Inference Technologies, a US/Australia-based provider of virtual agents, is likely to be sold to a strategic buyer in around three years’ time, founder and CEO Callan Schebella said.
The virtual agent market is very acquisitive, and Inference already had a number of buyer approaches during its recent capital raising process, Schebella said. A sale at this point would not give the best returns for shareholders, but it will be considered once the business has grown using the raised capital, he said.
Acquisitive companies in the space include Amazon [NASDAQ:AMZN], Cisco [NASDAQ:CSCO], Microsoft [NASDAQ:MSFT] and Google [NASDAQ:GOOGL] – companies that have an angle on telecom and customer experience, Schebella said. Inference saw interest from other communication/telecom platform companies – players similar to, but not including, Aspect and Avaya [NYSE:AVYA], he said.
Likely buyers are platform providers related to service to telcos, such as Nuance [NASDAQ:NUAN], Google, Genesys, BroadSoft/Cisco, and Ericsson [NASDAQ:ERIC], added Paul Salter, Managing Director of Inference’s largest shareholder, Salter Brothers.
An IPO is a less likely exit scenario – given the M&A activity in the sector, a sale will give a better valuation, Salter continued. Typical trade sale sector multiples are 8-10x annual recurring revenue, he said. It is rare for companies in the space to list, Twilio’s [NYSE:TWLO] 2016 IPO being the exception, Schebella agreed.
In the event of a future sale, Inference would hire a Financial advisor in the US, where most of the buyer universe as well as the vast majority of the company’s partners and resellers are based, Schebella said. The company will move to be incorporated in Delaware, US, he added.
Capital raises, past and future
Inference recently raised AUD 16m (USD 12m) from Melbourne-based funds manager Salter Brothers’s Private Equity Fund, Atlas Capital Group’s Emerging Companies Fund and US venture capital fund PeakSpan Capital Growth Partners, as announced on 19 July. Atlas Capital is part of the Salter Brothers.
The capital will be used mainly to increase sales and marketing in the US, UK, Europe and Asia, and is expected to Finance the company over the coming two to three years, the CEO said. Inference aims to increase annual recurring revenue more than tenfold by June 2020. It is growing on average 9% month-on-month with large gross margins. The company expects to become cash flow positive in 24 months, Salter said.
It is possible that the company could do another capital raise ahead of a sale, Schebella said. Salter Brothers and PeakSpan have set aside more funds to allow follow-on investments, Salter said. If Inference only needs a small sum, existing investors will fund it, while if it needs to raise a larger sum in the double-digit millions, it could open to new investors, he said.
Inference provides a software-as-a-service intelligent virtual agent (IVA) and intelligent interactive voice response (IVR) platform. The platform works via phone, text, app or webchat. The product is sold mainly through telecom carriers, which white label it and sell it to end customers. The company works with 35 resellers, including many of the largest carriers in Australia and North America, and has more than 300 end customers, he said.
Competitors include Genesys and Nuance, but Inference is different in that the solution is 100% browser-based, very quick to set up and users do not need technical expertise to set it up, the CEO said.
The platform as it is today launched in 2012, but the company originally started in 2006 and is a spinoff from Telstra Research Laboratories, Schebella said. It is now headquartered in San Francisco with an office in Melbourne.
Inference previously received investment of around AUD 6m from Salter Brothers in 2015, in roughly equal parts as equity and a convertible note, the CEO said. This investment allowed Inference to launch into the US, he said.
Salter Brothers is the largest shareholder with 27% across funds. PeakSpan is the second largest shareholder, and Schebella the third, he said. Other shareholders include high-net-worth and other private individuals, Salter added.
by Christel Thunell in Sydney