Latest Castle Placement News
Sep 18, 2023
September 18, 2023 it:Vertigo3d-iStockPhoto By Abhi Mathews, CFA, CBV, and Rebecca Spour. Abhi Mathews is a Principal at Minerva Valuations Inc. and a Managing Director at Castle Placement LLC. As the world hits the age of artificial intelligence (“AI”), which has just begun, development will be as crucial as the creation of the personal computer, the Internet, or the mobile phone. Investors, management teams, and everyday participants have begun to take notice and adapt. The impact, from labor to health care to automotive, will be profound. For example, a group of AI experts analyzed a list of 17 common domestic tasks (from grocery shopping and laundry to teaching a child) and estimated that, on average, 39% of the time spent on each task could be automated in a decade [i] . AI Industry Impact AI impacts industries differently, and we preview a guide on the impact. We segment industries by group, as follows: minimal — construction, mining, energy, and utilities moderate — financial, retail, real estate, and transportation significant — technology, healthcare, automotive, and professional services The minimal group represents the industries least affected, while the significant group represents industries severely affected. There are exceptions within each group, and the impact on most jobs and industries will be more complementary in nature than substitutionary. Various studies have estimated the impact AI adoption will have on annual worker productivity growth and on the firms adopting these efficiencies. With the potential to fundamentally disrupt one’s market through the creation of innovative new services and entirely new business models, AI has begun to impact the corporate boardroom. Among AI experts, there have been numerous discussions about whether artificial general intelligence (“AGI”) is already among us and the dangers that it may pose to us. While artificial general intelligence started as an attempt to reproduce parts of human intelligence in machines, it has since evolved to learn quickly, generalize well, and never stop learning. “AGI will inevitably be the best thing for humanity or the worst, but nowhere in between,” says Toufi Saliba, author of Toda/IP and CEO at HyperCycle.AI Business and society will be sustainable because of synergistic emergence, unprecedented efficiency gains, and inevitable cost savings emerging from smart logic programmed into secure code. The interoperability of AI with blockchain technologies is enabling like-minded visionaries to collaborate on the Internet from anywhere in the world for shared purposes - take decentralized autonomous organizations (“DAOs) that are completely borderless and operate on the internet. Financing Trends More recently, AI has been all the rage with investors, and we believe that we are in the early innings. We believe that funding for AI will continue to grow in influence as AI begins to touch every industry, directly or indirectly. Funding Trends We anticipate that AGI will bring forth a new wave where software will be integrated with hardware, enabling robots to coexist with or support their human companions. David Lake, Governor of SingularityNET, suggests that “The acceleration of AI and AGI in the run-up to the Singularity and superintelligence is reaching warp speed. The only issue is that we are too scared to embrace it, and because of that we may not be ready for the incredible impact that this will have on our civilization, whether we like it or not”. Since 2017, Apple and Accenture have been the top two strategic acquirers of AI and ML entities. By deal count, Alumni Ventures and Sequoia Capital have been the top two venture capital investors in the AI and ML space since 2017 [ii] . It appears that investors lack interest in software solutions unless they drive the generative field forward. Code generation appears to lead the use cases for VC funding, and these generative AI vc backed entities appear to be getting higher valuation multiples [iii] . The deal activity in the Generative AI space by VCs has increased year over year since 2018, while deal value ($B) has broken prior records by Q1 2023. Generative AI is a specific type of artificial intelligence that is focused on improving efficiency and productivity in a variety of fields, from journalism to data analysis. Generative AI may even be able to make a difference in financial services or the law. The acceleration in the potential for technical automation is largely due to Generative AI’s increased ability to understand natural language, which is required for work activities that account for 25 percent of total work time [iv] . Thus, Generative AI has a greater impact on knowledge work associated with occupations that have higher wages and educational requirements than on other types of work. We highlight the VC deal activity by year in the Generative AI subsector. “Our investors seek companies that are able to innovate and evolve. That’s why AI is a crucial competitive advantage, not only in business operations but in the capital raising process. We are seeing that the C-Suite’s ability to integrate AI into their business models results in significantly more interested financial and strategic investors” says Richard Luftig, Managing Partner at Castle Placement LLC. Similarly, management of public entities has begun incorporating corporate strategies to address the changing landscape that the AI age presents - see FactSet’s recent count of entities citing AI on earnings calls [v] . We believe that the greatest commercial potential of AI lies in doing things that have never been done before rather than advancing existing capabilities or performing simple automation. Footnotes:  Lehdonvirta, Vili, et al. “The Future(s) of Unpaid Work: How Susceptible Do Experts from Different Backgrounds Think the Domestic Sphere Is to Automation?” PLOS ONE, vol. 18, no. 2, 2023, https://doi.org/10.1371/journal.pone.0281282 .  Burke, Brendan. 2023, Artificial Intelligence & Machine Learning Report, https://pitchbook.com/news/reports/q1-2023-artificial-intelligence-mach… .  Ibid  Brynjolfsson, Erik, et al. National Bureau of Economic Research, 2023, Generative AI at Work, https://www.nber.org/papers/w31161 .  Highest Number Of S&P 500 Companies Citing “AI” On Q1 Earnings Calls In Over 10 Years, insight.factset.com/highest-number-of-sp-500-companies-citing-ai-on-q1-earnings-calls-in-over-10-years. About the Authors: Abhi Mathews is a Principal at Minerva Valuations Inc. and a Managing Director at Castle Placement LLC. He has structured and raised equity capital, senior debt, debentures, convertible notes and preferred shares for public and private entities. He has qualified as a financial expert in the Ontario Superior Court and assists clients in raising capital, business valuation, corporate advisory and conducting M&A transactions. He is a Chartered Financial Analyst and Chartered Business Valuator and a member of the American Society of Appraisers. He has his FINRA Series 7, 63 and 79 licenses. He sits on the board of numerous private entities and has previously sat on the board of not-for-profit entities focused on children. Rebecca Spour leads the Venture Capital Advisory practice at Minerva. She is a serial entrepreneur and strategic board advisor who works with executives, boards, VCs, incubators, and UHNW clients. She has an academic background in neuroscience and areas of cognition research (memory & learning) which inspired her passion for artificial general intelligence. She also has over a decade of experience advising small businesses and startups with a particular focus on deep technologies, decentralized autonomous organizations, blockchain, and artificial intelligence. Her clients have raised millions of dollars and had successful exits. She is a C-level board member at csga-global.org a cyber security not-for-profit think tank. She is inspired by how ai can be used for good. In her spare time, she is very involved in the arts and fundraising for charities. Be sociable, share this post!
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