AI companies come in three flavors, says AI investor

Venture capitalists who spoke in a panel discussion at the recent Emotion AI Summit in Boston tended to refer to AI companies as being either vertical, or industry specific, or horizontal, serving multiple industries.

But Janet Bannister, partner at Real Ventures in Montreal, introduced a different framework. She suggested that AI companies fall into one of three groups: full stack AI, AI first, and applied AI. Full-stack AI companies are self-explanatory: Their products provide a full stack of hardware and software, according to Bannister.

The distinction between the other two categories is less obvious. Bannister described AI-first companies as having a value proposition that revolves entirely around AI. Bannister said that MindBridge Analytics, which uses AI to identify fraud and is backed by Real Ventures, is an example of an AI-first company.

As for applied AI companies, they may not look like AI companies at first blush, but they are “using AI to build a competitive advantage,” Bannister said. Two examples in the Real Ventures portfolio are Breather Products, an Airbnb-like company that rents office space by the hour or the day and uses AI to determine pricing, and Unbounce, a company that builds and optimizes landing pages and uses AI to proactively suggest how a page should look.