Chinese AI startups raised a whopping US$5 billion in venture capital funding in 2017, outpacing the US

Chinese AI startups overtook their American counterparts for venture capital investments, taking away US$5 billion. That’s according to a recently released report published by ABI research, a market-foresight advisory firm providing strategic guidance on the most compelling transformative technologies. This report supports recent stories we’ve written about AI startup activities in China. Last month, we wrote about SenseTime, the world’s most valuable AI startup, that is now valued at $4.5 billion. In addition, AI is getting a lot of support from the Chinese government.

The Chinese Government is also adding Artificial Intelligence into the high school curriculum, unveils mandated high school AI textbook. In summer of 2017, China unveiled a plan to become the world’s leader in artificial intelligence, challenging the United States of its dominance of the technology. China is not alone, French President, Emmanuel Macron, in a Q&A interview with Wired Magazine of the country’s to spend nearly $2 billion on AI research and development. As part of China’s plan to dominate and rule AI, China Ministry of Industry and Information Technology issued 28-page document with a “Three-year Action Plan for the Development of a New Generation of Artificial Intelligence Industry (2018-2020).” This report also shows that investors are beginning to have confident with technologies developed by Chinese startups, their business strategies, and market potential.

Chinese AI startups raised US$5 billion in venture capital funding in 2017 and overtook their U.S. counterparts, found ABI research, a market-foresight advisory firm providing strategic guidance on the most compelling transformative technologies. This shows that investors are confident with the technologies developed by Chinese startups, their business strategies, and market potential.

The overall investment values for AI startups increased year on year by a staggering 150% globally in 2017, growing from US$4 billion in 2016 to US$10.7 billion in 2017. Contrary to their U.S. counterparts who raised US$4.4 billion of investment from 155 investments, Chinese startups raised US$4.9 billion from merely 19 investments, indicating a sharp focus by the investors on mature AI applications with strong commercial viability and successful use cases. In addition, the influence of the Chinese government plays a key role in attracting investment in AI startups. “The bullish sentiment shared among Chinese investors is a clear sign that China is going all-in in artificial intelligence (AI). The government of China is setting clear policy guidelines for the future development of AI and startups are responding with cutting edge AI technologies across many industries,” said Lian Jye Su, a Principal Analyst at ABI Research.

In contrast, Europe seems to have long-term strategic objectives as far as AI investments are concerned. Startups in the region have diversified interests across different industries and verticals, mainly for use cases such as cybersecurity, digital ID, public safety, healthcare, and IoT. The United States, on the other hand, takes a more balanced approach between short-term investments that could translate into immediate commercial opportunities and long-term transformative technologies targeting key sectors such as automotive, agriculture, finance, cloud robotics platform and insurance.

Among all the Chinese startups, Bytedance walks away with the highest funding. The creator of Toutiao, a personalized news aggregation app, and Douyin, a personalized video clip app, has raised over US$3 billion in investment and is enormously popular among Chinese youth, due to its content personalization and curation algorithms. Another sector that received a lot of attention was facial recognition. SenseTime and Face++ managed to raise significant funding due to the adoption of facial recognition technologies by various public agencies, payment and e-commerce companies.

Chinese startups are not merely focusing on software development only as it is the case in many other industry sectors but are also deeply involved with AI chipset innovation. Cambricon Technologies and Horizon Robotics have raised US$100 million in Series A funding respectively to design and manufacture purpose-built AI chipset for machine vision. The aim to launch a ‘Made in China’ chipset is one of the key priorities of the Chinese government. Previous attempts have been futile, but the technologies developed by Cambricon Technologies and Horizon Robotics seem to be promising. Cambricon’s chipset IP has been integrated into Huawei’s premium smartphones, while Horizon Robotics focuses heavily on machine vision in the automotive industry. Such a multi-prong AI investment approach in both hardware and software will ensure that the Chinese AI ecosystem continues to flourish, innovate, and stay ahead of the competition.

“While 2017 was a roaring success for Chinese startups, the real fruits and impact will be felt in 2018 and beyond. Already we are seeing a few startups launching new products, venturing into new business, or being acquired in 2018,” says Su. Unisound, for instance, released one of the first Made in China AI chipsets for natural language processing in 2018; Xilinx, a U.S.-based field programmable gate array (FPGA) vendor, acquired DeePhi Tech, a Beijing-based startup focusing on deep learning optimization.

These findings are from ABI Research’s AI Investment Monitor 2017. This report is part of the company’s AI & Machine Learning research service, which includes research, data, and Executive Foresights.