Emily Fontaine is the worldwide head of enterprise capital at IBM. The corporate’s enterprise fund, IBM Ventures, is a $500 million fund at present centered totally on AI and quantum computing. To date it has made 23 investments in firms together with Hugging Face (instruments for machine studying), Not Diamond (optimizes the selection of AI mannequin on a task-by-task foundation), Unstructured (which buildings information for LLMs), QEDMA (error correction in quantum computing), and Actuality Defender (deepfake detection software program).
Fontaine talked to Fortune just lately about what she is searching for when she invests.
Primarily, IBM is concentrated on business-to-business firms, particularly in the event that they match into IBM’s ecosystem of shoppers and clients, she mentioned.
“We’re looking for investments that are ready to scale, ready to partner, deploying responsible AI, [using] what we call the ‘capital-plus’ model,” Fontaine mentioned. The “plus” side is that not like a standalone VC fund, IBM has the flexibility to seek out new clients for its startups amongst its present shoppers.
“We actually have an over 90% collaboration rate with our portfolio companies,” Fontaine mentioned.
“We look at three key areas for every one of our investments. The first, products or capabilities. The second being: Are they an ecosystem partner? Generally, they fall within those two categories. The third being: Are they very disruptive to industry? And we work very closely with IBM Research on those ones that are totally disrupting the industry and doing something incredibly novel.”
A few of the investments give attention to merchandise that IBM itself desires to make use of.
“At IBM, we are client zero. We drink our own champagne and what I mean by that is we use our own capabilities internally to drive a ridiculous amount of value.”
An instance of that’s “AskHR,” IBM’s inner HR app, which is pushed by AI.
“I have a ton of amazing, young employees that all need an apartment,” Fontaine mentioned. “‘I need a mortgage rate! I need all these things!’ So before it used to be, Zach would come to me, ask me for this. I’d go to HR. HR would make the request. They’d come back to me. And it would take time. Now, we can go to AskHR, he can get it immediately.”
Fontaine mentioned IBM was on the right track to save lots of $4.5 billion in working bills this yr attributable to its inner adoption of AI instruments.
By way of quantum computing, IBM has up to now been extra centered on the software program and algorithm facet of the problem than {hardware}, Fontaine mentioned (though IBM has developed quantum chip {hardware} and deployed it in the actual world). One instance is QEDMA, an Israeli firm whose software program focuses on quantum error correction. (Quantum chip output entails loads of noise that requires some technique to resolve the information into one thing reliably helpful.)
IBM’s curiosity in quantum is pushed partly by the finance sector. Quantum computing guarantees to be so quick and highly effective that it threatens the standard encryption safety that banks use. Banks will thus want “quantum safe” defenses.
“The banks are at the forefront of wanting quantum strategy,” Fontaine mentioned. “The banking industry is really leaning in, saying, what’s our strategy around quantum? You need to be quantum safe, is what you need to be doing.”
Fontaine declined to say what sort of returns IBM Ventures has earned up to now, though she did say she was pleased with them.
4 firms have exited up to now and at the least two have been acquired: Gem Safety was purchased by Wiz at a reported valuation of $350 million, and Lightspin was acquired for an estimated $200-250 million by Cisco.
