BY GLENN HUNTER • FEB 16, 2023
"AI now is where the web was in the mid- to late-'90s," Sentiero Ventures' David Evans says. And North Texas is becoming central to the AI revolution, he and other local tech leaders contend. DFW's role as an AI hub has been burnished by its tech workforce, the breadth and diversity of its industries, its thriving startup community, and its wealth of AI-oriented universities and research institutions. Most important of all, though, is the region's status as a magnet for Fortune 500 companies, many of which are eager to partner with AI's local pioneers.
Addison-based Lone Star, which offers predictive and prescriptive analytics and guided artificial intelligence, helps companies make smart decisions in a variety of business sectors, from aerospace and defense to manufacturing, transportation, logistics, and oil and gas.
For the oil and gas industry—a critical mainstay of the Texas economy—Lone Star provides an advanced, “hybrid AI” solution that analyzes every aspect of the electrical submersible pumps that are used in well drilling, for example. Its so-called Evolved AI analysis, which augments certain raw pump data with specific information that’s already known, helps reduce pump failure and enhances the operator’s productivity.
At one well in the Bakken Shale Play, Lone Star’s cutting-edge, Evolved AI helped the well produce an additional $1.3 million annually, based on 1,000 barrels of oil a day at $50 per barrel.
“Our customers want actionable information, and they want to know what’s going to happen before it happens,” says Steve Roemerman, the company’s chairman and CEO.
Lone Star Analysis, which employs 150, is among a number of Dallas-Fort Worth companies making names for themselves in AI—the mimicking of human intelligence processes by machines, and especially computers, often using robust, real-time datasets. With AI playing an increasingly important role in our society—in everything from assembly-line robots and self-driving cars to virtual assistants and advanced chatbots like ChatGPT—the technology is attracting capital and generating interest among North Texas entrepreneurs with pioneering ideas.
Opportunities in the field are promising just now for startups and investors alike because, in terms of development, “AI now is where the web was in the mid- to late-’90s,” says David Evans, whose Dallas-based Sentiero Ventures VC firm invests in AI-enabled SaaS companies. While much of today’s AI is based on research from the 1960s, ’70s, and ’80s, Evans says, the field has accelerated in the last five years because computer “horsepower” has exploded. By 2030, artificial intelligence is expected to balloon global GDP by as much as 14% and add $15.7 trillion to the global economy, according to a study by professional services firm PwC.
“AI has come out of the back office and now it’s in the real world,” says Dave Copps, the co-founder and CEO of Dallas-based spatial AI company Worlds, and a serial entrepreneur with three successful startup exits to his credit. “It’s the only technology that’s going to affect every industry. We’re at the beginning of a transformation that’s going to take a decade.”
AI “changes how we work, literally,” Copps says. “In industry, it can be working with robots. Inside knowledge companies, it’s interacting with AIs that can do the ‘grunt’ work for you. Everywhere we look, we’re going to be interacting with AIs.”
With 24 Fortune 500 companies based in DFW and the area’s business-friendly climate, acclaimed international airport, high rate of startup formation, and ample supply of tech workers, North Texas is uniquely positioned in AI, experts say—especially when it comes to developing new efficiencies and business opportunities for big enterprises.
“I think the road to startup heaven is littered with companies who have an incredible technology, but have no idea how to sell it or make it solve a real problem,” Copps says. “That’s something we’re really good at here. We have a lot of large industry, and now we have a flourishing startup community. And the biggest problems and most important problems in the world are happening in those large industries.”
Supply chains, so exposed and disrupted during the COVID-19 pandemic, are one big problem attracting the attention of Copps’ Worlds, an AI-powered startup that launched in 2020 after being spun out of Hypergiant Sensory Sciences. A first-of-its-kind, “extended reality environment” platform that builds live, 4D digital twins (or models) of real-world operations, Worlds helps oil and gas companies, say, identify inefficient or unsafe processes in their models that can then be reimagined and automated in order to unlock unrealized value.
“We call it the industrial metaverse,” Copps says. “The best opportunity for us is the large industrial companies who are having to kind of play in a world of abundance now, since COVID. They’re having to do more than they ever had to do before. And it’s not about doing it with less people—it’s about making the people you have more effective.”
Another young firm helping enterprises solve real-world problems with artificial intelligence is Spacee, which founder/CEO Skip Howard calls a “computer vision AI company” that has just enjoyed a “breakout” year. Its recent breakthrough came about because the Dallas-based company, which started life in 2013 with virtual touch technology, pivoted during the pandemic to offer more sophisticated custom retail experiences using light and motion.
