With work comes unavoidable tedium, burning an inordinate amount of time. For some, the time lost is enough to justify hiring an assistant–an expensive solution that can be difficult to scale.
But some tasks once coordinated by costly humans are becoming automated. With advances in AI, a new, tech-based breed of assistants, often referred to as virtual assistants, are entering the market of support.
If startups have it their way, my people won’t get in touch with your people; instead, your bots will get in touch with my bots. But are investors on board with this future?
Startups Who Will Gladly Assist You
Over the past several years, the increase in both the number of deals and the total amount of funding that investors have put into virtual assistant platforms and infrastructure has been impressive.
The number of deals have seen significant year-over-year gains with the upward trend stretching all the way back to 2012. However, it wasn’t until recently that growth took off.
Between 2013 and 2014, the number of deals struck with virtual assistant platform and infrastructure companies grew by 136 percent. Although subsequent years saw comparatively less growth on a percentage basis, the 73 percent rise between 2014 and 2015 and the 51 percent increase between 2015 and 2016 is nothing to sneeze at.
The exceptional growth of the virtual assistant sector comes into focus when we take a look at changes in dollar volume. Relative to the increase in the number of deals between 2013 and 2014, the 16 percent global increase in equity investment dollar volume seems relatively tepid. But, between 2014 and 2015, the amount of capital invested in the sector grew by 112 percent. Over the next interval, between 2015 and 2016, dollar volume more than doubled, coincidentally, by 112 percent.
It’s uncommon to see such doublings occur once, much less twice, which could speak to investors’ optimism about the sector.
Greatest Funding Hits for Virtual Assistants
The growth the sector has experienced over the past couple of years can mostly be attributed to the outsized success of a handful of companies in the space. In 2015 and 2016, Interactions Corporation raised a total of $65.4 million in known equity funding. During that same period, Conversica raised $40 million from venture investors, Digit raised $33.8 million, and X.ai raised $32.2 million. What do these virtual assistants do that’s worth so much funding?
- Interactions Corporation. Made for the enterprise, Interactions creates customer care conversational chat solutions. The company uses what it calls “Adaptive Understanding” technology to power its various virtual assistant solutions. Notably, Comcast Ventures participated in its latest round. It’s an interesting investment, given Comcast’s well-documented customer services woes.
- X.ai. One of the more popularly known virtual assistants, X.ai takes over scheduling appointments on your behalf. Its AI’s skillset does not currently extend past scheduling meetings, but that hasn’t hindered its growth. Up until recently, X.ai was stuck in beta—regardless of whether or not you wanted to pay for the service.
- Digit. Saving a couple of dollars here and there can add up. And Digit has banked on the fact that its technology, which analyzes income and spending habits, will allow users to passively save small sums of money. And much like Twitter in its formative years, Digit relies on SMS-based chat to interact with its money-saving assistant.
- Conversica. Following up on leads and qualifying them for sales is a task that Conversica believes can be done better with its AI-powered sales assistant. Through email, Conversica will follow up and engage with potential leads, with the goal of getting a meeting on the books—putting the company in close competition with X.ai.
It’s worth noting that all but one of the companies mentioned above primarily work through a chat-based interface. Interactions, on the other hand, offers a robust service offerings that include voice.
Large Rounds Extend Into Q1 2017
Q1 2017 saw 20 deals representing over $154 million in global dollar volume for the sector. Nearly half of that can be attributed to Soundhound’s $75 million Series D round, but other companies raised significant rounds as well. Demisto raised $20 million on top of the $6 million in funding it closed in 2016. Similarly, Chorus.ai raised $16 million in Q1 2017, adding to its $6.3 million funding last year.
Q1 2017, relative to the same time last year, is shaping up to be a much better quarter for virtual assistant companies. The 20 deals from Q1 2017 are double the relatively modest 9 deals from Q1 2016. But it’s dollar volume that tells the story here. In Q1 2016, our dataset shows $23.4 million in venture funding. Q1 2017’s dollar volume of around $154 million represents a 560 percent increase in dollar volume in the space. Such a large growth rate could imply strong investor interest in the virtual assistant category, but it’s a growth rate that has been fueled by outsized rounds that will be hard to repeat.
