SoundHound, an AI company that develops voice interface technology used by automakers, restaurants, tech companies and others, is focusing on enterprise services by acting as an integrator in a crowded market. The company said Thursday it is acquiring Amelia AI, which develops AI agents that companies can customize for their own companies or customers.
SoundHound will pay Amelia $80 million in cash and stock. It's unclear what Amelia's valuation was before the acquisition, but according to PitchBook, Amelia has raised at least $189 million in funding, including a $175 million investment from Build Group in March 2023. (PitchBook cites multiple investments, two of which were undisclosed.)
Amelia's clients include BNP Paribas, pharmaceutical company Teva and Fujitsu. Combined, SoundHound said it has about 200 clients, including major banks and Fortune 500 companies, and expects to generate $150 million in revenue in 2025, of which $45 million will come from Amelia's current business.
SoundHound is a publicly traded company that has had a tumultuous journey since going public. When it went public in 2021 via a SPAC merger, the company was initially valued at $2.1 billion. However, in 2023, it laid off nearly half of its employees and raised additional capital to strengthen its position. The company's market position looks set to become stronger in 2024. Its current market cap has risen from less than $300 million in January 2023 to around $1.4 billion. However, analysts expect the company to post a loss when it reports its quarterly earnings today.
As part of the deal, SoundHound will assume Amelia's existing debt. The combined company will have $160 million in cash and $39 million in debt upon closing.
Both SoundHound and Amelia are no strangers to the long AI game: SoundHound has been around since 2005, while Amelia was founded as IPSoft in 1998 during the first wave of internet businesses, and founder Chetan Dube remains CEO.
For SoundHound, the reasoning is pretty straightforward: acquiring Amelia will allow it to expand into areas where it currently has little business, such as financial services, insurance, healthcare, retail and hospitality.
“Some of their customers are highly regulated, which means their integration requirements are significant and complex,” SoundHound co-founder and CEO Keyvan Mohajer told TechCrunch in an email. “It takes years to nurture these relationships and develop related product features, so this is an accelerator for us.” And because SoundHound is focused on voice interfaces, Amelia's voice assistant tool could be an easier entry point to more customers and businesses.
Still, the difference between the money Amelia raised and its selling price is notable.
Mohajer declined to comment on the difference in the total amount raised, saying it had not been disclosed. “We are pleased to have acquired Amelia at a price that is acceptable to both companies,” he said. “We share a common belief that our companies will be more profitable together. Amelia has built a great product portfolio and has a large customer base.”
The deal comes amid a big wave of activity around AI technology, as a flurry of AI startups launch and established AI companies race to scale, all backed by hundreds of millions of dollars in venture capital funding.
According to CrunchBase data, more than $35 billion will be invested in AI startups in the first half of 2024, and overall, 28 AI startups have raised more than $100 million each this year, while Goldman Sachs estimates that big tech companies and other companies plan to spend $1 trillion on AI-related capital expenditures over the next few years.
But more and more people are wondering if the bubble is about to burst – and is the fact that M&A deal values are far below what startups are raising one sign?
“Some have speculated that there has been overinvestment in companies building foundational models. But foundational models are just the beginning. We believe there will be a long wave of value creation for companies that build and scale their businesses around AI, and that's exactly what we're doing here,” Mohajer said in defense of today's market.
Still, SoundHound is seizing the opportunity to jumpstart its business through acquisitions: In June, it bought Ukraine-founded restaurant ordering platform Allset, and prior to that, it bought restaurant AI provider SYNQ3 for $25 million in December 2023.
The infrastructure and foundational models continue to receive the most attention, and it will be worth watching how service-based businesses develop and become more valuable.
“We have built an impressive portfolio and are scaling up production of conversational and generative AI solutions through innovation and effective management of illusory risk,” Mohajer said. “There is a huge opportunity to scale this even more broadly. This is not just about building infrastructure but also about end customer use cases and integrating different ecosystems to enable productivity.”