How Midwest AI Ventures Are Emerging From Universities and Legacy Industries

Even though artificial intelligence is poised to revolutionize countless aspects of American society, the bulk of AI firms continue to cluster around well-established technology centers. A Glassdoor study released in November found that 30 percent of available positions featuring the terms "artificial intelligence," "AI," or "deep learning" in their titles sat in San Jose, while another 18 percent were based in San Francisco.

This prompted VentureBeat to examine the AI ventures sprouting in a region venture capitalists have long neglected—the Midwest—and the challenges they aim to solve. Drawing on intelligence from CB Insights and Crunchbase, VentureBeat searched for Midwest-based startups boasting distinctive machine learning or AI platforms that had secured substantial venture backing. Two Midwest venture capitalists also shared their picks for companies deserving attention.

Chris Olsen, a partner at Columbus, Ohio-based Drive Capital, expresses confidence in the Midwest's capacity to nurture transformative AI ventures.

Olsen told VentureBeat during a phone conversation: "The genuine value of artificial intelligence lies in applying it to longstanding problems and products society requires, and the most prosperous firms possess the domain expertise to grasp how to deploy this technology. We encounter more of those specialized experts in these industries, [with] massive portions of GDP situated here in the Midwest."

A drawback confronting Midwestern AI startups is the region's thinner pool of engineers qualified to construct AI systems. Gene Munster, managing partner at Minneapolis' Loup Ventures, which invests in AI and VR among other pioneering technologies, estimates the Midwest commands roughly one tenth of the AI talent that Silicon Valley does.

"I think the encouraging news is that as AI becomes a more popular field, there's obviously good schools here and as it becomes a more popular field over the next 10 years, I think that that gap will dramatically close," Munster told VentureBeat.

VentureBeat's investigation revealed that numerous promising Midwest AI companies emerged from local universities or maintain connections to the region's historically dominant industries, offering hints about what other ventures the area might produce.

Chicago

Among Chicago's fastest-expanding AI ventures is Uptake, the latest in a series of companies from Groupon cofounders Brad Keywell and Eric Lekofsky. Backed by $264 million in venture capital funding, Uptake's algorithms enable enterprise clients to gather and analyze sensor data on industrial machinery and equipment.

Narrative Science has likewise attracted $43 million in funding. Originating as a Northwestern University student's class project, Narrative Science has developed a Natural Language Generation platform capable of producing written insights—useful for assembling material like client reports and marketing copy—tailored to the tone and style of the customer's business.

Another noteworthy venture is car insurance startup Clearcover, which has secured $11.5 million in funding. Clearcover engineered an algorithm helping the company advertise to potential customers during what it calls "moments that matter"—when a consumer is shopping for a car, or trying to save money on their finances. To accomplish this, Clearcover integrates its API with insurance comparison sites, personal finance apps, and other partner websites.

Civis Analytics, a data science startup, has garnered national attention as it's led by the former chief analytics officer for President Barack Obama's 2012 reelection campaign, and counts Eric Schmidt as an investor. Civis Analytics, whose clients include Airbnb, Verizon, and Robinhood, has developed a subscription cloud-based data science environment in which data scientists can consolidate data, analyze it, and build predictive models. Civis Analytics closed a $22 million round in November 2016.

Rounding out the list is Catalytic, which has gathered roughly $16.7 million in funding. Catalytic's AI-powered software advertises the ability to automate over 100 common workplace tasks, such as working with spreadsheets and filling out forms. Catalytic also integrates with software like Salesforce, Dropbox, and Workday.

St. Louis

Two of the St. Louis startups dabbling in machine learning that appeared to capture the most momentum maintain ties to local research institutions. There's Cofactor Genomics, founded by three former Human Genome Project scientists who worked out of Washington University in St. Louis. An alumnus of Y Combinator's Summer 2015 batch, Cofactor Genomics has built a platform that uses RNA biomarkers to predict drug response and monitor disease—it then uses machine learning to tie cell types, diseases, and treatments to an encyclopedia of RNA fingerprints. The company has raised about $21 million total in venture capital.

Benson Hill Biosystems is based on research that emerged from St. Louis' Donald Danforth Plant Science Center. The company has developed a crop design platform called CropOS that uses machine learning to help agriculture companies identify which seeds will produce the desired traits, such as increased yield or increased levels of a certain nutrient, in a crop. Founded in 2012, the company has raised $35 million in funding.

Another up-and-comer is Jane.ai, founded by the former CEO of Answers.com, which recently raised an $8.4 million round of funding. Jane.ai is another chatbot for businesses that sifts through data from cloud storage providers, emails, and other data files to help employees more easily access company information.

Ann Arbor

Ann Arbor's University of Michigan has played an instrumental role in the growth of several AI startups in the state of Michigan. Trove, which has developed a platform that scans users' emails to provide them with insights about their professional network, has worked with a pair of research teams at the University of Michigan, the company previously told VentureBeat.

There's also Clinc, founded by University of Michigan professors, which specializes in conversational AI. One of the products Clinc has developed is a voice-activated intelligence assistant called Finie, which integrates with certain banks' mobile applications, allowing customers to ask questions like where the nearest ATM is, and receive a natural language answer.

Finally, May Mobility, which has developed its own fleet of electric self-driving vehicles, was founded by the former head of the APRIL robotics lab at the University of Michigan. A spokesperson for May Mobility also notes that about half of the company's employees today have some sort of connection to the University of Michigan.

Trove, Clinc, and May Mobility have raised approximately $11 million, $7.8 million, and $11.6 million in funding, respectively.

Columbus

Like Clearcover, Columbus' Root Insurance is using artificial intelligence to try and sell cheaper car insurance. Root, which recently raised a $51 million Series C, has developed an algorithm that uses sensor data from a person's phone to determine things like how quickly they drive around a corner, or how much they tailgate, and then uses that to generate a quote for a customer.

Columbus is also home to CrossChx, a healthcare startup armed with about $40 million in funding that has developed an AI bot called Olive. Olive helps healthcare companies complete tedious administrative healthcare tasks. Lastly, there's Nexosis, which has created a machine learning API for developers, and has raised about $7 million in venture capital funding.

Minneapolis/St. Paul

Though his firm Loup Ventures is based there, Munster said that he hasn't invested in any Minneapolis AI startups yet. But he highlighted two promising ones to VentureBeat—Equals 3 and Rambl (formerly known as Aftercode), which have raised about $7 million and $2 million in venture capital funding respectively, according to Crunchbase.

Equals 3 has developed an AI-powered marketing assistant called Lucy. Lucy scans client and industry reports to make suggestions to marketers on where to spend their money. Rambl's AI-powered assistant targets sales professionals, promoting the ability to analyze sales calls and suggest follow-up actions—like when to schedule another meeting, or whether professionals should spend more time listening during their next call.

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