While much of our attention has been focused on the seemingly never-ending bull market – pandemic and economic reality be damned – it’s hard not to notice just how much money is being poured into the private market. Global funding to startups in the second quarter of this year was $156 billion. That’s just three months, and represents a 157% increase compared to a year ago. Nearly half of that capital – $70 billion – was raised in the United States. During the same time period, more than 130 companies had their valuation hit $1 billion or more. These so-called unicorns are becoming less rare over time: There were 128 companies valued at $1 billion or more born in all of 2020.
All of these fun factoids come from the big brains at CB Insights, which tracks the startup scene like a pimply teenager in heat, especially when it comes to companies with sky-high valuations. As of August 2021, there were more than 800 companies priced at $1 billion or more with a combined value of $2.6 trillion. About 100 of those startups are classified primarily as AI companies, meaning their business model relies on providing goods and services around machine learning, computer vision, and all of the other types of technologies where machines mimic human capabilities. We’ve covered about 75% of that list, which tells us we’ve been doing a pretty good job of keeping track of the leading companies in the field of AI.
What is Enterprise AI?
But that still leaves about 25 companies that have yet to come across our radar. The biggest chunk of those remaining offer enterprise AI solutions – a term, like unicorn, which is becoming less meaningful over time. Or maybe the meaning is becoming more slippery, as AI becomes as ubiquitous as electricity. On one end, enterprise AI solutions might encompass a company’s full technology stack, where data and algorithms churn out analytics that help drive decisions across the enterprise. On the flip side, AI for enterprises may tackle specific tasks or problems. We’ve covered a bunch of these AI enterprise companies over the years, and even invested in some. So, how would we define enterprise AI?
We know that AI algorithms can do great things if they’re fed loads of big data. A company might try to do this alone. If their name is Walmart, then maybe they have enough big data. But for most companies, it’s better to solve a very specific problem using specialized AI algorithms that do the same thing, over and over, across many different organizations – enterprise AI. Such a solution is almost always sold using an attractive software-as-a–service (SaaS) business model.
As investors, we’re constantly monitoring the competition, particularly among the most well-funded startups that are gaining traction. In the remainder of this article, we’ll introduce you to five AI enterprise companies that you should keep an eye on, especially if you’re already invested in some of the more popular enterprise AI stocks such as Palantir (PLTR).
Moving in the Right Direction
Founded in 2016, Silicon Valley-based Moveworks moved into the unicorn club this summer after it raised a $200 million Series C at the end of June, bringing total funding to $305 million and raising its value to $2.1 billion. Its investors include a lot of big names in the venture capital world, such as Kleiner Perkins, Sapphire Ventures, Lightspeed Venture Partners, Bain Capital, and the most prolific unicorn-maker of all, Tiger Global Management, which has backed more than 100 of these highly valued companies. Moveworks has spent the last five years developing a chatbot for enterprises that not only answers questions but can unlock employee accounts and even grant access to cloud-based software. The platform integrates with popular knowledge bases like SharePoint, which it searches to answer life-changing questions like, “How much PTO do I get under the new policy?”
The company recently upped the game of its conversational AI with Adaptive Response, which uses machine learning like in the above example to tailor answers to even the most lazy ambiguous questions. Noteworthy customers include Autodesk, Slack, and Unity, among others.
A New Paradigm
Founded in 2014, Beijing-based 4Paradigm may not be a startup much longer, as news recently broke that the enterprise AI company plans to IPO on the Hong Kong exchange. The Chinese startup has raised $1.1 billion with a valuation of $2 billion, which it earned back in 2018. However, it’s unclear if this past January’s $700 million Series D factored into its overall value. It has about three dozen investors, with quite a few names familiar to Americans, such as Sequoia Capital, Goldman Sachs, Lenovo, and Cisco. 4Paradigm also has the backing of at least five of China’s major banks, which reflects its early focus on applying AI to improve financial services such as smart collection, anti-fraud applications, and liquidity management. The company has since expanded its platform to include retail, healthcare, and other industries.
