MOSTLY AI, an Austrian synthetic data startup, announced today the successful completion of a $25 million Series B funding round. The operation was led by British VC firm Molten Ventures, with participation from new investor Citi Ventures. Returning investors include Munich-based 42CAP and Berlin-based Earlybird, the latter having led MOSTLY AI’s $5 million Series A round in 2020.
Synthetic data, though not genuine, is meticulously crafted by MOSTLY AI using artificial intelligence to closely mimic its clients’ databases. The data sets emulate the realism of a company’s original customer data, encompassing equivalent details but excluding the original personal data points, according to the company.
MOSTLY AI’s CEO, Tobias Hann, revealed to TechCrunch that the company intends to utilize the funds raised to expand its product capabilities, grow its team, and acquire more customers, with a focus on both Europe and the U.S., where it already maintains offices in New York City.
Established in Vienna in 2017, MOSTLY AI aligns with the privacy-centric requirements imposed by the General Data Protection Regulation (GDPR), implemented across the EU a year later. The growing demand for privacy-preserving solutions, coupled with the increasing prominence of machine learning, has propelled the momentum for synthetic data. Gartner predicts that by 2024, 60% of the data utilized for AI and analytics projects will be synthetically generated.
MOSTLY AI primarily caters to Fortune 100 banks, insurers, and telecommunication companies, which, being highly regulated sectors, generate significant demand for synthetic tabular data, along with healthcare.
In contrast to some competitors, MOSTLY AI hasn’t historically focused on healthcare. However, the CEO mentioned potential changes, stating, “It’s certainly something that we are watching closely and we are actually starting some pilot projects this year.”
As AI becomes more widespread, MOSTLY AI envisions the eventual use of synthetic data beyond Fortune 100 companies. The company plans to extend its services to smaller organizations and a broader range of sectors in the future. Nonetheless, the current emphasis on enterprise-level clients aligns with their budgets, needs, and the sophistication required for working with synthetic data, according to CEO Hann. MOSTLY AI has obtained ISO certifications to meet the expectations of these enterprise clients.
While the startup is technically robust, it is equally committed to commercializing its technology and delivering business value to clients. Christoph Hornung, the investment director at Molten Ventures, noted, “MOSTLY AI is leading this emerging and rapidly-growing space in terms of both customer deployments and expertise.”
The demand for synthetic data is not solely driven by the necessity to comply with privacy laws like GDPR and CCPA. In Europe, a broader cultural context contributes to the demand, while in the U.S., it is fueled by a desire to innovate. Use cases encompass advanced analytics, predictive algorithms, fraud detection, and pricing models—all without data traceable back to specific users.
Companies are proactively entering this space due to an understanding that customers prioritize privacy. They recognize that embracing privacy-preserving data practices can yield a competitive advantage.
MOSTLY AI aims to expand its U.S. team, capitalizing on the increasing interest from U.S. companies in adopting synthetic data for innovative purposes. The company is also recruiting globally, with plans to raise its headcount from 35 to 65 people by the end of the year.
CEO Hann anticipates 2022 as the year synthetic data takes off, marking the beginning of a robust decade for synthetic data. This growth aligns with the rising demand for responsible AI, emphasizing concepts such as fairness and explainability. Synthetic data, according to Hann, plays a crucial role in addressing these challenges by enabling enterprises to enhance and de-bias their datasets.
MOSTLY AI recognizes substantial potential for leveraging synthetic data in software testing, aiming to make it accessible not only to data scientists but also to software engineers and quality testers. The release of MOSTLY AI 2.0, a few months ago, reflects this focus. The platform can be implemented on-premise or in a private cloud, adapting to different data structures within the utilizing company.
Describing itself as a B2B software infrastructure company, MOSTLY AI sought investors who understood this approach in both its Series A and B funding rounds. Molten Ventures, as a publicly listed VC not subject to typical funding cycles, provided a long-term commitment that appealed to the company’s flexibility needs, as confirmed by CEO Hann.
The involvement of Citi Ventures, the venture arm of Citigroup, headquartered in the U.S., adds value. With plans to significantly expand its team in the U.S., MOSTLY AI sees the benefit of having a U.S.-based investor that can assist with networking and relationships.
With $25 million in new funding and an enhanced U.S. presence, MOSTLY AI is better positioned to compete in the synthetic data space. Competitors in this segment include Tonic.ai, which raised $35 million in a Series B last September; Gretel AI, disclosing a $50 million Series B round in October; and seed-funded British startup Hazy, along with players focusing on specific verticals. CEO Hann acknowledges the increasing number of players in the space, indicating a high level of interest.
