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Unlike general funds that invest in various industries, Baidu Ventures is a $500 million independent venture fund focused only on artificial intelligence investments. Vice-president Felix Fang recently told TechNode that this focus has helped the firm to gain strong experience in the field.
As vice-president, Fang is responsible for AI investments and how the technology can empower and transform traditional industry. He told TechNode that Chinese AI first took root in the security and surveillance market because of government policy. High importance is attached to the sector as it can save lives, he added. In fact, China’s four leading AI companies—Sensetime, Megvii, Yitu and Cloudwalk—are all present in this field.
Fang said that in the future, AI technologies would expand to other fields gradually dependent on the basic datasets available and the digitization of different industries.
“For example, AI in the medical, retail and industry fields will develop incrementally because the ability for commercialization will not be as strong and its uses will be less widespread,” he said. “But we do think these industries represent potential markets for future AI applications and will have better development prospects in the future.”
Valuation bubble
Fang believes that there is a valuation bubble in terms of AI investment. He cites the lack of talent in the sector as a key reason. While funds are abundant in the market, companies will pay more when choosing investment targets, thus further inflating the value of the AI industry.
“So, I think we have to go back to the value of the investment itself,” Fang said. “We should consider a firm’s valuation from a more quantitative perspective, rather than over-scoring some projects that come with a lot of hype.”
As an investor, Fang said they could provide help in several ways. The first is to provide crucial talents for early-stage companies. Secondly, the VC can provide industry partners to help them better understand the real application scenarios, and thirdly, it can help with ideas on how to bring a product to market.
Fang contends that entrepreneurs often overlook pain points associated with doing business in the real world. He suggests they remember to carry out enough market research before pushing ahead with commercialization efforts, which can help them to know the actual drawbacks of their plans.
“We also need to have a clear road map on how to grow into a $1 billion or $2 billion unicorn,” he said. “It’s a process that requires constant adjustment throughout the whole entrepreneurship.”