Artificial Intelligence Investment Banking + M&A Advisory · PDF fileArtificial Intelligence Investment Banking + M&A Advisory Artificial Intelligence M&A and VC Funding Update Q2

Artificial Intelligence Investment Banking + M&A Advisory

Artificial Intelligence M&A and VC Funding Update Q2 and YTD 2017 August 1, 2017

Table of Contents

• M&A Market Brief – Page 3

• Global M&A Deal Value & Artificial Intelligence Investment Activity– Page 4

• Artificial Intelligence M&A Activity – Page 5-7

• Artificial Intelligence M&A Market Trends - Global Comparison – Page 8-9

• 2017 Artificial Intelligence Trends – Page 10-13

• Notable AI VC Fundings, 2017 – Page 14-15

• Notable AI M&A Transactions, 2017 – Page 16-18

• M&A Spotlight: Ford/ ArgoAI– Page 19

• M&A Spotlight: Intel/ Mobileye– Page 19

• M&A Spotlight: Microsoft/ Maluuba– Page 20

• VC Spotlight: Element AI – Page 21

• VC Spotlight: NIO – Page 21

DISCLAIMER

The information contained herein is of a general nature and is not intended to address the circumstances of any particular company,

individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it will continue to be accurate in the future. We perform our own research

and also use third party research. No one should act on such information without appropriate professional advice after a thorough

examination of the particular situation. This is not an offer or recommendation to buy or sell securities nor is it a recommendation

to merge, acquire, sell or exit a specific company or entity. We do not hold any equity or debt position in any of the securities listed

herein as of the date of this report.

Sources for our research and data include: PitchBook, MergerMarket, Wall Street Journal, Company Websites, SEC Filings, Bloomberg, TechCrunch, MergerMarket, MIT Review, and CB Insights

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M&A Market Brief Global, U.S. and Artifical Intelligence M&A Activity Q2 2017

Worldwide

•Global M&A activity in Q2 2017 was USD $793.9 billion - deal value increased by 6.36% compared to Q1 2017.

•The first six months of 2017 proved the middle market’s most productive first half in 10 years, inking 5,620 deals, according to Thompson Reuters.

•Global M&A activity has been motivated by limited organic growth options and the need to address the business model transformation that is occurringacross industries. Example, Amazon's acquisition of Whole Foods Market.

•Technological disruption is an important deal motivator. Companies involved in M&A are most interested in acquiring relevant technologies and responding to transformation in their industry as well as a desire to expand on their products. Established businesses are modernizing through technology focused deals, making traditional industry boundaries blurry and unconventional.

• High liquidity, access to cheap financing, healthy balance sheets and a need to demonstrate growth to shareholders via M&A all provide a positive outlook for the remainder of 2017.

United States

• Sluggish international growth and global uncertainty has made the United States a favored destination for M&A activity. Western Europe is the next preferred destination for M&A deals.

• Large amount of available capital, increased corporate acquisition activity and buying power, improved financing markets and expected policy reforms from the new administration position 2017 to be a strong year for M&A activity.

• The total value of U.S. deals fell sharply due to uncertainty about President Donald Trump's tax reform and deregulation agenda.

• U.S. M&A dropped 36 percent to $281 billion in Q2 2017.

ArtificialIntelligence

•The total capital invested in Artificial Intelligence companies has already reached an all-time high of $22.9 Billion this year at a deal count of 914.

•Q1’17 maintains the most active AI M&A quarter status in terms of deal volume as Q2’17 registers lesser number of deals. Overall deal activity is up both YoY as well as quarterly when compared to previous years.

•As Venture Funding continues to increase, 2017 saw an exponential growth in AI M&A activity as well as PE funding in terms of the total capital investment. An increase in the early stage and late stage VC funding as compared to previous years suggests a positive M&A market in the future.

•Investments in Artificial Intelligence from the Middle East increased steeply in 2017 as the year also witnessed a dip in capital from the States.

