SoundHound Accelerates Growth in AI by Acquiring Amelia AI
SoundHound, an innovative AI company specializing in voice interface technology for automotive, restaurant, and tech industries, is taking bold steps to enhance its enterprise services amid a competitive landscape. On Thursday, the company announced its acquisition of Amelia AI, a provider of customizable AI agents for businesses.
SoundHound is investing $80 million in cash and equity to acquire Amelia. While Amelia's valuation prior to the deal remains unclear, PitchBook notes that the company had secured at least $189 million in funding, including a significant $175 million investment from BuildGroup in March 2023.
Amelia's clientele includes notable firms such as BNP Paribas, pharmaceutical giant Teva, and Fujitsu. Following this acquisition, SoundHound and Amelia will collectively serve approximately 200 customers, including major banks and Fortune 500 companies. The combined entity anticipates generating revenue of $150 million by 2025, with $45 million coming from Amelia's existing operations.
As a publicly traded entity, SoundHound has experienced fluctuations since its SPAC merger in 2021, which initially valued the company at $2.1 billion. However, after laying off nearly half of its workforce and securing additional funding in 2023, SoundHound's market position has strengthened. Its current market capitalization is approximately $1.4 billion, a notable increase from less than $300 million in January 2023. Nevertheless, analysts expect the company to report losses in its upcoming quarterly results.
The acquisition will involve SoundHound assuming liabilities associated with Amelia, resulting in a combined total of $160 million in cash and $39 million in debt once the transaction finalizes.
Both SoundHound and Amelia come equipped with extensive experience in AI technology. SoundHound has been a player in the industry since 2005, while Amelia, founded in 1998 as IPsoft, boasts a long history in the space. Chetan Dube, the founder, continues to lead the company as CEO.
For SoundHound, this acquisition aligns with its strategy to penetrate sectors where it previously had limited exposure, such as financial services, healthcare, insurance, retail, and hospitality. Keyvan Mohajer, SoundHound's co-founder and CEO, stated, "Some of their customers operate in highly regulated environments, making integration complex. Cultivating these relationships and building necessary product capabilities would take us years, so this acquisition accelerates our progress." The addition of Amelia's voice assistant tools also offers SoundHound a straightforward pathway to reach new clients.
The disparity between Amelia’s substantial funding and its acquisition price is noteworthy, yet Mohajer refrained from commenting on the specifics, emphasizing that both parties see mutual value in the deal. "We are thrilled to have acquired Amelia at a fair price for both our organizations. We believe in our combined growth potential, as Amelia has an impressive product suite and a strong customer base."
This acquisition takes place amid a dynamic AI landscape, with numerous startups emerging and established companies racing to scale operations, fueled by significant venture capital investments. According to CrunchBase, over $35 billion was injected into AI startups in the first half of 2024, with 28 startups each raising more than $100 million this year. Furthermore, a Goldman Sachs report predicts that large tech companies and other industries will allocate $1 trillion to AI-related capital expenditures in the coming years.
Despite this booming investment environment, skepticism is growing regarding potential market overvaluation. Could the relatively lower value of recent M&A deals signal a shift? Mohajer defended the current market, stating, "Some speculate that we’re witnessing over-investment in foundation model companies. However, foundation models are only the start. We believe in the enduring value creation opportunities for companies that build and expand AI applications, which is precisely what we are doing with this acquisition."
SoundHound is making strategic acquisitions to boost its business, having previously acquired Allset, a Ukrainian-based restaurant ordering platform, in June, as well as SYNQ3, another AI provider for the restaurant industry, for $25 million in December 2023.
As attention continues to focus on infrastructure and foundational AI models, it will be interesting to observe how service-focused businesses evolve and the value they bring to the market. “We have developed a remarkable product portfolio, scaling our conversational and generative AI solutions while effectively managing potential risks. There is a tremendous opportunity for broader application. It’s not just about building infrastructure; it's about enhancing customer experiences and integrating diverse ecosystems to drive productivity,” Mohajer concluded.
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