The company has also made a splash with its Deming shelf-mounted supply-chain robot, a cost-efficient, retail inventory device that roves across store shelves, providing data about what’s on the facility’s shelves and what may need to be replenished.
Late last year, Spacee enhanced the robots further by adding live and recorded video feeds.
The robots’ computer vision algorithms interpret what the robot “sees,” Howard says, such as “what product it is, how much of it is left, is it in the right spot?”
Fortunately, DFW’s AI infrastructure is nourishing startups like these and keeping pace with all the new opportunities.
For that, the field’s most prominent players credit the likes of the Center for Applied AI & Machine Learning at the University of Texas at Dallas—UTD was designated a national research university by the state of Texas in 2018—and the Artificial Intelligence Laboratory at Southern Methodist University.
They also praise the work and support of the Dallas Entrepreneur Center, the Dallas Regional Chamber, the Richardson Innovation Quarter, companies like Texas Instruments, Dallas Mayor Eric Johnson’s Task Force on Innovation and Entrepreneurship, and the nonprofit Dallas AI Meetup group, which boasts nearly 4,000 members.
One promising new development for the region’s AI infrastructure is occurring between Frankford and Keller Springs roads, just west of the Dallas North Tollway. There, Spacee’s Howard is creating an incubator, called A.I. Center Dallas, for tech companies focused on artificial intelligence.
Spacee has taken the ground floor of the new, 51,000-square-foot building at 17230 Dallas Parkway for its headquarters space and a 2,200-square-foot showroom, while the offices upstairs will be leased to AI-oriented ventures seeking a community of like-minded companies. Tenants will be able to display their products for free in the downstairs showroom, Howard says, and also will have free access to Spacee’s optics experts and hardware like cameras and 3D printers.
“The whole point is not really to make money on a community,” he says. “It’s to build a community.” \
A spirit of cooperation is characteristic of DFW business in general, observers say, and it’s certainly no less true of the artificial intelligence space.
As alluded to by Worlds’ Copps, huge enterprises like Lockheed, Walmart, and Toyota are routinely partnering up with third-party, AI-oriented tech companies to solve specific, real-world problems—a process that results in so-called “narrow AI” solutions.
Take Dallas-based AT&T, for instance. Last year, the communications and technology giant said it had teamed with Silicon Valley startup H2O.ai to offer an AI “feature store” to companies and organizations looking to speed development of their own AI projects. AT&T has also partnered with companies including Ericsson, Cisco, and Juniper Networks to use AI to tune its “software-defined network” platform—a more fluid, more efficient way of managing a telecom network that carries many hundreds of petabytes of global data each day.
Previously, engineers would monitor and adjust the network’s signals in response to constantly changing conditions, says David Williams, AT&T’s assistant vice president of automation. But today, “We’re able to use artificial intelligence to do that millions of times a day, where before you had teams of people across the United States manually looking and making these judgment calls to tune the network,” Williams says. “So, it just increases the performance of the network overall.”
While artificial intelligence is also helping the company improve its interaction with business customers over billing and services issues, Williams adds, the network-tuning advancement thanks to AI has the added benefit of cutting AT&T’s costs, giving it fifth-generation (5G) wireless networks.
That’s obviously important, because it’s estimated that at least 2.5 quintillion bytes of new data are being produced every day—a figure that will only increase with time. And harnessing all that data in a smart, actionable way is AI’s driving force. That’s why companies need to ensure the datasets they’re using in AI processes are accurate, consistent, and comprehensive.
“The most valuable naturally occurring resource in the world today is data, and it becomes exponentially more valuable when it’s connected through AI,” says Copps. “Now we can start to build, measure, and understand the world in ways that were never possible before.”
One company that’s doing just that is Cien, a Dallas-based, “AI-first” platform that aims to boost its clients’ sales performance by optimizing their CRM (customer relationship management) data. The six-year-old SaaS company uses AI and machine learning to track salespeople’s performance in real time, providing accurate feedback so that enterprise B2B firms, for instance, can better understand their problems and their potential for growth.
“The issue of smart, efficient growth comes down to analyzing each aspect of the go-to-market process,” says Margot Carter, Cien’s co-founder. “We look at over 20 dimensions and find the areas that are slowing the organization down. For example, it can be how reps are not ramping up fast enough according to industry benchmarks, or generating a poorly qualified pipeline. One of the cool things about AI is that you can measure things that previously you only had a gut feeling about—such as how likely a deal is to close.”
Besides large enterprises like AT&T, AI also has obvious benefits for small and medium-sized companies, according to Sentiero’s Evans, who predicts that AI will be “table stakes” for all firms in the not-so-distant future.
Evans advises companies to “take a small part of their business and optimize it” with AI in order to either make money, save money, or improve their customers’ experience. AI consultants can help, he adds, likening them to attorneys who guide their clients toward a solution once the clients’ problems have been identified.