•Israel- the reason behind the spike in Middle East investments –represents 26.33% of the capital invested in AI. United States continues to hold a strong 49.43% of the total share.

Artificial Intelligence

Investment Banking + M&A Advisory

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Global M&A Deal Value — Quarterly Comparison

Source: MergerMarket and Wall Street Journal IB scorecard

Global Artificial Intelligence Investment Activity The total capital invested in Artificial Intelligence companies has already reached an all-time high of $22.9 Billion this year at a deal count of 914.

Source: Solganick & Co. Analysis, Pitchbook



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Artificial Intelligence M&A Activity Q1’17 maintains the most active quarter status in terms of deal volume as Q2’17 registers lesser number of deals. Overall deal activity is up both YoY as well as quarterly when compared to previous years.

M&A Deals

Over 250 private companies using AI algorithms across different verticals have been acquired since 2012, with 37 acquisitions taking place in Q1’17 alone and 23 in Q2’17. Source: CB Insights, The Race for AI



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Capital Invested by Universe As Venture Funding continues to increase, 2017 saw an exponential growth in Artificial Intelligence M&A activity as well as Private Equity funding in terms of the total capital investment.




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Deal Count by Deal Type The growing M&A volume in Artificial Intelligence accounts for a 6.04% of the total deal count as different stages of VC funding holds majority share. There is also an increase in the early stage and late stage VC funding as compared to previous years suggesting a positive M&A market in the future.




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Artificial Intelligence M&A Market Trends – Global Comparision Capital Invested by Global Regions Investments in Artificial Intelligence from the Middle East increased steeply in 2017 as the year also witnessed a dip in capital from the States. Asia has also picked up its share of AI investments when compared to last year.




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Capital Invested by Countries Israel- the reason behind the spike in Middle East investments – represents 26.33% of the capital invested. United States continues to hold a strong 49.43% of the total share.




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2017 Artificial Intelligence Trends As more startups emerge in the Artificial Intelligence space, the 100 startups below are leading transformation in different industries through artificial intelligence. They have raised a total of $3.8 billion in funding across 263 deals since 2012.

Source: CB Insights



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VC Capital Investments Deal size continues to mature in the Artificial Intelligence Venture funding, also ensuring higher valuations for the growth startups




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Major Players and Top Acquirers Google is the most active acquirer in the AI space along with Apple, Facebook, Intel, Microsoft and Twitter as the top active companies.

Source: CB Insights



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Outlook for the future Expect to see better language understanding and an AI boom in China, among other things.

• Positive Reinforcement Reinforcement learning takes inspiration from the ways that animals learn how certain behaviors tend to result in a positive or negative outcome. Using this approach, a computer can, say, figure out how to navigate a maze by trial and error and then associate the positive outcome—exiting the maze—with the actions that led up to it. This lets a machine learn without instruction or even explicit examples. In 2017, we are likely to see attempts to apply reinforcement learning to problems such as automated driving and industrial robotics. Google has already boasted of using deep reinforcement learning to make its data centers more efficient.

• Dueling neural networks

The approach is exciting because it offers a powerful way for computers to learn from unlabeled data—something many believe may hold the key to making computers a lot more intelligent in years to come.

• China’s AI boom The country’s tech industry is shifting away from copying Western companies, and it has identified AI and machine learning as the next big areas of innovation. Chinese investors are now pouring money into AI-focused startups, and the Chinese government has signaled a desire to see the country’s AI industry blossom, China’s leading search company, Baidu, has had an AI-focused lab for some time, and it is reaping the rewards in terms of improvements in technologies such as voice recognition and natural language processing, as well as a better-optimized advertising business while simultaneously actively acquiring in the space.

• Language learning This is a long-standing goal in artificial intelligence, and the prospect of computers communicating and interacting with us using language is a fascinating one. Better language understanding would make machines a whole lot more useful. But the challenge is a formidable one, given the complexity, subtlety, and power of language. Some impressive inroads are being made, and you can expect further advances in this area in 2017.

