Artificial Intelligence: How To Separate Hype From Reality

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Artificial Intelligence:  How To Separate Hype From Reality

The world is confused about what Artificial Intelligence really means. Artificial Intelligence has garnered a great deal of mainstream media attention lately.   Like any major technology platform shift, the media consistently conflates hype with reality and there are plenty of self-proclaimed gurus who throw around Artificial Intelligence as a marketing buzzword.


At Omega Venture Partners, we hold a highly differentiated and informed view on the reality and realizable potential of Artificial Intelligence.


Misuse of AI Is rampant. Many individuals and companies are flat-out mischaracterizing themselves as AI experts or companies.  Beneath the marketing veneer, however, there is no genuine AI thesis to back-up the claims.  In many cases, we have found that self-declared artificial intelligence companies are doing little more than statistical data analysis.  These companies have products that analyze data and derive actions that are often no different than traditional rules-based systems. As discussed in the Omega Alpha Blog, these systems don’t fit the definition of the third era of computing—Cognitive Computing.  This is not to say that these products don’t add value; but it is to say that they shouldn’t be characterized as AI systems.


Omega Venture Partners has an informed and pragmatic perspective on the commercial value of Artificial Intelligence.  Omega’s view is informed both by our actual investments in the Applied Artificial Intelligence category as well as world-class domain expertise, including our extraordinary partnership with the MIT Artificial Intelligence Lab.  We review over 1,000 qualified investment opportunities per year and can speak from some authority.  We’re also investors in several breakout startups that have achieved escape velocity in this category, and we are in constant dialogue with the Omega Network of executives and decision makers who are adopting these solutions.


The crucial difference that separates real AI companies from the hype has to do with the data-algorithm virtuous loop, proprietary data, and domain expertise.  Real AI systems benefit from a virtuous cycle between the quantity of data they are exposed to and output quality.  These systems get smarter as they analyze more data, improving their capability and autonomy.  In addition, at Omega, we look for companies that tap into exabytes of enterprise data and generate proprietary metadata.  We also look for deep problem domain expertise on the management team.  This is particularly critical in vertical and horizontal AI applications where the management team needs to possess a nuanced understanding of what problem they are solving and why AI can solve it much better, faster, and cheaper.  We embrace human-in-the-loop, as we see Intelligence Augmentation as the best place to invest at the current stage in the AI renaissance.  And of course we look for companies with product-market fit and traction that supports a robust, attractive business model.



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