The problem for some of Spacee’s retail clients, for example, was making their stores more fun, interactive, and profitable.
Spacee’s AI and computer vision solution was its immersive HoverTouch technology—a custom “augmented reality” experience that has customers interacting with 2D and 3D surfaces. The contactless HoverTouch Connect product serves up actionable data while allowing retailers and brands to retain control of their content, device management, and customer experience.
So, what’s up next for Spacee, whose clients include a slew of Fortune 500 companies?
“It has to do with loss prevention,” Howard replies. “Our next big thing is using computer vision to help solve a multifaceted problem where we not just make a dent, but revolutionize loss prevention—while removing friction at the same time—from any kind of commercial application that’s in a physical store.” While revolutionizing loss prevention might seem like a tall order, Copps stresses that industry of every stripe will need to leverage AI eventually.
“If you’re in business today and you plan on being here in 10 years, and if you’re not trying to understand how your business and your people can be augmented through AI, you’re going to fall behind—period,” he says.
If funding can be a major stumbling block on the road to business success—no matter the venture’s industry or niche—things are looking up on the money front for North Texas tech companies. At the same time, though, challenges persist alongside the new opportunities.
Two things that could hold back DFW’s continued progress in the AI space in particular, experts say, are the tech-preparedness of tomorrow’s workforce and lingering funding concerns—especially at the mezzanine-finance level. “It’s what you do when you’ve got to raise $20 million to $50 million,” Copps says. “We’re still reaching out a little bit. But we’re getting better here. I raised $8 million out of $10 million for Worlds here in Texas, which is great, and that wouldn’t have happened five years ago.”
Howard agrees. “The investment world is really getting better here,” he says. “It’s just not there yet, in my opinion. You have a few fantastic players, and then a lot more on the way.”
Any list of those “fantastic” funders in DFW will include firms like Evans’ Sentiero Ventures, Perot Jain, Capital Factory, and Cypress Growth Capital, as well as major family offices like Goff Capital, JF2 Capital, and Green Park & Golf Ventures. In 2021, more than $2 billion in investment from all quarters went to early-stage entrepreneurs in North Texas across about 90 funding rounds, according to Trey Bowles, managing director of the Techstars program in Fort Worth. In 2011, by contrast, DFW lured just less than $400 million for 33 early-stage rounds.
“Dallas has a great opportunity to really carve itself out as a major player.”
One of the new funders “on the way” in North Texas, as Howard put it, is Scott Wisniewski, who not only invested early in Spacee, but purchased the Dallas Parkway building where Howard is creating the AI incubator. Wisniewski, a self-described “finance guy” who splits his time between Addison and San Angelo, in West Texas, says he sold a home-security business and has deployed anywhere from “$100,000 to millions” in deals.
“I’m an opportunity investor, and boy, do I see the opportunity in tech,” he says. “With all the California companies moving here, Dallas has a great opportunity to really carve itself out as a major player.”
In contrast to more risk-averse investors who look for “aces, straights, and flushes” instead of taking big chances with other people’s money, “I’m playing with my own money, so I know what I can afford to risk,” Wisniewski says. “But I’ll expect a nice multiple if we succeed.”
Like the owner of his new Addison space, Howard agrees that North Texas has “a pretty nice role to play” in technology—and especially as an “AI super hub of innovation.”
After all, local companies have been proving it every day.
At Lone Star Analysis in Addison, for example, its proprietary AI helped the company grow its revenue about 30% in 2021 and close to that in 2022 through early November, CEO Roemerman says. Over the next two to three years, “We think our footprint in North Texas will roughly double,” partly on the strength of more international business, he adds.
Lone Star is poised to capitalize further on what the chief executive calls DFW’s “huge concentration of tech workers and big concentration of tech-savvy organizations,” as well as its willingness to adopt pragmatic AI solutions for specific business problems.
That’s in stark contrast to other markets, Roemerman says—even California’s Silicon Valley.
“You can’t spill a latte on Sand Hill Road without finding somebody with a pitch deck who downloaded everything free in the Berkeley or Stanford AI library and is trying to package that as an AI platform,” he says, smiling.
“You don’t have that here, but there, there’s a lot of noise, a lot of public relations. And while it’s not very pragmatic—most of those [pitches] will fail—it does generate a lot of heat and light. So I think Silicon Valley is going to score more PR points, but Dallas is going to make more money for their shareholders.”
A version of this story was originally published in Dallas Innovates 2023.
Read Dallas Innovates 2023: https://dallasinnovates.com/digital-edition-dallas-innovates-magazine-2023/