• Backlash to the hype While many have faith in the underlying value of technologies being developed today, it’s hard to escape the feeling that the publicity surrounding AI is getting a little out of hand. One real problem is that hype inevitably leads to a sense of disappointment when big breakthroughs don’t happen, causing overvalued startups to fail and investment to dry up. Perhaps 2017 will feature some sort of backlash against the AI hype machine—and maybe that wouldn’t be such a bad thing.

Source: MIT Technology Review



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Notable Artificial Intelligence VC Funding, Q1 and Q2 2017

Deal Date Company Investors Description of the company Amount Raised

Jun 27, 2017 Drive.ai New Enterprise Associates, GGV Capital and Northern Light Venture Capital

Developer of a self-driving technology designed to offer artificial intelligence software for autonomous vehicles. The company's self-driving technology uses learning algorithms for full stack, including computer vision, path planning, user interface and communication outside the vehicle, enabling vehicle drivers to safely navigate any driving environment.

$50 million

Jun 14, 2017 Element AI

Business Development Bank of Canada, Data Collective, Fidelity Investments, Hanwha Investment, Intel Capital, Microsoft Ventures, National Bank of Canada, NVIDIA GPU Ventures, Real Ventures, Tencent

Provider of AI as a Service (AIaaS) platform designed to give deep domain expertise and access to cutting-edge technology. The company's through their AI as a Service (AIaaS) platform launches and incubates advanced Artificial Intelligence products in partnership with large corporations and research institutions. It offers a platform that helps organizations embrace an AI-First strategy. It identifies projects and founded spin-off companies and joint ventures.

$102 million

May 15, 2017 Yitu Hillhouse Capital Group, Yunfeng Capital, Sequoia Capital, Banyan Capital and Zhen Fund

Provider and developer of artificial intelligence technology intended to improve the current healthcare quality by applying AI technologies. The company is engaged in the research of computer vision, image and video intelligent understanding, distributed system and big data application, it offers traffic management software, medical diagnostic technology and intelligent hardware, enabling computers to detect and recognize faces and cars

$55.17 million

May 11, 2017 CrowdStrike Accel, CapitalG, March Capital Partners, Telstra, Warburg Pincus

Developer of a cloud-based cybersecurity platform designed to prevent, detect, and respond to attacks in real-time. The company's Falcon platform utilizes signatureless artificial intelligence/machine learning and Indicator of Attack (IOA) based threat prevention, enabling companies to prevent both malware and malware-free attacks in real-time.

$100 million

Apr 20, 2017 SenseTime Sailing Capital

Developer of a face recognition technology designed to help in object recognition and image processing. The company's face recognition technology improves bank card verification services and security systems, enabling computer vision scientists to use the technology for payment and picture analysis.

$60 million

Apr 06, 2017 Mobvoi Volkswagen Group China

Developer of next-generation human-machine interaction technologies designed to offer speech recognition systems. The company's human-machine interaction technologies use artificial intelligence to offer an Android-based smartwatch operating system, enabling customers to access personalized digital interaction.

$180 million



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Mar 23, 2017 DataRobot New Enterprise Associates, Open Field Capital and other undisclosed investors

Developer of a machine learning automation platform designed to deploy accurate predictive models. The company's machine learning automation platform uses open source machine learning algorithms to automate, train and evaluate predictive models in parallel, delivering more accurate predictions at scale, enabling data scientists to export scoring code and operationalize models in any environment.

$54 million

Mar 17, 2017 Nio Baidu Capital, China Everbright, IDG Capital, Tencent, Warburg Pincus

Developer of next-generation electric cars designed to shape the future of mobility in the hopes of establishing a sustainable future. The company engages in the research, development and production of smart, high-performance, premium electric vehicles that offer an artificially intelligent engine coupled with an intuitive human interface that provides verbal and visual connections both within the vehicle and with the outside world, enabling passengers to experience an augmented vision while being driven autonomously.

