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AI start-up sets sights on going public with a valuation of more than US$1bn

Bloomberg

The promise of artificial intelligence has yet to translate into big business. Now, Lee Kai-fu (李開復), a prominent venture capitalist in China and founder of Sinovation Ventures (創新工場), said that his firm’s new start-up should be able to reach US$100 million in revenue next year and go public the year after.

AInnovation, established in March last year, develops artificial intelligence (AI) products for companies in industries such as retail, manufacturing and finance. Its customers include Mars Inc, Carlsberg A/S, Nestle SA, Foxconn Technology Group (富士康科技集團), China Everbright Bank Co (光大銀行) and Postal Savings Bank of China Co (中國郵政儲蓄銀行).

AInnovation CEO Hocking Xu (徐輝), a veteran of International Business Machines Corp and SAP SE, has hired staff that work with traditional companies to figure out how to take advantage of AI in their operations.

AInnovation is on track to hit US$100 million in revenue within two years of its founding, the fastest pace yet for such a start-up, Lee said.

“We took the approach of: ‘Let’s take some of the best businesspeople and let’s target the industries which need AI the most,’” he said.

Lee projected that AInnovation will be able to go public in less than two years at a valuation of US$1 billion to US$2 billion. The firm has raised about US$70 million from Sinovation, CICC ALPHA (中金甲子) and Chengwei Capital (成為資本).

As the company was funded with yuan, it would most likely list domestically, either on China’s new NASDAQ-like STAR Market or on ChiNext.

For retail companies, AInnovation sells products including a smart vending machine that opens with facial recognition and software that monitors retail shelves with image recognition.

It has created computer vision technology that detects defects on the production line for manufacturers and underwriting software and natural language processing technology for financial firms.

There is a large market in particular for technology to catch flaws early in the manufacturing process, said Jeffrey Ding, a researcher with Oxford’s Center for the Governance of AI.

That effort “aligns with the Chinese government’s priorities to upgrade smart manufacturing capabilities to compete with countries like Germany and Switzerland,” he said in an e-mail.

The former president of Google China, Lee founded Sinovation Ventures in 2009. It manages more than US$2 billion across seven funds in the US and Chinese currencies.

It holds shares in more than 300 companies, most of which are in China. Its investments include autonomous driving company Momenta, consumer AI chip firm Horizon Robotics Inc and bitcoin mining and AI chip company Bitmain Technologies Ltd.

In artificial intelligence, “we’re still at a very early stage in the commercialization,” Lee said. “We’re still at the equivalent of early Internet portals, back when everybody was using Yahoo and there wasn’t even a Google, Amazon, or Facebook.”

However, global economic ructions might present short-term challenges. Venture deals in China have been plummeting as investors pull back amid escalating trade tensions and slowing economic growth.

The value of investments in the country tumbled 77 percent to US$9.4 billion in the second quarter from a year earlier.

“In an economy that’s slowing down, everything slows, including venture capital. There will definitely be a shakeout,” Lee said. “The positive side is that if the economy is challenging, and valuations are down, it’s a good time for us to go shopping.”

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