Artificial intelligence is the subject generating by far the most buzz in startup circles.
But if we look at public markets, it’s clear that an AI focus hasn’t been a recipe for stock market gains. This is evident looking at recent performance of the most highly valued AI-oriented companies to go public in the quarters leading up to the market peak.
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To illustrate, we used Crunchbase data to curate a sample set of venture-backed companies in the space that went public on U.S. exchanges in the past three years. Open the list below to see all 11 of the companies we found.
It’s a varied set, with focus areas ranging from business automation (UiPath) to legal discovery (Disco) to voice AI (SoundHound). What all have in common, however, are shares that are currently far below where they were at the time of their market debuts.
In the chart below, we compared valuations at IPO time to recent market caps for the nine companies on the list that are still public. (Two, Berkshire Grey and Zymergen, have been acquired.)
Altogether, the nine companies on our list have shed nearly $50 billion in collective market capitalization since going public. That works out to a decline of 76.5% from the time of their debuts.
Not entirely discouraging
Though they’re down, they’re not out. While those declines sound discouraging, it should be emphasized that most tech stocks are well below their 2021 heights. Also, the companies on our list went public around the time the market was peaking, so initial valuations were bubbly by historical standards.
Moreover, even now, the nine companies on our list are all valued in the hundreds of millions or more. Some are multibillion-dollar companies. UiPath, for instance, has an $8.4 billion market cap. C3 AI, a provider of configurable enterprise AI software that snagged the ticker symbol “AI,” is a $3 billion company.
Several of the companies are also generating sizable revenue. UiPath, for instance, has over $1 billion in sales for the past year, while C3 is in the hundreds of millions. But no, in case you are wondering, they’re not profitable.
AI hype meets market downturn
So what does it mean that AI-focused recently public companies are far off their highs even while buzz around the space is red hot? Is AI overhyped in startup circles? Is it underhyped in public markets?
Who knows. And either way, it seems unwise to make any sample set of companies serve as representative of AI’s potential. Also, it should be confessed, we did not vet the quality of AI technologies from companies in our sample. They could be down because progress has been slower than hoped or they are behind newer startups or older incumbents in technology or adoption. Or maybe not.
Additionally, although all the companies listed proudly and prominently tout their artificial intelligence focus on their websites, we didn’t assess how critical the technology is to their business models. We also didn’t quantify what portion of their resources go toward AI.
What we do know is this: It’s a tough time to be a very mature startup or newish public tech company. Investors seem weary of the kind of company that’s been around for a long time, has an established business model and growing revenue, but still loses money. It’s too late in the game to win them over with just a story and a vision.
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Illustration: Dom Guzman
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