Giants Want To Be Assistants Too
While investor activity in software-supported virtual assistants appears to be flourishing, it’s a space that has drawn offerings from nearly every major tech company.
Google, for instance, has made overt moves into the sector, naming its assistant, not so shockingly, “Google Assistant.” But what Google lacks in creativity, it makes up for in ability. In Business Insider’s review of virtual assistant capabilities and ease of use, Google Assistant had a “slight edge” over all its public peers.
But while Google Assistant may offer a more technically proficient virtual assistant, it is Amazon’s Alexa that has managed to capture the attention of consumers and developers. RBC Analyst Mark Mahaney told The Motley Fool Google Home’s installed base is “a third that of Alexa” as of Q1 2017. Whether Amazon can maintain its lead is not clear. In Q4 2016, Mahaney estimated that Amazon’s Echo devices (which are powered by Alexa) outsold Google Home 10-to-1.
But Internet giants Google and Amazon aren’t alone. Apple’s virtual assistant Siri, once a beta service launched in 2011, has had a headstart on much of the competition. Since then, Siri has been made available on nearly every major Apple product that runs iOS or OS X. But despite its ubiquity and large install base courtesy of the company’s iPhone sales, Siri has been lamented as lacking in features and capability.
Similar to Siri, Microsoft has also launched its own virtual assistant named Cortana. Microsoft’s assistant is voice-activated, and it also observes the habits of users and trawls emails to provide traffic information and appointment reminders.
Yet the largest contender amongst our Internet overlords is likely Facebook, which has set its sights on being a virtual assistant for all of its 800 million users. As VentureBeat reported:
Speaking at this week’s Facebook F8 conference, the company’s chief executive, Mark Zuckerberg, and head of Messenger, David Marcus, announced plans to turn Messenger into a sort of “social living room” — one where you can chat, make dinner reservations, hail a cab, order food, and share music directly from Spotify. What that means, in essence, is that Facebook wants M to act as the digital butler in your social living room.
Mark Zuckerberg, CEO of Facebook, also has shown a vested interest in making a powerful virtual assistant, outlining his Iron Man “Jarvis” ambitions in December of last year.
Hurdles Remain For Virtual Assistants
While the virtual assistant category has captured the imagination of startups, investors, and large tech companies, the technology powering virtual assistants still has a long way to go.
According to a Bloomberg report, virtual assistants are often powered by humans in the background. Amy, X.ai’s scheduling assistant, has a collective of humans responsible for training the AI or handling one-off tasks that are outside of Amy’s scope.
This is also the case for large enterprises too. Facebook M, for instance, relies on humans to help supplement and train its AI as well. And even with human intervention, many tasks are still left incomplete by AI-powered virtual assistants.
Virtual assistants are also data hungry in order to provide their stated usefulness to end users. But needing such access to a vast treasure trove of data has raised some privacy concerns. These concerns are magnified by Google, Amazon, and Facebook, all of which gobble up data to serve targeted ads to consumers. Apple, on the other hand, has foregone the data collection trend in favor of machine learning, possibly impacting Siri’s usefulness.
For startups who have entered the virtual assistant space, competing with nearly every major tech company that has its own virtual assistant software, and dedicated team of AI experts, will likely prove challenging. And unlike Siri, Alexa, and Google Assistant, many of the virtual assistant startups have foregone a broad assistance strategy, preferring to focus on very specific tasks (such as scheduling appointments). Whether consumers will tolerate piecemeal virtual assistance remains to be seen.
In the meantime, the future of tech-powered virtual assistance looks bright and healthy. Assuming virtual assistants continue to improve in capability, the future of my bot talking to your bot is not looking too far off.
Methodology
Due to nuances in how Crunchbase defines virtual assistant firms, we broadened the category using public reports. Crunchbase News compiled a list of 241 funding events announced between January 2012 and the end of Q1 2017. Of these, 184 had known funding amounts, and it was from this set of rounds with known dollar amounts that we constructed the charts and based our analysis.
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