How Citi Ventures Backs AI Startups It Thinks Can Transform Its Business

Editor’s note: This article is part of an ongoing series in which Crunchbase News interviews active investors in artificial intelligence. Read previous interviews with Felicis, Battery Ventures, General Catalyst, Bessemer Venture Partners, Accel, Insight Partners, Index Ventures, Sequoia Capital, Section 32, M12, Sapphire Ventures, Bain Capital Ventures,  Menlo Ventures and Costanoa Ventures as well as highlights from these stories from 2023.

For the final article in our AI investor series for 2024, we spoke with Citi Ventures, one of the more active corporate venture investors through the past decade, on its investment focus in AI.

“We haven’t seen anything this disruptive in all my time in enterprise investing, for the last 20 years,” said Matt Carbonara, managing director for Citi Ventures, which is the venture investment arm of banking giant Citigroup.

With AI, there is more motivation on the customer side than any new technology, with many Fortune 2000 companies exploring use cases, he said.

Smart entrepreneurs naturally look for opportunities to innovate and disrupt, and investors seek companies with big outcomes. All three constituents are aligned, he said.

“We’ve had to try to move fast, to hustle, to be in front of these companies, to build relationships ahead of their financings,” said Carbonara on competition among investors in the AI sector. “It’s been a very active area.”

The firm invests in companies that could help CitiGroup transform its business.

AI is a horizontal technology, he said. “Coding, compliance and regulation, data quality, employee productivity, and knowledge management — those are the areas that we’ve been really thinking about,” Carbonara said.

Citi’s wealth management business could also benefit from automation.

Carbonara said CitiGroup has 40,000 developers, representing almost a quarter of its employees. “Even a 10% productivity gain for a group that large would be meaningful to Citi,” he said.

Thus far, AI companies Citi Ventures has invested in include knowledge management company Glean; Writer, which offers content generation for companies organized by verticals; compliance startup Norm Ai; developer productivity startup Poolside; and Galileo, which is used for monitoring, debugging and improving the accuracy of AI models.

Two of Citi’s portfolio companies were also acquired this year. Lexion, which uses AI for contract workflows, was acquired by Docusign for $165 million in cash, and Datavolo, which takes data from PDFs and other documents and puts them in a vector database, was acquired by Snowflake for an undisclosed sum.

Active corporates

Citi Ventures rounds out the top 10 leading corporate venture firms investing in AI-related companies, Crunchbase data shows. Its team of 18 people are spread out across the Bay Area, New York, London, Singapore and Israel. The firm has around 120 active portfolio companies.

Other active corporate venture firms investing in AI, based on an analysis of Crunchbase data, include Google Ventures, Samsung NEXT, Salesforce Ventures 1, NVentures (which is part of Nvidia), Databricks Ventures, M12 (Microsoft‘s venture fund), Intel Capital, Bloomberg Beta and the OpenAI Startup Fund.

In addition, Microsoft, Amazon and Alphabet have invested billions directly in foundation model companies, with OpenAI and Anthropic raising the largest amounts from these investors.

AI adoption

Most of Citi Ventures’ portfolio companies have integrated AI to some degree, Carbonara said. While some have added generative AI to a meaningful extent, the majority of interest is in the category of native AI, he said, with application companies beginning to break out with real revenue.

Venture investor Sapphire Ventures recently published a post estimating that 47 or more native AI application companies have over $25 million in revenue.

Adoption of applied AI is beginning to take off, Carbonara agreed: “They’re pre-built and just easier. Enterprises are still learning. It’s a new skillset. How do you deploy it? How do you get the accuracy you want? And it’s an iterative process, versus somebody coming to you with a pre-baked pie.”

Among Citi’s portfolio, Carbonara is tracking the companies with meaningful adoption.

“We see this with Glean. We see this with Writer. It’s the application companies that are some of the faster-growing companies, and they are getting to meaningful revenue where you say, ‘hey, that’s a real business that’s going to be a big business.’ ”

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Illustration: Dom Guzman