ARTIFICIAL INTELLIGENCE: Fintech AI Kensho Sells for $550M

  Source: Kensho / Forbes

Source: Kensho / Forbes

Big news is big. Finance startup Kensho has just become one of the largest artificial intelligence acquisitions in history. What is even more impressive is that the acquirer S&P, is also a financial services firm, and not the ever-present boogeyman of Google, Apple, Facebook, Amazon. Forbes claims this is the most expensive AIacquisition to date, though we see you Otto (self-driving trucks) at $680 million in Uber equity.

There's a nagging question around the acquisition price. Pitchbook shows a bit over $100 million raised into the company to date, with the last check being $50 million, led by S&P, and with a post-money valuation of $595 million in March 2017. So the acquisition price is essentially identical to that of a year ago, with none of the investors taking a downround, and S&P effectively not paying for their own slice. Across all rounds, it looks like the company sold about 50% of the equity. Why exit now without an uptick for control -- the other investors from last March, like Goldman, JPM, Bank of America, etc., can't be happy to just get their toys back.

Anyway, wat does Kensho do that is valuable? According to Goldman, which was one of the original investors, the answer is not that the AI manufactures investment product. Instead, it augments human analysts so that they are more powerful and can get more done -- like running a quantitative analysis in seconds rather than days. "It never disrupted the underlying business model". That's a lot of exit money for something that didn't disrupt any business models. Also not a surprose -- very few fintech companies are standalone businesses, but many will work when levered up 1000 times on a large incumbent client base. This was the logic behind BlackRock's $150 million spend on FutureAdvisor, a company with about $3 million in revenue. And a similar logic must animate the need to have the industry's best known AI asset to distribute to thousands of S&P institutional clients.