H2O raises $100M to make AI accessible to every type of organization

H2O AI is seeing rising demand as AI applications become more common and non-tech companies want in on the action.

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Main Highlights:

H2O.ai, an open-source framework, and proprietary application allow any enterprise to build and operate artificial intelligence (AI)-based services. Platforms like H2O saw massive growth as AI applications have become more pervasive and enterprises outside of technology companies seek a piece. After securing $100 million in finance, H2O.ai’s value has increased to $1.7 billion (pre-money), and the company is now valued at $1.6 billion.

The Commonwealth Bank of Australia (CBA), an Australian financial institution, has invested in the company’s Series E round, which will be used to expand the company’s services. Goldman Sachs, Pivot Investment Partners, Crane Venture Partners, and Celesta Capital, the fundraising was also co-led. As part of this funding, H2O.ai plans to grow its product line and hire more employees to continue building its H2O AI Hybrid Cloud platform.

This is not the first time that a customer has led around as a strategic investor: in 2019, Goldman Sachs led the company’s $72.5 million Series D investment. H2O’s valuation had increased dramatically from the previous round, when it was valued at $400 million, according to PitchBook statistics. H2O.ai, based in Mountain View, has raised a total of $246.5 million.

Both of the startup’s most recent funding rounds were led by significant banks that are also customers of H2O.ai who speak loudly about the startup’s opportunity. Sri Ambati, the company’s founder and CEO (and a co-founder of Platfora, which was acquired by Workday), informed me via email that the vast and all-encompassing world of financial services today generates around 40% of the company’s income.

cloud storage

H2O’s collaboration with tech businesses

According to Ambati, H2O.ai is also beginning to collaborate with other tech businesses that want to incorporate AI into their processes to deliver services to their clients. Vertical clouds and SaaS ISVs are two of their most recent triumphs.

H2O, the open-source component of its services, has been available since its inception and is now used by more than 20,000 businesses. Its open-source framework, H2O.ai claims, works on top of existing extensive data infrastructure, on bare metal or top of existing Hadoop, Spark, or Kubernetes clusters, and can ingest data directly from HDFS, Spark, S3, Azure Data Lake, or any other data source into its in-memory distributed key-value store.

H2O.ai’s proprietary tools, on the other hand, provide more finished applications in areas like fraud detection, churn prediction, anomaly detection, price optimization, and credit scoring — areas that can benefit from the ingestion of massive amounts of data to gain better insights into what might happen next: this sit either as a supplement to what human analysts and data scientists might be able to do or as a replacement for them. Some 45 applications have been submitted so far.

“App stores” in specific verticals will offer a range of its own, pre-built solutions tailored to the needs of each one, according to Ambati’s concept. Since its inception, H2O.ai’s growth has been fueled by a growing trend.

Machine learning, computer vision, and natural language processing are just a few of the AI techniques that can boost productivity or even open up entirely new avenues of potential for businesses. Savings in operating and other costs can amount to billions of dollars over the long term.

While this may not seem like a significant deal at first glance, firms may find themselves lacking the internal resources necessary to develop and implement AI-based initiatives, let alone maintain that infrastructure as demands and parameters change. There is a lot of overlap between technology and business these days, but not all businesses are tech companies.

Several companies have attempted to fill this void in the industry, but H2O.ai appears to have done so with more tremendous success than the others.

Importance of AI Services 

Microsoft and Nvidia, two of the biggest tech companies in the world, invested heavily in AI research and development in Canada, which was built on the idea of democratizing AI for the broader world of businesses that might not have the resources to build and run AI tools themselves, but could greatly benefit from them before their companies are cannibalized by the many AI-fueled tech companies moving into their spaces.

It was a little like Accenture for AI services when it came to AI services, but it never made a significant enough leap from concept to company. ServiceNow eventually acquired it in 2020 to help it with its efforts to develop tools for enterprises. According to Ambati, just 10% of H2O.ai’s revenue comes from services, with the remaining 90% coming from the company’s products. This could explain why one startup’s strategy worked while the other failed.

According to Matt Comyn, CEO of CBA, the bank’s millions of data points are a significant asset. However, they are aware that there is still untapped potential for AI to improve their client experience. As a result of the bank’s investment in and strategic engagement with H2O.ai, the bank will be better able to offer leading digital solutions and reinvented products and services to its clients. A new member of the H2O.ai board will be Dr. Andrew McMullan, CBA’s chief data officer and an expert in AI.

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