$600 million

Mar 10, 2017 Anki Andreessen Horowitz, C4 Ventures, Index Ventures (UK), J.P. Morgan, Two Sigma Ventures

Developer of an artificial intelligence-based software designed to harness robotics. The company's artificial intelligence-based software programs physical objects to be intelligent and adaptable in the physical world, enabling consumers to blend robotics, toys and video games into a new level of physical play.

$77.50 million

Feb 24, 2017 CloudMinds SB China Venture Capital, Launcher Capital and Bojiang Capital

Developer of cloud connected smart machines and robotics designed to make helpful and affordable humanoid robots for the average household by 2025. The company's cloud-intelligence-based applications and robots are built based on its AI cloud platform, connected and controlled wirelessly through cloud computing, block chain and other innovative technologies that enables intelligent robots.

$100 million

Jan 24, 2017 Workfusion Georgina Partners, Mohr Davidow Ventures, iNovia, Nokia Growth Partners, Greycroft and RTP Ventures

Provider of an intelligent automation platform designed to digitize enterprise operations. The company's intelligent automation platform offers artificial intelligence based tools needed to automate business processes, enabling enterprises to digitize their operation, increase productivity and improve service delivery.

$35 million




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Notable Artificial Intelligence M&A Transactions, Q1 and Q2 2017

Deal Date Seller Buyer Description of Seller

Deal Size (million,

USD)

EV/ Revenue

EV/ EBITDA

Jun 21, 2017 Kitara Media DeepIntent

Technologies Developer of a data management platform created to offer data-driven approach to programmatic advertising.

$8 million

Jun 16, 2017 Trooly AirBnb

Provider of an online background check platform designed to authenticate user identities. The company's online background check platform uses machine learning technology to provide rich insights in order to understand users' personality and behavior traits, enabling businesses to verify, screen and predict trustworthy relationships.

Undisclosed

Jun 01, 2017

McCoy Medical

Technologies TeraRecon

Provider of machine learning marketplace intended to allow researchers to securely distribute trained machine learning algorithm. The company's marketplace reduces the barriers associated with distribution, starting with rapid deployment via a scalable, cloud-based infrastructure making codes and training data publicly available.

Undisclosed

May 24, 2017 Hexadite Microsoft

Developer of a security automation and orchestration platform designed to address the deficiencies within the IR tools and processes that significantly hamper an organization's ability to effectively investigate and respond to breaches. The company's security automation and orchestration platform connects to existing security detection systems to investigate every threat, leveraging artificial intelligence to apply targeted mitigation to stop security breaches in their tracks.

$100 million

May 17, 2017 Niland Spotify

Provider of music search and recommendation engines designed to solve search and recommendation problems for music companies.

Undisclosed

May 11, 2017 Mindmeld Cisco

Developer of a cloud-based unique AI platform designed to build intelligent and human-like conversational interfaces for any application or device. The company's cloud-based unique AI platform uses machine learning to interact with voice and chat assistants in a more natural way

$125 million

Apr 28, 2017 Guavus Thales Group

Developer of big data analytics applications designed to offer real-time analytics and enable businesses to become more efficient, profitable and competitive.

$215 million Apr 20, 2017 PV Cube Element Data Developer of a machine learning based software

created to validate sales prospects. Undisclosed

Mar 22, 2017 Invincea Sophos

Developer of an endpoint security software intended to kill enterprise IT threats without impacting business performance. The company's endpoint security software combines machine learning and behavioral monitoring to eliminate endpoint security blind spots without sacrificing usability.

$120 million 12.24x



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Mar 13, 2017 Mobileye Intel

Developer of collision avoidance system designed to reduce vehicle injuries and fatalities. The company's collision avoidance system engages offers computer vision and machine learning, data analysis, localization and mapping for advanced driver assistance systems and autonomous driving.

