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H2O.ai – a startup that has developed an open source framework as well as proprietary applications that make it easier for any type of business to create and operate services based on artificial intelligence – has seen renewed interest as AI applications have become more ubiquitous, and businesses beyond tech companies want to join in on the action. Now he’s raised $ 100 million to fuel his growth, a fundraising round that values ​​H2O.ai at $ 1.7 billion after money ($ 1.6 billion before money).
This is a Series E cycle, and it is led by a strategic funder, the Commonwealth Bank of Australia (CBA), which has been a client of the startup and will use the support to launch a deeper partnership. in between to build new services. Other participants in the round include Goldman Sachs, Pivot Investment Partners, Crane Venture Partners and Celesta Capital. Other funding plans include creating more products for H2O.ai as a whole and hiring more talent to continue developing the company’s H2O AI Hybrid Cloud platform.
This isn’t the first time a client has led a tour as a strategic funder: In 2019, Goldman Sachs led the company’s $ 72.5 million Series D. A sign of the company’s growth and the general appetite for what it does, H2O’s valuation has surged since that last round, when it was valued at $ 400 million, per PitchBook data. Mountain View-based H2O.ai has raised $ 246.5 million to date.
The fact that the last two rounds were led by big banks who are also clients of H2O.ai says a lot about how successful the startup has been. Sri Ambati, the founder and CEO (who was previously also co-founder of Platfora, which was acquired by Workday), told me via email that around 40% of the company’s revenue currently comes from the very world. broad and universal financial services.
“Retail banking, credit cards, payments – almost all payment systems from PayPal to MasterCard are customers of H2O,†he said. On the equity side, companies are powering fixed income, asset management and mortgage security services using H2O technology, with MarketAxess, Franklin Templeton and BNY Mellon also “strong†clients, said. -he declares.
This also sees a growing complement of activities in other verticals, he added: Unilever, Reckitt P&G are among those in consumer goods; UPS is one of its users in logistics and delivery; Chipotle is one of those who work in the restaurant business; and he said AT&T “is one of our biggest customers.”
The Covid-19 also had a role to play here.
“Manufacturing has become a rapidly growing vertical due to the disruption of the supply chain and the sensing of demand,†he said of the pandemic. “We launched H2O AI Health to help our hospitals and providers, payers like Aetna and pharmaceutical customers. “
Notably, H2O.ai is also working more with other tech companies who want to integrate more AI into their own workflows in order to in turn provide services to their own customers. “Our latest victories are in vertical clouds and SaaS ISVs,†Ambati said.
The company has offered an open source component to its services, which it simply calls H2O, since its inception, and is now used by more than 20,000 companies. This is partly explained by its flexibility: H2O.ai claims that its open source framework works both on existing Big Data infrastructure, bare metal or on existing Hadoop, Spark or Kubernetes clusters and is able to ingest data directly from HDFS, Spark, S3, Azure Data Lake or any other data source in its distributed in-memory key-value store.
“Our open source platform gives customers the freedom and the ability to create their own centers of competence and excellence in AI,†Ambati said of open source tools. “We are like the Tenzing Sherpas of the AI ​​mountains helping our customers to cross and conquer the heights of AI. “
This framework can be used by engineers to create custom applications, while H2O.ai’s proprietary tools provide more comprehensive applications in areas such as fraud detection, churn prediction, anomaly detection, Optimizing pricing and credit scoring – areas that can benefit from ingesting massive amounts. data to better understand what might happen next: these come either as a supplement to what human analysts and data scientists might be able to discover, or potentially, in some cases, as a replacement for more work. basic they could do. In total, there are currently some 45 nominations.
The plan, Ambati said, is to develop more of them over time, which will reside in “app stores†in specific verticals offering a range of its proprietary, pre-built tools tailored to individual requirements. ‘between them.
The trend that is fueling the growth of H2O.ai has been accelerating for several years now.
Artificial intelligence holds great promise for the world of enterprise computing: when used properly, tools like machine learning, natural language processing and computer vision can accelerate productivity and even open up whole new areas. opportunities for an organization. Over time, this can save businesses billions of dollars in operational and other costs.
A big problem, however, is that in many cases organizations may lack internal teams to create or complete projects using AI, and that is before considering the fact that as the needs arise. and the settings change, this whole infrastructure will also need to be updated. Technology touches everything in a business these days, but not every business is a technology company.
H2O.ai is not the first nor the only startup to have sought to fill this gap in the market, although it seems to have succeeded in its task a little more than others.
Notably, Element.AI outside of Canada was built on the back of a large amount of funding and membership from large tech companies like Microsoft and Nvidia also to respond to the idea of ​​democratizing AI for the wider world. companies that might lack the resources to create and run AI tools on their own, but could benefit a lot from them before their businesses are simply cannibalized by the many AI-powered tech companies that are moving into their spaces. It was heavily focused on integration (it was kind of like an Accenture for AI services) but never managed to make a big enough leap from concept to business and was eventually bought out, in 2020. , by ServiceNow to complement its own tool creation efforts. for companies.
Ambati said that only about 10% of H2O.ai’s business is in the service realm, with the rest 90% coming from its products, which is why a startup’s approach worked while a other did not work.
“It’s easy to get drawn into data science and AI services,†he said. “Being true to our culture as a product manufacturer while developing deep empathy and listening to customers is essential to success. Customers discover our maker culture and become makers themselves. We are continuously facilitating (democratizing) our software, reusable recipes and low code automation through AI Cloud and building data pipelines, AI AppStores and delivering AI as a service that our customers can use to improve their business. customer experiences, their brands and their communities.
“The big difference: we are raising a forest, not just a tree. H2O AI Cloud, H2O Wave our low-code application development, H2O AI AppStores, Marketplace and H2O-3 Open Source ML are already at the heart of AI applications and software and we work in partnership with customers and their ecosystem of partners and developers.
It is a play, and a company, which resonates as well with investors,
“The Commonwealth Bank has a significant asset in the millions of data points collected every day. AI has already helped us improve our customer experience, but we know there is untapped potential to do more, â€said Matt Comyn, CEO of CBA, in a statement. “The investment and strategic partnership with H2O.ai extends our leadership in artificial intelligence and ultimately strengthens the bank’s ability to deliver leading digital propositions and redesigned products and services to customers. Dr Andrew McMullan, director of data and analytics at CBA, will join the H2O.ai board of directors.
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