Recently, World Financial Symposiums (WFS) held its latest Growth and Exit Strategies (GXS) Conference. The GXS Conference is a regularly scheduled, half-day WFS event specifically designed for tech CEOs, founders, and investors centered around tech M&A, covering topics such as investments, growth strategies, buyouts, sales, and mergers. It brings together private equity, venture capital, investors, accelerators, strategic and financial buyers, and many M&A experts and CEOs who have built and sold their own tech companies.
The theme of the conference was the AI shockwave, that is, how artificial intelligence (AI) is disrupting the tech market. During the conference three panels of investors, buyers, and sellers, respectively, shared their insights and tips on a variety of subjects. In addition, Corum executives presented information on various topics of interest. This multi-part article summarizes some of the significant insights about AI covered during the event.
This first part of the series of articles focuses on insights from Timothy Goddard, Executive Vice President of Corporate Strategies at Corum about how Generative AI is one of the top disruptive trends for 2024. It also covers some of the key statements about AI aired during the investors panel.
Companies are already generating revenue from Gen AI
Every year Corum uses its unparalleled insights into the tech M&A marketplace to develop what it sees as the top 10 disruptive trends that are driving tech M&A. Generative artificial intelligence (Gen AI) enablement is one of the top 10 disruptive trends for 2024. Gen AI uses artificial intelligence technology to create content that mimics what a human can create. That technology is already enabling a wide variety of applications ‒ from chabots, to medical imaging diagnostic assists, to virtual reality development tools.
According to Timothy Goddard, Executive Vice President of Corporate Strategies at Corum, tech companies are already generating real revenue from Gen AI. And that is bringing those companies to the attention of prospective buyers. Goddard pointed out that companies that benefit from Gen AI, for instance, those building tools and applications based on Gen AI, as well as companies that enable it, are in demand. As for the latter, Goddard noted that companies that can address the infrastructure needs of Gen AI are of interest. This includes those that can provide the management, quality assurance, compliance, orchestration, training, and customization needed by the large language models used in Gen AI. So too are companies that can address the compute power and electrical power required by the technology.
However, Goddard added a word of warning. "The heat in the Gen AI market is a double-edged sword for smaller tech companies. If you've built exciting tools in this space, you're likely seeing significant customer interest and will see significant buyer interest if you go to market now. But all the major players are betting on this space, and what's unique and highly valuable today, may be eclipsed tomorrow. We strongly encourage companies in this space, in particular, to calibrate the market today and find a partner to help them weather the exciting, competitive future of generative AI.”
Investors are focusing on leading-edge AI applications and use cases
AI was also a key topic of discussion in the investor panel discussion. The panelists were:
Michael Marks, Founding General Partner at Celesta Capital, a venture capital firm focused on accelerating and scaling disruptive global technology companies.
Pratima Aiyagari, Partner at Nauta Capital, a venture capital firm that invests in early-stage B2B software companies in Europe.
Peter Ackerson, General Partner at Audere Capital, a venture capital firm that invests in critical technologies that drive societal resilience, including artificial intelligence, robotics, and automation.
Anne Balduzzi, Founder at SameGrain, an AI-enabled community engagement platform.
Michael Marks noted that while companies such as OpenAI that provide large language models and other basic AI tools, are getting a lot of general attention, it is really the companies that can provide specific leading-edge AI-based applications that will get the attention of investors. As an example, he pointed to a company in Celesta's portfolio called Whiterabbit.ai that uses AI to read mammograms, and in doing so, improve detection of early-stage breast cancer. Marks said, "The technology already can read a mammogram way better than any radiologist, and that's just an example. It's a very simple, small one, but there are lots of those ‒ from fraud detection, to various kinds of image processing, and so on. It's very exciting.”
Pratima Aiyagari pointed out that U.S. venture capitalists have already spent $18.3 billion in AI investments this year, and if it continues at the current pace, it would mean over $50 billion in VC investments for the entire year. However, she feels investors need to be cautious and understand the value of what these companies can actually deliver. She and the other panelists agreed that some companies claiming to be AI providers are simply wrapping AI around the functionality they always provide. As an example of a company that is providing real value with AI, Aiyagari cited one of Nauta's portfolio companies, a company that operates in the retail tech space. Aiyagari said, "They're using computer vision models to detect things such as how quickly stock is being depleted, where the stock is needed, and whether the stock is properly positioned on the shelves. These are things that previously required people to verify in person. Now they can be done with vision models.”
Anne Balduzzi had another perspective on which companies will be successful in the AI market. Her view was that companies with the best shot at success will be those that have proprietary data. Because, she said, "Data is what feeds AI. And if you have proprietary datasets that nobody else has, that's certainly going to set you apart from your competition. She also noted that people have not quite yet realized how competitive things are going to get, and how easy it might get for young startups to displace larger companies.
Peter Ackerson agreed that data is a fundamental part of the AI equation for investors. He noted that, "AI represents not just the algorithm. You have to look at it through the lens of the data and the entire product stack in order to really understand who's got something and who doesn't. Ackerman also laid out his vision regarding which companies will have long-term success in this space. "There will be massive companies built. But it is not necessarily going to be the first, and it is not necessarily going to be the most widely recognized that captures long term value. Some of them will do it on the application side. Some of them will do it on the picks and shovels side. And some of them will do it in ways that we don't know yet because the business model hasn't been created.” As far as investors in this market, Ackerman felt those will do well if they're building and investing into this space in a shrewd way, because he said, “there's no question that this is the big wave.”
Tech M&A Master Class
Produced by WFS, the Tech M&A Master Class is 2-day/2-night interactive workshop covering all the must-knows of M&A for Tech CEOs and founders. You’ll learn from our experienced speakers, all CEOs who’ve navigated the M&A process. They will share proven best practices and the most effective tools to set your company up for a successful process.
Here is the schedule of upcoming Tech Master Classes: