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UK Artificial Intelligence activity map

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As a UK-focused venture capital investor, Oxford Capital is fortunate that the UK is a world leader in AI (although to avoid topical accusations of British exceptionalism, it’s definitely worth mentioning that there are centres of excellence in AI and machine learning (ML) throughout Europe). We have just completed an as-yet undisclosed investment in the AI space, and we’re evaluating several other opportunities. Along with taking an interest in AI companies that approach us for funding, we’ve mapped out recent activity in the sector across the UK. The map below (larger version here) shows that clusters of AI activity are emerging, particularly around Oxford, Cambridge in London, in three key areas:


Talent pools and research centres

Innovation starts with talented individuals, and AI is no exception. Many of the UK’s most respected universities have AI research groups, such as the Intelligent Systems group within UCL and the joint Oxford-Cambridge Strategic AI Research Centre. Interestingly, several dedicated AI research institutes have been funded and founded in the last few years, such as the Turing institute in London.


Financial and strategic investors

It’s no surprise that venture capital investors are very interested in AI. Financial investors have backed AI companies across the UK, from Edinburgh to Bristol, but of particular interest are the investments made by strategic players like Google in pre-commercial teams or academic research groups. For instance Google made a “substantial” donation to the University of Oxford to fund AI research in 2014.


Exits

Interest at the team and funding level has continued at the exit stage. The UK has amassed a strong track record in AI exits in a few short years, with high value exits in young or pre-commercial companies (e.g. Magic Pony and Deepmind) and more established commercial businesses (e.g. SwiftKey) alike.

Whether you’re involved with a company in the space looking for funding, would like to add something I’ve missed or have a different view, we’d love to hear from you – do get in touch.

 

Estimated reading time: 2 min

 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
    2. These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.