AI Fintech Success: Upstart's Growth Signals Maturing Investor Interest in AI

# AI Fintech Success: Upstart's Growth Signals Maturing Investor Interest in AI

## Introduction
This article from TechCrunch, published on March 19, 2021, by Alex Wilhelm, explores the significant growth of AI-powered fintech companies, using Upstart's recent performance as a prime example. It highlights how AI is moving beyond experimental phases in finance, driving real-world financial output and attracting substantial venture capital investment. The piece also touches upon the broader trend of increasing VC funding and exits within the AI startup ecosystem.

## Upstart's Blockbuster Performance
The article begins by detailing the remarkable surge in Upstart's stock price. After closing at approximately $61 per share on Wednesday, it jumped to $115 per share by Thursday. This surge is attributed to the company's strong fourth-quarter 2020 earnings report and its highly optimistic guidance for 2021.

### Financial Highlights:
*   **Q4 2020 Revenue:** $86.7 million (up 39% year-over-year).
*   **Full Year 2020 Revenue:** $233.4 million (up 42% year-over-year).
*   **Q1 2021 Revenue Guidance:** $112 million to $118 million (80% year-over-year growth at the midpoint).
*   **Full Year 2021 Revenue Guidance:** Approximately $500 million (114% year-over-year growth).

These figures significantly beat street expectations, particularly the full-year 2021 guidance, which projected a remarkable 114% growth.

## The Role of AI in Upstart's Success
Upstart's CEO, Dave Girouard, attributes the company's projected growth to the increasing velocity and adoption of its AI-powered lending models. He suggests that the COVID-19 pandemic, much like the 2008 financial crisis for Quicken Loans, presents an opportunity for Upstart to capture significant market share.

### How Upstart's AI Works:
*   Upstart utilizes AI models to efficiently determine the creditworthiness of loan applicants.
*   The company earns fees from banking partners who ultimately provide the loans.
*   Upstart is transitioning to a pure-play software company, focusing on consumption-based pricing, while also developing a SaaS product for smaller banks.

Girouard notes that while AI-powered credit decisions are new to the risk-averse banking sector, the company's strong performance indicates growing comfort and adoption among traditional financial institutions. The success of AI financial products at scale suggests that machine intelligence is now on par with, or even superior to, human capabilities in assessing consumer credit risk.

## Broader AI Funding and Exit Trends
Beyond Upstart, the article examines the wider landscape of AI investment, citing a PitchBook report.

### Key Findings from PitchBook Data (2020):
*   **Record Quarterly AI/ML VC Funding:** Q4 2020 saw a record $15.6 billion invested in AI and Machine Learning startups globally.
*   **Record Annual AI Funding:** The full year 2020 recorded $52.1 billion in global AI funding.
*   **Deal Volume:** While deal volume dipped slightly in 2020, the overall trend shows mature market growth with increasing capital deployment.
*   **AI Exits:** 212 AI exits in 2020 generated $49.6 billion in liquidity, surpassing 2019's $30 billion and 2018's $12 billion.

These trends suggest that Upstart's success is not an isolated incident but part of a larger, robust growth phase for the AI sector.

## The Rise of GPT-3 Powered Startups
The article also briefly touches upon the burgeoning field of startups leveraging OpenAI's GPT-3 technology. Companies like Copy.ai, Headlime, ShortlyAI, Anyword, and Pencil are mentioned as examples of businesses using GPT-3 to optimize marketing copy, writing, and other content generation tasks. The author expresses enthusiasm for gaining access to the GPT-3 playground to explore these applications further.

## Conclusion
The article concludes that the AI and fintech sectors are experiencing significant growth, driven by technological advancements and substantial investor interest. Upstart's impressive financial results serve as a testament to the viability and scalability of AI-powered solutions in the financial industry, signaling a maturing market where AI is delivering tangible results and attracting significant capital.

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**Image Credits:** Pitchbook, Nigel Sussman, TechCrunch