$15.3 billion 36.44x 106.2x

Mar 08, 2017 Kaggle Alphabet Provider of a predictive modelling platform designed

for statistical and analytical outsourcing. Undisclosed

Feb 27, 2017 Skry Bloq

Developer of block-chain analytics and intelligence platform designed to manage, visualize and analyse blockchain data from disparate sources. The company's Skry platform uses latest Artificial Intelligence technologies allowing people to extract insights at a speed and scale that no human can on their own.

Undisclosed

Feb 20, 2017 Realface Apple

Developer of a facial recognition software. The company's facial recognition software specializes in creating friction-less face recognition enabling consumers to verify on mobile and personal computer effortlessly and securely.

$2 million

Feb 10, 2017 Argo AI Ford

Developer of artificial intelligence software designed to offer self-driving technology. The company's artificial intelligence technology helps to tackle robotics and artificial intelligence for self-driving vehicles, enabling its users to avail effective self-driving technology.

$1 billion

Feb 02, 2017 Wrapidity Meltwater

Group Provider of data collection software designed to automate the extraction of data from unstructured Web-based content.

Undisclosed

Feb 01, 2017 Delta ID Fingerprint

Cards

Developer of a scanning technology for mobile devices designed to identify and authenticate people. The company's ActiveIRIS system is based on iris recognition software which uses advanced computer pattern recognition techniques to create mathematical representations to do quick and reliable iris recognition in a typical mobile use scenario.

$120 million

Jan 23, 2017 Meta AI

Chan Zuckerberg

Initiative

Provider of an artificial intelligence search engine designed to find scientific research papers. The company's artificial intelligence search engine organizes information about scientific papers, as well as offers big data analysis of scientific and technical literature, enabling researchers to sort new publications according to subject matter.

Undisclosed

Jan 13, 2017

Maluuba Microsoft

Developer of natural language technology using deep learning models. The company's technology allows machines to think, reason and communicate with human-like intelligence.

Undisclosed

Jan 09, 2017

Harvest.ai Amazon

Provider of products and services for protection against cyber attacks. harvest.ai has successfully applied AI-based algorithms to learn the business value of critical documents across an organization,

$19 million Source: Solganick & Co. Analysis, Pitchbook



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Notable Artificial Intelligence IPOs, Q1 and Q2 2017

Deal Date Company Description of the acquired company Amount raised Stock Exchange

Feb 08, 2017 Wangjin Holdings

Provider of finance services for domestic Internet operators designed to provide investment, financing, payment settlement and other financial transactions. The company's finance services uses ICT convergence and artificial intelligence technology to provide financial services for businesses as well as integrates industry information through big data analysis and the value of mining, enabling banks and issuers to reduce financial transaction costs and improve the efficiency of financial services.

$500 million Hong Kong Stock Exchange

May 12, 2017 Veritone

Developer of a cloud-based cognitive media platform designed to revolutionize media discovery and analysis. The company's cloud-based cognitive media platform uses artificial intelligence to combine powerful applications with orchestrated cognitive computing to transform unstructured data, extracting actionable intelligence from public and private content globally, enabling businesses and content owners to collaborate and monetize the insights gained by programmatic cognitive analysis of audio and video streams.

$37.50 million NASDAQ




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M&A Spotlight

Ford Invests in Argo AI, a New Artificial Intelligence Company, in Drive for Autonomous Vehicle Leadership

Feb 10, 2017

Ford is investing $1 billion during the next five years in Argo AI, combining Ford’s autonomous vehicle development expertise with Argo AI’s robotics experience and startup speed on artificial intelligence software – all to further advance autonomous vehicles.

