H2O.ai – a startup that has developed an open source framework and proprietary apps that make it easier for any type of business to create and manage AI-powered services – has seen an increase in interest as AI applications have become more and more. more Ubiquitous and companies beyond tech companies want to take action. It has now raised $ 100 million to fuel its growth, a funding round that values H2O.ai at $ 1.7 billion post-money ($ 1.6 billion pre-money).
This is a Series E round and is led by a strategic supporter, the Commonwealth Bank of Australia (CBA), which has been a customer of the startup and will use the backing to kickstart a deeper partnership between the two to build new services. . Others in the round include Goldman Sachs, Pivot Investment Partners, Crane Venture Partners and Celesta Capital. Additional funding plans include creating more products for H2O.ai as a whole and hiring more talent to continue expanding the company’s H2O AI Hybrid Cloud platform.
This isn’t the first time a client has led a round as a strategic supporter: in 2019, Goldman Sachs led the company’s $ 72.5 million D Series. As a sign of how the company has grown, and the general appetite for what it does, H2O’s valuation has jumped since the last round, when it was valued at $ 400 million, for PitchBook data. Mountain View-based H2O.ai has raised $ 246.5 million to date.
The fact that both recent rounds have been led by large banks who are also H2O.ai customers speaks volumes about where the opportunity has been for the startup. 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 broad and all-encompassing world of services. financial.
“Retail banking, credit cards, payments – almost all payment systems from PayPal to MasterCard are H2O customers,” he said. As for equities, the companies power fixed income security, asset management and mortgage services using H2O technology, with MarketAxess, Franklin Templeton and BNY Mellon also “strong” clients, he said.
This is also seeing an increasing complement of business from other verticals, he added: Unilever, Reckitt P&G are among those in consumer goods; UPS is one of its users in logistics and deliveries; Chipotle is among those in restaurant services; and stated that AT&T “is one of our biggest customers”.
Here, too, Covid-19 had a role to play.
“Manufacturing has become a fast-growing vertical due to supply chain disruption and demand detection,” he said of the pandemic. “We launched H2O AI Health to help our hospitals and suppliers, payers like Aetna and pharmaceutical customers.”
Notably, H2O.ai is also starting to work more with other tech companies who want to integrate more AI into their workflows to in turn provide services to their customers. “Our latest victories are in vertical clouds and SaaS ISVs,” said Ambati.
The company has offered an open source component to its services, which it simply calls H2O, from his first days, and is now used by over 20,000 businesses. Part of the reason is its flexibility: H2O.ai claims that its open source framework works on either existing big data infrastructure, bare metal or existing Hadoop, Spark or Kubernetes clusters, and is capable of importing data directly from HDFS, Spark, S3, Azure Data Lake, or any other data source in the in-memory distributed key-value store.
“Our open source platform gives customers the freedom and ability to build their own centers of AI expertise and excellence,” said Ambati of Open Source Tools. “We are like the Tenzing Sherpas of the AI mountains helping our customers cross and conquer the AI peaks.”
This framework can be used by engineers to build custom applications, while H2O.ai’s proprietary tools provide more comprehensive applications in areas such as fraud detection, churn forecasting, anomaly detection, pricing optimization, and credit score – areas that can benefit from ingesting huge amounts of data in order to gain a better understanding of what might happen next – these sit as a complement to what human analysts and data scientists might be capable of to discover, or potentially, in some cases, as a substitute for the more basic work they might be doing. In all, there are currently around 45 applications in all.
The plan, Ambati said, is to build more of these over time, which will reside in “app stores” in specific verticals by offering a range of its proprietary and predefined tools specific to the needs of each.
The trend fueling the growth of H2O.ai has been gaining momentum for several years.
Artificial intelligence holds great promise for the corporate IT world: when used well, tools like machine learning, natural language processing, and computer vision can accelerate productivity or even open entirely new areas of opportunity for a ‘organization. Over time, it can save companies billions of dollars in operational and other costs.
A big problem, however, is that in many cases organizations may not have the in-house teams to build or run projects using AI, and that’s before considering the fact that as needs and parameters evolve, all that infrastructure will also need to be updated. Technology touches everything in a business these days, but not all businesses are a tech company.
H2O.ai is not the first or the only startup that has aimed to fill this gap in the market, although it seems to have managed its task with a little more success than others.
Specifically, Element, AI from Canada was built on the back of a large amount of funding and buy-in from big tech companies like Microsoft and Nvidia also to address the idea of democratizing AI for the wider world of businesses that may not have the resources to build and run AI tools, but could benefit greatly from it before their businesses are simply cannibalized by the many AI-powered tech companies moving around their spaces. He focused heavily on integration (it was a bit like an Accenture for AI services) but never managed to make a big enough leap from concept to business and was possibly acquired, in 2020, by ServiceNow to complement their efforts to create tools for businesses.
Ambati said that only about 10% of H2O.ai’s business is in the services area, while the rest, 90%, comes from its products, as an explanation of why one startup’s approach worked while another no.
“It’s easy to be drawn to data science and artificial intelligence services,” he said. “Being true to our culture as product creators and yet building deep customer empathy and listening is critical to success. Customers experience our maker culture and become makers themselves. We are continually making our software simpler (democratizing) low-code and reusable recipes and automation through AI Cloud and building data pipelines, AI AppStores, and providing AI as a service that our customers can use to enhance their customer experiences, brands and 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 AppStore, Marketplace and H2O-3 Open Source ML are already at the heart of AI applications and software and we are collaborating with customers and their partner ecosystem and developers. “
This is a game, and business, which also resonates well with investors,
“Commonwealth Bank has a significant asset in the millions of data points collected every day. AI has already helped us improve our customer experience, however, we know there is untapped potential to do more,” said Matt Comyn, CEO of CBA, in a note. “The investment and strategic partnership with H2O.ai broadens our leadership in artificial intelligence and ultimately strengthens the bank’s ability to deliver cutting-edge digital offerings and reinvented products and services to customers.” Dr. Andrew McMullan, CBA’s chief data and analytics officer, will join the board of H2O.ai.