James Breyer is best known for investing in Facebook in 2005, when Mark Zuckerberg was still a little-known Harvard dropout and the company was selling its shares at just 5 cents each.
His next big bet will be in China’s artificial intelligence sector, where he will spend more money — and expects almost-as-impressive returns. Breyer Capital, his eponymous venture capital fund, is teaming up with IDG China to invest in the sector.
“My partners at IDG China and Breyer Capital will invest $1 billion this year in China and Silicon Valley on AI, internet of things (IoT), machine learning companies and next generation consumer applications,” said Breyer at the Boao Forum for Asia (BFA), an event held in Hainan, China.
Breyer served on Facebook’s board until 2013, and started his own firm Breyer Capital in 2006. He has invested in more than 40 internet and tech firms since then, and several have returned 100 times their initial investment. The most recent exit was from Legendary Entertainment, which China’s Dalian Wanda Group acquired for $3.5 billion in January last year.
He is also on the investment committee of IDG China Capital Partners, which made early and lead investments in Tencent, Baidu, Xiaomi and Ctrip.
Given this track record, other investors have reason to watch where Breyer is investing next. He made his focus clear last week.
“Our expectation and belief is to make 100 times of the money over 10 years in certain companies” in AI and machine learning, Breyer told a panel during the BFA. The overall target for the $1 billion investment is a 10 times return, Breyer later told FinanceAsia.
Son also rises
Breyer is certainly not the only one bullish on an AI boom. Softbank’s chief executive Masayoshi Son, for example, told last month’s Mobile World Congress trade show that “the birth of super-intelligence is definitely happening in the next 30 years”.
After purchasing a controlling interest in the US mobile operator Sprint Nextel for $21.6 billion in 2013, the Japanese company has been on an acquisition spree, buying several companies that could profit from the growth of AI. The company’s investments in chipmaker ARM and satellite firm OneWed are, according to Son, inspired by his belief that AI will “undoubtedly” exceed human intelligence in the coming years.
In China, venture capital firms are piling cash into the AI sector, according to a KPMG report released in January. The study predicted VC investors in China would increasingly move into AI this year following a big-data boom over the last two years ago.
“Back in 2015, you had a lot of data points,” said Lyndon Fung, a KPMG China partner, during a CNBC show. “Now, we’re moving into the second phase where companies are trying to capture data, analyse the data ... and monetise it.”
China ranked second after the US in 2016 in investments into AI enterprises, with $2.6 billion, according to WuZhen Institute, a Chinese think tank.
The next Zuckerberg
Breyer is pinning his hopes on the top university research faculties in China that are focused on AI and machine learning technologies, where he believes he will meet the next Mark Zuckerberg.
He spends at least two weeks a year in Beijing and Shanghai at university centres meeting students. “This is a great time for faculties to build technically differentiated breakthrough companies [and] many will be sold to Tencent, Google, Facebook and Alibaba,” he said.
But he added, with a touch of humility that “many others will build standalone very large companies [and] we will look back and say ‘we wish we would have been in the series A or B’.”
China’s artificial intelligence potential does not come without risks. There are some concerns that a bubble is developing. Anisha Singh, founder and CEO of India’s mydala.com, and now a venture capital investor, expressed her worries when sitting next to Breyer at the panel.
“My only fear is that we saw this e-commerce boom in Asia, which was desperately needed in the region; but after that, I hear the buzz words [such as] AI, and I feel that will be the next bubble that everybody runs after,” Singh said.
Wang Xiaochuan, CEO of Sogou, a search engine and a subsidiary of Sohu, said during another panel at the BFA that a bubble already existed now in the AI sector, both in the job market and in terms of investor flows into the sector.