13 October 2023
Some call it the golden age of artificial intelligence, while others prefer the more cautious route and see it as another hyped industry. Whichever side you belong to, most pioneering AI companies are betting on the industry’s potential and attracting the big bucks. Recently, we have seen several AI companies going public through IPOs and doing well. Here is our take.
AI companies worldwide have been going public through IPOs, and more are at late funding stages and will be ready for IPO events soon. Besides the hype around AI technology, there are valid reasons why this is happening. Here are some of these reasons:
Undoubtedly, AI and related technologies like machine learning and deep learning are evolving rapidly and present immense future potential. This is great timing for innovative companies who want to go public due to the current “window of opportunity,” as they say in IPO land. The current period is characterized by favorable investor appetite and positive market sentiment toward AI technologies.
AI companies aim to capitalize on these favorable market conditions to maximize their IPO proceeds. Indeed, recent IPOs involving AI companies have performed well across the board, including in markets where technology stocks have not been the cup of tea for seasoned local investors. There is no clear sign that the current “window of opportunity” for AI IPOs will also subside in the short term.
There is a scramble for IPO events for AI companies that have just started realizing the proceeds of years of development and experimentation in AI. Naturally, the first AI companies to have a successful IPO will gain a competitive advantage through capital infusion and brand visibility.
It also drives the perception that these early birds in IPO land are the pioneers in the industry, which is great for gaining a sustainable competitive advantage.
As AI technologies become mainstream and gain more users, there is bound to be more regulatory scrutiny and ethical concerns. Mature AI companies can opt to go public at this time as regulations and ethical concerns catch up so they can have a chance to evolve and adapt to them. This strategy also reassures investors about the prospects of the company and their commitment to ethical standards that may come in the future.
Many AI companies are still involved in the active development of their AI products as the technologies and models keep improving and evolving rapidly. To fund future innovation, these companies may choose to access public markets for the much-needed capital injection and other resources that come with transitioning to public entities.
Last but not least, many AI companies are choosing this period to go public through IPOs because the market is ripe for AI technologies. Recent developments show that AI technologies are enjoying adoption across industries worldwide. AI companies can capitalize on this growth in demand to gain market share and demonstrate that they can develop AI solutions at scale.
In the practical and impactful areas of AI and machine-leaning innovation, we see a lot of money flowing and high-potential AI companies going public or considering it. Nearly half of the startups in tech are developing AI solutions or using it in some way in their solutions.
Some prefer to call it hype, while many experts have a positive outlook on AI’s potential as a commercial technology. In the past three years, several promising AI companies have gone public with multi-million-dollar valuations. Here are some examples:
|Berkshire Grey||$2.7 Billion|
Source: CrunchBase Company Financials
This trend is not restricted to the USA and other developed economies like China and Europe. Across the world, there is a buzz around innovative and disruptive AI companies going the IPO route after years of active innovation and successful funding from venture capitalists and angel investors.
Take, for instance, India, known for its immense technological talent and engineering focus. In the past few years, we have seen many promising AI startups attract funding and succeed and maintain a growth trajectory healthy enough to support an IPO event.
The AI industry is regarded by many as a rapid-growth industry, with the adoption of AI technologies in India growing much faster than anywhere else in the world. Here are some of the top publicly traded companies in India that sell AI or AI-supported technologies:
|Ai Company in India||Current Market Cap (INR)||Net Income (March 2023) INR||Stock Ticker|
|Persistent Systems Limited||366.72B INR||2.52B||PERSISTENT|
|Kellton Tech Solutions Ltd||6.19B||-1.76B||KELLTONTEC|
|HCL Technologies Limited||3.01T||481.00M||HCLTECH|
|Tech Mahindra Limited||1.04T||11.18B||TECHM|
|Happiest Minds Technologies||29.89B||576.60M||HAPPSTMNDS|
Source- Google Finance Company Quotes National Stock Exchange of India (NSE)
Using the above companies as examples, one can appreciate the potential benefits of AI companies going public now or soon. Pre-IPO AI companies in all markets worldwide have good reason to be excited about their prospects, given the state of AI as a disruptive, high-potential technology just now coming of age, for lack of a better phrase.
With that in mind, we shall now focus on the IPO process for AI companies nearing a liquidating event. We shall also cover other important topics around IPOs, such as risks or pitfalls, strategy, etc. Let’s get right into it!
Effectively presenting the AI technology and the company’s growth potential is crucial for attracting investors to an AI company. Here are some tips to consider:
Start by providing a clear and concise explanation of the AI technology employed by the company. Avoid using technical jargon and instead focus on conveying the value proposition and how the technology solves real-world problems. Use visual aids, diagrams, or demonstrations to illustrate AI technology’s functionality and potential applications.
Highlight specific use cases or success stories that demonstrate the tangible impact of AI technology. Showcase how the technology has improved efficiency, reduced costs, increased revenue, or transformed industries. Use real-world examples or case studies to help investors envision AI technology’s practical applications and potential market reach.
Clearly articulate the AI technology’s scalability and the market opportunity’s size. Explain how AI technology can be deployed across various industries, geographies, or customer segments. Quantify the market size and addressable market potential to showcase the growth prospects and the company’s ability to capture a significant market share.
Communicate the company’s unique competitive advantages in the AI space. This could include proprietary algorithms, unique datasets, patented technologies, or strategic partnerships. Emphasize what sets the company apart from competitors and why investors should view it as a leader or innovator in the AI industry.
Highlight the company’s intellectual property portfolio, including patents, copyrights, or trade secrets, that provide a competitive edge. Explain the company’s R&D strategy and ongoing efforts to stay at the forefront of AI innovation. Investors are interested in understanding how the company maintains its technological advantage and fosters a culture of innovation.
Acknowledge and address ethical considerations associated with AI technologies. Discuss the company’s commitment to responsible AI practices, data privacy, and mitigating bias. Highlight any safeguards or compliance measures to ensure ethical use of the technology. Addressing these concerns proactively demonstrates the company’s commitment to responsible AI and can build investor trust.
Showcase the expertise and experience of the management team, highlighting their background in AI, technology, or relevant industries. Investors often evaluate the team’s capabilities in executing the business plan and driving growth. Demonstrate how the management team’s expertise aligns with the company’s strategic objectives and supports the successful implementation of AI technology.
Present a compelling financial story that supports the growth potential of the company. This includes discussing revenue projections, profitability forecasts, and the company’s path to sustainable financial performance. Highlight key financial metrics, such as revenue growth rates, gross margins, or customer acquisition costs, to illustrate the business’s financial viability.
Utilize engaging visuals, charts, or infographics to support the presentation. Visual aids can help investors better understand complex AI concepts and make the information more memorable. Consider live demonstrations or prototypes to showcase the functionality and potential of the AI technology in action.
Ensure that the presentation is well-rehearsed, concise, and engaging. Tailor the content to the specific audience, using language investors can easily understand. Keep the presentation focused, highlighting the most critical points and avoiding excessive technical details. Engage with the audience, encourage questions, and be prepared to address investor concerns or inquiries.
Effectively presenting the AI technology and growth potential involves clear explanations, and real-world examples, emphasizing scalability and competitive advantages, addressing ethical considerations, showcasing the management team’s expertise, and providing a compelling financial story.
Undoubtedly, the AI industry will feature heavily in the next IPO events for the next few years. As a company with potentially disruptive AI products and a fair chance at gaining a competitive advantage, this might be the right time to consider going public. Join other AI companies going public and reap the benefits of the hottest industry of the decade!