The head of Bloomberg's $150M VC fund explains formula for finding an AI startup

The head of Bloomberg's $150M VC fund explains formula for finding an AI startup(businessinsider.com)

55 points by jerryhuang100 9 years ago | 20 comments

erdevs 9 years ago |

This is yet another clickbait-y title that overpromises and underdelivers. Little value, no specificity, and hardly any real description of a "formula" whatsoever. Here, though, is a tl;dr summary for one of the only concrete pieces of the "formula" actually described:

Bloomberg's early-stage VC fund will only invest in Series A or earlier companies. Then when looking at AI companies they ask two questions: "1) Do you have access to your own user? 2) Do you have access to a data set that's yours? If they have both those things, then they can create a virtuous cycle where the user contributes the data, the data gets better, and it makes for a better user experience."

Asking about access and usage rights to data and means of applying learnings from the data is a very obvious qualifier, so there is little valuable insight here.

tlb 9 years ago | |

Many AI startups don't have (1) because they provide a service to someone else who has the relationship with the user. For example, startups that provide APIs for image classification, e-commerce fraud risk estimation, ad targeting, or product recommendation. I believe there will be big winners in the API space too, but they'll look different from consumer-facing companies.

cocktailpeanuts 9 years ago | | |

It's hard to become extremely successful (I'm talking Google/Facebook scale) if you don't have access to your users. It's much easier to build a consumer product that provides an experience 10 times better than what's on the market, than building a technology that is 10 times better than what's on the market. And even when you do come up with something like that, unless you actually capture your own customer (which brings us back to "having access to your users"), others will end up copying you or commoditize you.

nostrademons 9 years ago | | |

They still have (2), right? An image classification startup that provides services to other companies will see more images than competing firms, which lets them train their models on more data, which gives them better quality models than competitors. Ditto fraud detection, ad targeting, or product recommendation (within a specific vertical, at least).

It seems like it'd be hard to build a durable competitive advantage without either owning the user relationships or owning the data, correct? Such a company would be just an algorithm and some tools around it, which are relatively easy for a competitor to copy.

erdevs 9 years ago | | |

Yes, I only meant it's an obvious question to ask to qualify the sort of AI startup. Agree there can be winners without this qualification but it's an obvious distinction to be noted.

ganeshkrishnan 9 years ago | |

Some AI cannot have access to data set that's "ours" because it makes little sense.

We are trying to cluster user personalities and match it with our text corpus cluster in order to find the best documents matching the user's personality. For us Wikipedia raw data suffices since it's counterproductive to use proprietary searchable text corpus.

While the VCs viewpoint is totally understandable from their perspective, always chasing money & valuation gets aggravating for us startups.

Animats 9 years ago |

Summary: "Bloomberg Beta tends to ask two questions of its potential investments: 1) Do you have access to your own user? 2) Do you have access to a data set that's yours?"

Business today: can you cut off their air supply, or can they cut off your air supply?

danieltillett 9 years ago | |

I am pretty sure that is the way business has always been. JD Rockefeller didn't get rich playing nice.

pbiggar 9 years ago |

Disappointed that the answer isn't "We use AI to do it."

mtbomb 9 years ago |

Just feed the data into an ML algorithm.

appleflaxen 9 years ago |

> and cofounder and chairman of gaming console OUYA

I can't imagine why this would be a good thing to draw attention to.

OUYA's execution was bad enough that it went out of business.

Retra 9 years ago | |

Are you looking for white-washing or journalism?

SwellJoe 9 years ago |

As someone that has seen AI come and go through multiple "AI winters", I'm amused to see it coming back around. Of course, it's totally gonna work this time!

Actually, I believe we really are on the cusp of a very different world of software, due to AI. But, it's been a long time coming, and a lot of great minds have kinda gotten lost in the academic pursuit of AI.

drdrey 9 years ago |

"A number of executives at Bloomberg realized technology was being developed in the startup world they were only seeing once it was mature enough to be ready for Bloomberg, but that was often too late to be able to fully understand it."

That's a peculiar way to think about new technology, to say the least. "Too late to fully understand it", really?

yalogin 9 years ago | |

They probably mean they could have used the tech early on to gain an advantage over their competitors. But if they waited till it matured then they are no different than anyone else.

danieltillett 9 years ago |

Having unique data is incredibly important if you are going to build a business around better data analysis. You can live without direct access to end customers, but without access to unique data you are just playing the game of my people are smarter than your people.

nxzero 9 years ago |

Believing that only AI startups that will make it big are ones that don't own the data or end user seems like an obviously flawed filter; for example, imagine if someone demand AirBNB or Uber owned the property they ultimately profited from.

srtjstjsj 9 years ago | |

AirBNB or Uber both have access to their user and have a proprietary data set.

tlb 9 years ago | |

Every investor's filter excludes some winners. But they have to focus on a segment or they'll be spread too thin.

obmelvin 9 years ago | |

Those aren't AI based products...