4Paradigm reportedly has more than 8,000 customers and works with more than 80% of state-owned and joint-stock commercial banks in China.
Enterprise Forecasting
Founded in 2009 and valued at $1 billion, o9 Solutions out of Dallas, Texas has raised $122 million, with most of the cash coming last year in a $100 million Private Equity Round from KKR Inc., an alternative asset investment firm. The startup represents enterprise AI classic: It uses artificial intelligence for business planning, particularly around product forecasting and market demand, by ingesting all sorts of delicious internal and external data. For example, it can tap internal sources of information such as procurement and CRM, as well as tap into external ones such as consumer demographics and IoT data. Of course, that’s the simple version. Here’s an illustration of the Digital Brain for businesses with more nuance:
So, what does this mean in the real world? Take the use case of a multinational coffee roaster and retailer with more than 30,000 retail locations: There were plenty of problems aside from the store associates getting high between shots of espresso. For example, there was loads of food waste due to inaccurate forecasting. The o9 Digital Brain was able to improve forecasting at a store/SKU level by incorporating indicators such as weather and local events, like an Insomniacs Anonymous Convention.
Amped on Customer Data
Founded in 2016 and valued at $1 billion, Seattle-based Amperity has developed an enterprise AI platform around customer data. The startup has raised $187 million, with a big boost coming in July from a $100 million Series D. Tiger Global has backed several rounds, and former NFL quarterback Joe Montana was an early investor, for whatever that’s worth. The company leverages AI to help its clients – brands like Wyndham Hotels & Resorts, Michaels, DICK’S Sporting Goods, and Cost Plus World Market – to really get to know its customers. Amperity’s Customer Data Platform Hoovers up data points like in-store visits, web traffic, mobile usage, loyalty programs, and more to create a unified data stream that identifies customers, creates a Customer 360 profile, understands customers’ interests, and develops analytics to predict their intent.
Again, we want to know what all this means in the real world. In the case of Alaska Airlines, it wanted to be able to deliver the right message to its customers but its data was scattered across reservations, loyalty, and mobile app systems. Amperity helped to corral all the data into a Customer 360 so that it could connect to customers with personalized messages about their trip – mainly that it would be delayed. Again.
The Search for Relevance
Founded way back in 2005, Coveo is a Canadian company that has amassed nearly $340 million at a valuation of $1.1 billion for its enterprise AI tech, which is kind of like Moveworks but different. The Coveo Relevance Cloud uses AI to enhance search engines for both consumer-facing (think e-commerce) and internal company applications like those supported by Moveworks’ chatbots. For example, take one of the latest features, something called Coveo Smart Snippets, which analyzes search inputs from a customer and then offers a snapshot of the answer within search results. The platform also uses machine learning to intuit intent, based on previous experiences with other users.
The idea is that these intelligent search and recommendation systems get smarter over time as they learn what kind of porn experience users are after. Coveo claims it has implemented more than 1,500 of its search engines, with the base model starting at $600 a month. Clients include Dell and Motorola Solutions, among others.
Conclusion
As noted earlier, enterprise AI can encompass numerous business automation software solutions beyond those we’ve covered today. One of the more basic and ubiquitous these days is robotic process automation (RPA), where bots do the back-office grunt work – the sort of jobs where failed MBAs used to go to die.
Overall, we like enterprise AI stocks, because most use SaaS business models which are often accompanied by rapid growth, high margins, and predictable diversified recurring revenue streams. We’ll continue to track the unicorns on this list and check back if any of them are headed to the greener pastures of the public markets.
Four of the five AI stocks we’re holding are SaaS businesses, some selling RPA software. Become a Nanalyze Premium annual member and get immediate access to our entire tech stock portfolio, our catalog of over 360 tech stocks, trade alerts, and much more.
Source: nanalyze.com
