IQ Capital fuels VC boom in AI start-ups

by Ken Wieland

18 July 2019

LONDON — In another sign of venture capital (VC) enthusiasm for AI, IQ Capital announced additional funding resources to the tune of $300 million.

Based in Cambridge, UK, IQ Capital — which describes itself as a deep-tech VC firm — will use the extra funding to invest in AI and machine-learning start-ups. IQ Capital has expertise in both areas, and the related issue of data privacy. Deep tech also covers the likes of biotech, blockchain and clean-energy technologies – all of which IQ Capital has an interest in.

The $300 million sum was divvied up into two. Using €125 million IQ Capital launched a new Growth Opportunities Fund. This will provide later-stage capital to the best-performing companies in the IQ Capital portfolio.

Privitar, a specialist in data privacy software — which IQ Capital has supported since seed stage — has already benefited from the new investment fund (indicating it was active before the official IQ Capital announcement). Last month, with some help from the new fund, Privitar closed a $40 million Series-B funding round led by global VC firm Accel.

The remaining $175 million of the $300 million saw the closing of IQ Capital Fund III, the firm’s third fund, which focuses on seed and series-A funding. IQ Capital claimed it was “significantly oversubscribed” with more than 90% of the firm’s Fund II investors apparently doubling down on their commitment by re-investing in Fund III. Among Fund III investors are National Grid Partners, British Patient Capital and a “number of other global institutions”.

Related: Record Venture Investments of $9.3bil In AI Startups During 2018

VC still has the hots for AI

After a bumper year of global VC investment on AI during 2018, there’s no sign of any significant tailing off in 2019. According to the latest Venture Pulse report from KPMG Enterprise, there were 43 VC deals within the ‘cybersecurity & AI/ML’ space worldwide during the first half of 2019, which totalled $803 million. This is not too far off the blistering pace set in 2018, when there were 99 VC deals in this sector over the entire year worth a total of $1.7 billion.

Last year was something of a VC turning point towards AI/ML and cybersecurity firms. During 2017, Venture Pulse calculated deal value in this space at a much more modest $1.07 billion.

Following on from Q1 2019, KPMG said AI “drew a significant amount of attention from investors” in the quarter through to 30 June 2019, “likely as a result of its overwhelming applicability to every sector”. The Venture Pulse report added that “compared to other technologies, AI is seen as a true game changer in terms of the disruption it poses for industries and verticals the world over, including healthcare and financial services”.