Now is the time when we see the raindrops of artificial intelligence and AR/VR startups filling up the pool of the startup investments. While tech giants and investors are trying to scoop up the best AI, AR, and VR startups, how do we know who are good and who are not?
Richard Wang, a partner at DFJ DragonFund suggests looking into companies that are applying AI algorithms to verticals of these companies.
Over 550 startups using AI as a core part of their products raised US$ 5 billion in funding in 2016 according to CB Insights, and AR/VR startup investments hit US$ 2 billion in one year, according to Digi-Capital’s data published in 2016 Q2.
“In artificial intelligence, we are interested in companies with AI algorithms applied to verticals or enterprise applications,” Richard told TechNode. “We are interested in the verticals such as financial, medical, industrial sector.”
As an investment expert in artificial intelligence, fintech, and smart hardware, Richard Wang was a co-founder of OLEA Network and had 20 years of experience in the semiconductor industry before joining DFJ DragonFund in 2011.
AI companies
“An easy way to think about AI is when you think of your five senses. Outstanding AI startups have better sensors for Input and Output,” Richard says.
He mentioned two startups as examples. AiSense is a speech recognition and deep learning company that helps improve enterprise productivity by conducting data fusion of human to human conversation. When two people are having a conversation, AiSense will write down a meeting note, and let you know where, when, with whom, what did they say talk about. WestWell labs is another AI company that uses a neural network for enterprises.
“We are looking for a company doing neural network computer chips that will make robot’s image recognition much faster, more accurate, and localized, meaning it doesn’t have to go to the cloud to process the data,” Richard says.
AR/ VR companies
AR and VR companies with verticals in education, logistics, and manufacturing have higher chances of attracting this fund.
“Ideal AR glasses should have two things. Its hardware should have dual lenses, should use optical technology and it should be light. Its software should have a clear cut backend and provide a decent API or SDK (software development kit) to bring in third parties,” Richard remarks. “China’s AR technology is not so different from that of the US now. As for VR, the hardware still has room to be improved.”
For example, UltraVision (影创) is AR glasses for B2B companies and SculptrVR provides the platform to let users create their own VR social world. Users are able to create their own virtual world to interact with others, just like movie Matrix.
Silicon Valley to China
Headquartered in Silicon Valley, DFJ DragonFund manages USD and RMB funds, with a total investment of more than US$ 300 million in China and nearly 100 investment projects involving TMT, healthcare, and clean energy.
“There are 4 partners in Shanghai, and 2 partners in Silicon Valley,” he told us. “When we invest in Chinese companies, we benchmark Silicon Valley companies, and find the counterpart in China.”
USD funds are focused earlier-stage companies while RMB fund is focused on the later stage, who have revenue of several RMB million. In addition, 80% of the RMB fund goes to series A while only 20% goes into the angel round.
The DFJ DragonFund is a member of the Draper Venture Network, founded by Tim Draper, with companies and offices in more than 30 cities around the world. Funds are more than US$ 7 billion, invested into more than 600 projects, and put into more than 20 unicorn projects.
“DFJ Dragon invests in green tech, medical, semiconductor. For our USD fund, we invest in a lot of AI in vertical applications. We have 30, 40 portfolios in VR and AR companies, and self-driving technology deals in the Bay area. We focus a lot on new energy car, too,” Richard noted at Startup Grind event in Shanghai. “There is a huge opportunity in China, especially in enterprise software, AI, healthcare, such as genetics and hospital management.”