AI-focused Cortex Ventures to Begin Investing by Year-End

As Featured in VentureBurn

Cortex Ventures, a Cape Town based fund that aims to invest in artificial intelligence (AI) developments, expects to make its first investments in the second half of the year, CEO Nick Bradshaw revealed this week.

The VC firm was launched last month and is part of AI-focused holding company The Cortex Group. Last month, the group — which also owns AI and machine intelligence startup Cortex Logic — announced that it had acquired Tesla Water‘s water quality monitoring solution (see this story). Bradshaw told Ventureburn on Tuesday (25 June) that the fund aims to invest in early-stage startups on a case-by-case basis through private or angel investors within its network.

Cortex Ventures selects startups for investment through its Click-2-Pitch submission process.

In addition, the VC firm has a R300-million Growth Fund through which it invests in AI ventures that have been trading for at least three years. “We expect to make investments in the second half of this year. We have seen a couple of very promising propositions and some very interesting and diverse applications of AI, that alone tells us that entrepreneurs are looking at multiple markets and also solutions that include both software and hardware combined,” he said.

The VC is looking to back startups with an AI component —  including machine learning, deep learning and data science — or those seeking an AI partner to take it to market or operationalise their platforms with machine learning and deep learning.

“Other factors such as use of IoT (Internet of Things) and devices that pull in data in real time are also a key component as AI cannot work without data. We consider both B2B and B2C type companies,” he added. Bradshaw explained that the size of Cortex Ventures’ investments and the equity it will take will depend on the proposition of prospective investees, as well as how advanced their products are. “We consider early stage funding — pre-minimum viable product (MVP), MVP, pre-revenue and post-revenue — so equity allocations and investment levels will vary, Its not a one size fits all approach,” he pointed out.

In addition to funding, Cortex Ventures will offer investees in-house technical advisor on AI and related subjects like data science, model training and IoT, development and architecture support services, as well as access to clients or partners in a variety of verticals. The VC will also offer its investees free co-working space in Cape Town. Cortex Ventures portfolio companies also stand to gain from introductions to the firm’s networks. Bradshaw said the fund’s founders and executives are all experienced tech entrepreneurs with exits in their respective careers, and that they have a “wealth of knowledge” to share with Cortex Ventures investees.

Click-To-Pitch

Cortex Ventures has a rolling monthly submissions process, Click-2-Pitch, which Bradshaw said is open to any startup or scale-up. Those applicants that make it through the process will then be invited to Cortex Ventures’ monthly pitch day for a 30-minute pitching session where the VC firm will further assess their proposition and decide on next steps. “For those companies we don’t invest in we aim to introduce them to other relevant communities, accelerators, incubators and platform players in the region,” he stressed.

Besides its Click-2-Pitch submission process, the VC firm is also working with multiple partners to source deal flow. Cortex Ventures, he said, has an open partner programme and is talking to both VCs, incubators and accelerators as well as universities. “We have already been approached by several VCs seeking out technical expertise to help understand some of the approaches they have had. It’s proof that the collaborative model and co-investment opportunity will only increase over time,” added Bradshaw.

‘AI Seen as Black Box’

Most VCs, Bradshaw pointed out, tend to have broader portfolios and spread risk by investing in multiple sectors. “Often AI is seen as a ‘Black Box’ and so higher risk, so it’s fair to say the risk appetite is lower and therefore the number of VCs willing to make such investments is smaller. “That is why we created Cortex Ventures. We have both investment and entrepreneurial expertise allied to a deep technical expertise in AI to de-risk early stage investing in this newest of sectors,” said Bradshaw.

Bradshaw believes the solutions and products being developed by African AI startups compare “very well” to those from around the world. This he pointed out is because the underlying components and technologies many of these companies use are “broadly the same”. “The key challenge in our region is the number of companies engaged with this sector vs the available funding,” he said. This, he said, is going to change over time. Although Bradshaw sees Cortex Ventures “leading the way”, he thinks co-funding and working as part of a “broader collaborative ecosystem” will be the key to success in the sector. “Levels of funding are so much higher in say US, Europe and Asia but we have to start somewhere,” he said.

Bradshaw believes that with platform players lining up to offer users free storage, compute and components, there has never been a better time to become an AI entrepreneur in Africa.

Read more: AI startup Cortex Logic’s holding company to acquire Tesla Water solution [Updated]
Read more: SA AI startup Cortex Logic secures investment, eyes global expansion
Read more: A primer on the South African artificial intelligence ecosystem