Founded by former Google and Uber leaders, Argo AI will include roboticists and engineers from inside and outside of Ford working to develop a new software platform for Ford’s fully autonomous vehicle coming in 2021; through their equity participation, Argo AI employees will share in the startup’s growth. Investment in Argo AI strengthens Ford’s leadership in bringing self-driving vehicles to market in the near term and creates technology that could be licensed to others in the future. Source: Ford Media Center

Intel Buys Mobileye in $15.3 Billion Bid to Lead Self-Driving Car Market March 13, 2017 Under the terms of the agreement, a subsidiary of Intel will commence a tender offer to acquire all of the issued and outstanding ordinary shares of Mobileye for $63.54 per share in cash, representing a fully-diluted equity value of approximately $15.3 billion and an enterprise value of $14.7 billion. The acquisition will couple the best-in-class technologies from both companies, including Intel’s high-performance computing and connectivity expertise and Mobileye’s leading computer vision expertise to create automated driving solutions from the cloud through the network to the car. The combination is expected to accelerate innovation for the automotive industry and position Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles. Source: Intel Announcement



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M&A Spotlight

Microsoft acquires deep learning startup Maluuba; AI pioneer Yoshua Bengio to have advisory role January 13, 2017

Microsoft has agreed to acquire Maluuba, a Montreal-based company with one of the world’s most impressive deep learning research labs for natural language understanding. Maluuba’s expertise in deep learning and reinforcement learning for question-answering and decision-making systems will help Microsoft advance its strategy to democratize AI and to make it accessible and valuable to everyone — consumers, businesses and developers.

Sam Pasupalak and his Maluuba co-founder, Kaheer Suleman, have created a very strong engineering and research team that will become part of Microsoft’s Artificial Intelligence and Research organization. Additionally, Yoshua Bengio, one of the world’s foremost experts in deep learning, head of the Montreal Institute for Learning Algorithms and an advisor to Maluuba, will also be advising Microsoft.

Source: Microsoft Blog – official deal announcement



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VC Spotlight

Element AI, a platform for companies to build AI solutions, raises $102M

June 14, 2017

Element AI — a Montreal-based platform and incubator that wants to be the go-to place for any and all companies (big or small) that are building or want to include AI solutions in their businesses, but lack the talent and other resources to get started — is announcing a mammoth Series A round of $102 million. It plans to use the funding for hiring talent, for business development, and also, to put some money where its mouth is, by selectively investing in some of the solutions that will be built within its doors.

This large Series A has been swift: it comes only six months after Element AI announced a seed round from Microsoft Ventures (of an undisclosed amount), and only eight months after the company launched. Source: Tech Crunch

Tencent, Baidu Lead $600M Round In Chinese Electric Vehicle Maker NIO March 17, 2017

Chinese tech giant Baidu has confirmed having led a financing round in the electric vehicle startup NIO, formerly known as NextEV. The news comes just after the company unveiled its ‘EVE’ concept, an all-electric and autonomous vehicle. The round of investment is reportedly worth $600 million, which makes NIO one of the most, if not the most, well financed electric vehicle startups today.

Earlier this month, Baidu established an intelligent driving group headed by its president and chief operating officer, Lu Qi. The unit will enhance efficiency and coordinated development in the artificial intelligence-powered autonomous driving industry, as well as promote upgrades in the traditional automotive industry through the use of AI.

Source: China Money Network and Electrek



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About Solganick & Co.

Solganick & Co., Inc. is an independent investment banking and M&A advisory firm focused exclusively on the global technology and digital media industry sectors, including an active practice within artificial intelligence. We advise buyers and sellers of companies and efficiently execute M&A transactions that help increase shareholder value. Our professionals have advised on $20+ billion in M&A transactions to date and have current clients and relationships globally with entrepreneurs, companies and leading private equity firms within the sectors we cover. Please contact us for information regarding this report or to inquire about an M&A transaction.

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Artificial Intelligence Investment Banking + M&A Advisory · PDF fileArtificial Intelligence Investment Banking + M&A Advisory Artificial Intelligence M&A and VC Funding Update Q2