public agencies, payment and e-commerce companies.

Chinese startups are not merely focusing on software development only as it is the case in many other industry sectors but are also deeply involved with AI chipset innovation.

Cambricon Technologies and Horizon Robotics have raised $100 million in Series A funding respectively to design and manufacture purpose-built AI chipset for machine vision.

The aim to launch a ‘Made in China’ chipset is one of the key priorities of the Chinese government. Previous attempts have been futile, but the technologies developed by Cambricon Technologies and Horizon Robotics seem to be promising.

Cambricon’s chipset IP has been integrated into Huawei’s premium smartphones, while Horizon Robotics focuses heavily on machine vision in the automotive industry.

Such a multi-prong AI investment approach in both hardware and software will ensure that the Chinese AI ecosystem continues to flourish, innovate, and stay ahead of the competition.

“While 2017 was a roaring success for Chinese startups, the real fruits and impact will be felt in 2018 and beyond. Already we are seeing a few startups launching new products, venturing into new business, or being acquired in 2018,” said Su.

Unisound, for instance, released one of the first Made in China AI chipsets for natural language processing in 2018; Xilinx, a US-based field programmable gate array (FPGA) vendor, acquired DeePhi Tech, a Beijing-based startup focusing on deep learning optimization.

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