AI Excitement In Asia Grows, But It's Not Enough To Beat US Funding Totals

The venture capital scene in Asia is growing and, according to Crunchbase data, outpacing Silicon Valley in dollar and deal volume.

Over the past year, a number of outlets have also predicted that Asia, and China, in particular, will become the epicenter of progress in artificial intelligence and machine learning. But for now, the largest continent still has a big gap to close with the United States in terms of startup funding in AI.

AI Is Getting More Buzz In Asia

Artificial intelligence in 2017 has become quite the buzzword in the United States. For Asia, that’s no different. Leading Chinese tech firms, such as Tencent, Baidu, and Alibaba, have made great overtures to the sector.

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China’s most popular search engine Baidu, for instance, has committed over a billion dollars in AI research, considering it essential to stave off competitors from taking ad revenue. The company also has, according to Forbes, built research facilities in China and Silicon Valley, with over 1,700 bodies fueling the effort. Meanwhile, Tencent, the owner of Chinese messaging behemoth WeChat, has launched its own AI lab.

But while major Asian-based firms have taken AI quite seriously, are startups seeing big capital influxes? Increasingly, the answer is yes.

Since 2014, over $1.7 billion has been invested in artificial intelligence and machine learning startups headquartered out of Asia, according to Crunchbase data. The following chart shows what investment looks like year-over-year:

Notably, investment into the AI category started off quite slowly. But from 2016 to today, investment in the AI sector has ramped up significantly—growing by a whopping 400 percent when compared to the previous year. So what fueled this growth in venture activity?

According to Crunchbase, the largest deal struck in 2016 was for iCarbonX’s $155 million Series A. With backing from lead investor Tencent, iCarbonX, an artificial intelligence platform for health data, now ranks on the Crunchbase Unicorn Leaderboard. Following in close second for the year is AI robotics startup Roobo. Based in the China, the company raised $100 million from speech technology and chip firm Iflytek.

And as we head into 2017, the good times for AI startups in Asia continue. Just a little over halfway through the year, investment in Asia-based AI and ML startups is on track to supersede 2016 in dollar volume. Leading this year’s cohort of AI startups in Asia is SenseTime, a facial recognition and deep learning startup, with a $410 million Series B. And as the year finishes out, 2017 will undoubtedly peak 2016 in terms of funding.

However, it’s doubtful that Asia will achieve the same growth rate jump it achieved from 2015 to 2016. With round counts down, and a very large round of capital deployed into one startup, 2017 may end on a quieter note than expected.

Still, AI is being taken seriously by accelerators and investment funds. Singapore has announced a $107 million fund to stoke innovation in AI. It is also anticipated that funds previously earmarked for big data startups will increasingly be diverted to AI-focused companies in China through the rest of 2017.

In the meantime, how does the United States fare against Asia in artificial intelligence investing?

Slow And Steady Wins The Race For The United States

Much like Asia’s tech behemoths, Google, Microsoft, Facebook, Apple, and others are embracing the AI trend.

Most recently, Google has begun to offer its labs to crews of artificial intelligence experts in an attempt to stoke app development. And further reinforcing Google’s dedication to AI is the announcement of Gradient Ventures, a new AI-focused fund that Google works with directly. Salesforce Ventures has also announced its intent to invest in startups that focus on integrating and developing AI into products and software services.

Unsurprisingly, investors are taking note of the trend and writing checks to support it. According to Crunchbase data, United States-based AI and ML startups have raised nearly $10 billion in funding across a total of 1,609 rounds. Here’s what that pace of investment looks like year-over-year:

Most notably, when compared to Asia, investment in AI-focused startups regarding deal volume and amount is over double what Asia-based startups have been able to attain.

However, unlike Asia, there is no huge jump in funding. Rather, deal volume sees modest gains, with 2015 to 2016 seeing the largest increase at nearly 19 percent—paling in comparison to the same period in the whole of Asia.

But although deal counts are down in 2017, funding amounts for AI startups is hitting new records. In February 2017, Argo AI, a self-driving focused AI startup, raised $1 billion in funding.

But even without Argo AI to pad the numbers, in 2017 the U.S. still outperforms Asia as a whole. Excluding Argo AI, funding in 2017 totaled over $1.5 billion across 258 deals made. That is still double the total amount of Asian AI funding and deals.

That leaves Asia with a lot of catching up to do for funds. To bridge the gap, Asia-based startups need to continue to land home runs. With approximately six months left in the year, a large deal or two could help in that endeavor. But in the meantime, venture capital interest in AI and ML remains dominated by US-based startups and companies.

Correction: An AI and ML investment chart was incorrectly labeled as China. It has now been updated to Asia.