May 26, 2017 / 7:30 PM / 2 months ago

Acquisitions accelerate as tech giants seek to build AI smarts

4 Min Read

FILE PHOTO: The Apple logo is pictured inside the newly opened Omotesando Apple store at a shopping district in Tokyo June 26, 2014.Yuya Shino/File Photo

SAN FRANCISCO (Reuters) - A total of 34 artificial intelligence startups were acquired in the first quarter of this year, more than twice the amount of activity in the year-ago quarter, according to the research firm CB Insights.

Tech giants seeking to reinforce their leads in artificial intelligence or make up for lost ground have been the most aggressive buyers. Alphabet Inc's (GOOGL.O) Google has acquired 11 AI startups since 2012, the most of any firm, followed by Apple Inc (AAPL.O), Facebook Inc (FB.O) and Intel Corp (INTC.O), respectively, according to CB Insights.

The companies declined to comment on their acquisition strategies. A spokesman for Apple did confirm the company's recent purchase of Lattice Data, a startup that specializes in working with unstructured data.

The first quarter also saw one of the largest deals to date as Ford Motor Co (F.N) invested $1 billion in Argo AI, founded by former executives on self-driving teams at Google and Uber Technologies Inc [UBER.UL].

Startups are looking to go deep on applications of artificial intelligence to specific fields, such as health and retail, industry observers say, rather than compete directly with established companies.

“What you will see is very big players will build platform services, and startup communities will migrate more to applied intelligent apps,” said Matt McIlwain, managing director of Madrona Venture Group.

Healthcare startup Forward, for example, is using artificial intelligence to crunch data that can inform doctors’ recommendations.

“For people who really want to focus on core AI problems, it makes a lot of sense to be in bigger companies,” said Forward Chief Executive Officer Adrian Aoun, who previously worked at Google. “But for folks who really want to prove a new field, a new area, it makes more sense to be separate.”

Artificial intelligence companies that do remain independent field a steady stream of suitors: Matthew Zeiler, chief executive of Clarifai, which specializes in image and video recognition, said he has been approached about a dozen times by prospective acquirers since starting the company in late 2013.

Clarifai’s pitch to customers such as consumer goods company Unilever Plc (ULVR.L) and hotel search firm Trivago is bolstered by its narrow focus on artificial intelligence.

“(Google) literally competes with almost every company on the planet,” Zeiler said. “Are you going to trust them with being your partner for AI?”

Tech giants have been locked in a bidding war for academics specializing in artificial intelligence. Startups rarely have the capital to compete, but a company with a specialized mission can win over recruits, said Vic Gundotra, chief executive of AliveCor, which makes an AI-driven portable heart monitor.

“They say, ‘I want to come here and work on a project that might save my mother’s life,’” Gundotra said.

Reporting by Julia Love; Editing by Jonathan Weber and Lisa Shumaker

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