Octopus Ventures, the 10-year-old British venture capital firm that has backed three high-profile artificial intelligence start-ups acquired by US tech giants, has raised a fresh £120m tranche of funding to invest in new AI talent in the UK.
The £660m venture fund, which is the tech investing arm of UK fund management business Octopus Group, invested in natural language processing company Evi Technologies, predictive keyboard maker Swiftkey and AI video start-up Magic Pony, sold to Amazon, Microsoft and Twitter respectively.
Octopus has also backed several other successful British companies such as Lovefilm, which was also bought by Amazon, and property website Zoopla; but the three AI start-ups in its portfolio have led the firm to develop a specialism in such early-stage companies.
The industry could be extremely lucrative for the UK: Accenture, the consultancy, has estimated that AI could add up to £654bn to the national economy by 2035.
“Evi Technologies in Cambridge was sold to Amazon and now powers Alexa, the voice-activated speaker. We also backed Swiftkey which went to Microsoft last year [for $250m] and made a seed investment in Magic Pony, which went to Twitter [for $150m],” said Alex Macpherson, chief executive of Octopus Ventures.
“We have expertise in the machine-learning field, but the challenge today is pretty much every business that comes through to us is machine learning or artificial intelligence.”
Octopus is currently in discussions with two new British AI start-ups to provide seed funding from its fund over the coming months.
British AI skills have been particularly appealing to international companies, including the big US tech businesses such as Google, Apple and Uber.
In 2014, Google paid $400m for DeepMind, a London start-up that is now arguably a world leader in AI with a team of more than 250 academic experts in the fields of deep learning and machine intelligence.
A year later, Apple acquired UK-based speech technology start-up VocalIQ, and last December, Uber bought Geometric Intelligence, a partly Cambridge, UK-based AI start-up, to staff its new AI lab focused on transport.
It is not just the Americans looking to Britain to exploit AI expertise: late last year, Chinese private equity firm CSC Group funded an AI incubator in Britain, in a multimillion-pound partnership with British start-up incubator Founders Factory, led by entrepreneur and investor Brent Hoberman.
The goal was to invest in and grow five early-stage AI start-ups and launch two companies from scratch each year. “The UK has innovative artificial intelligence technology,” said Dania Zhou, senior managing director of CSC Group, who has been overseeing the deal. “We want to fuse the technology we find in the UK with the Chinese market.”
Ultimately, Octopus wants to build British companies that become world leaders in their own right. Mr Macpherson said: “Our whole concept is how can we help support British entrepreneurs to take their business the whole way, and not sell out to the Americans or others a bit too early.”