Spotlight on the UK’s flourishing Artificial Intelligence start-up scene

Originally posted for and on Crowdcube in June 2016 — see original blog post here.

Recently Twitter announced its $150m acquisition of Magic Pony, which has yet again put the spotlight on the UK’s burgeoning A.I. (Artificial Intelligence) tech scene. Equity investments in A.I. just saw a record-breaking 143 deals in Q1 globally, according to research firm CB insights, including an increasing amount of corporate VCs getting involved. Khosla Ventures, Intel Capital, Data Collective and Google Ventures led the rankings as being the most active investors in the space since 2011.

Putting aside A.I.’s popularised science fiction connotations, it is useful to define A.I. in this context as primarily referring to cognitive computing. In other words, the development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.

Over the course of the last 5 years, Crowdcube has had the pleasure to work with some of the UK’s most exciting entrepreneurs including a number of A.I.-powered start-ups. We recently caught up with Kwiziq — an A.I. language coach that helps people learn a second language — to get their thoughts on the sector and find out how they had progressed since raising £200k from 67 investors in August last year.

Gareth Davies, co-founder & CEO of Kwiziq said: “I believe A.I. is the future of education. I think it’s one of the most exciting areas to be working in. In fact, Wendy and Joe White (Kwiziq board advisors and close friends) are general partners of Entrepreneur First. They helped create and sell Magic Pony. At Kwiziq we are using a number of A.I. techniques to solve the problem intermediate students experience learning online. Learning a language is a highly non-linear process and all students beyond the beginner level have unique needs. We use A.I. to work out what those needs are and match that to learning content, both our own and 3rd party. Everyone can learn a language faster with intelligent help!”

Kwiziq raised investment in order to further develop their product range and accelerate R&D. They have since seen 14% average monthly revenue growth, are soon to hit half a million ‘Kwizzes’ taken and their user base is up 215% — all achieved without having spent a penny on marketing. We are excited to see what they have in store with their planned site redesign in July.

Indeed for A.I. start-ups with a clear B2C focus, raising investment via equity crowdfunding can make a lot of sense from a user acquisition point of view — as demonstrated by #FundedClub company, Kwiziq. But even for non consumer-oriented start-ups, running a crowdfunding campaign can be an important exercise in educating the wider public about the remarkable applications A.I. can have for businesses or enterprise. It can also very much lead to surprising outcomes: whether it be finding that new PhD recruit, signing on a new strategic partnership or securing key press coverage — the benefits of running a highly public fund-raise are abundant.

One of the reasons there has been increasing investor interest is also as mergers and acquisitions in the space has also been rising steadily. CB insights finds that most A.I. start-ups were acquired within the first 4 years of initial funding, making the potential timeline for returns very attractive. Undeniably, the UK has been at the forefront of this revolution and has seen a host of successful exits in the space. From Google’s $600m acquisition of Deepmind in 2014 to Apple’s acquisition of Vocal IQ, a Cambridge University spin-out, in late 2015 or more recently Microsoft’s $250m acquisition of Swiftkey — who develops text prediction software for mobile devices — in Feb 2016, US tech titans have been actively hunting for great technology and talent to join their teams. With 24 exits to date this year, it paints an attractive growth story for the market.

As the UK’s most prolific equity investor two years running, we are hugely excited by the space and will continue to help fund A.I. start-ups as well as democratise access to these types of potentially highly lucrative investments.