The Yuan requests your support! Our content will now be available free of charge for all registered subscribers, consistent with our mission to make AI a human commons accessible to all. We are therefore requesting donations from our readers so we may continue bringing you insightful reportage of this awesome technology that is sweeping the world. Donate now
AI Startups Are Doing Poorly, as Is AI Overall
By Jeffrey Lee Funk  |  May 23, 2022
AI Startups Are Doing Poorly, as Is AI Overall
Image courtesy of and under license from
Much hype has surrounded AI startups in recent years, but some of this may be overblown as such startups have tended to underperform compared with their peers in other fields. Such companies’ profitability, or lack thereof, along with decisions about whether to go ahead with IPOs or SPACs offer insights into the current state of the AI sector, and what the near future holds.

SINGAPORE - Over the past 100 years, the companies that have commercialized the most new technologies have tended to be startups, e.g., personal computers, integrated circuits, enterprise software, and e-commerce services were all predominantly commercialized by startups. Even when incumbents have commercialized products, it has often been startups who have ended up becoming the dominant companies. 

On the surface, artificial intelligence (AI) is following the same trend. A large number of AI startups were founded in the 2010s and venture capital (VC) funding of AI startups set records in 2020 and 2021. These data suggest AI startups are doing quite well, and that AI is also doing very well. 

Below the surface, however, a more nuanced picture of the situation emerges. Only two publicly traded startups, SoundHound and c3.AI, can be truly defined as AI firms, and neither are profitable or have large market capitalizations (See Table 1). 

Table 1 lists many other startups that use algorithms, and many of these claim to use AI, thus implying that their algorithms use AI. Many readers will assert that these are not true AI startups, but with so few publicly traded AI startups, one must define this liberally to talk about it. This small number is interesting in and of itself too. Given the record amounts of funding and such hype surrounding AI, one would have expected many more startups to have gone public. 

Table 1. America’s Publicly Traded AI/Algorithmic Unicorn Startups

The content herein is subject to copyright by The Yuan. All rights reserved. The content of the services is owned or licensed to The Yuan. Such content from The Yuan may be shared and reprinted but must clearly identify The Yuan as its original source. Content from a third-party copyright holder identified in the copyright notice contained in such third party’s content appearing in The Yuan must likewise be clearly labeled as such.
Continue reading
Sign up now to read this story for free.
- or -
Continue with Linkedin Continue with Google
Share your thoughts.
The Yuan wants to hear your voice. We welcome your on-topic commentary, critique, and expertise. All comments are moderated for civility.
Hopefully investors will become more demanding in the future when funding AI startups, and that companies in the sector can improve their chances of achieving sustained (and sustainable) success. Maybe more of these companies should place a higher priority on less glamorous, incremental innovation, rather than getting ahead of themselves by always trying to pursue riskier, headline-grabbing ventures.
Benedict Armour
Quite a unique take on the performance of the sector. Proof once again of how great expectations eventually must yield to the cold, hard light of reality. Hopefully a wake-up call to all developers/practitioners to stop building castles in the air and instead focus on real-world uses cases.
Kim Taylor
A bit of an eye-opener into the poor profitability of the AI sector, now a decade in the making, despite the huge sums being poured in. Hopefully things will improve in the future.
Dr. Jeffrey pointed out a vital problem. AI companies are losing more money than their investors expected yesterday and today. Although some so-called futurists said we should treat AI as this century's electricity, there is no apparent advantage we could see on Wall Street. Probably, we exaggerated the power of AI's role in the future.