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SoundHound — the AI company that has made a name for itself selling voice interface technology to car companies, restaurants and tech companies like Snap and Qualcomm — is doubling down on enterprise services, taking an opportunity to play the consolidator in a crowded market. Today, the company announced that it is acquiring Amelia AI, a New York-based company whose primary product is an AI agent that businesses can customize for internal or customer use.
SoundHound is paying $80 million in cash and equity for Amelia. It’s not clear what the latter company’s valuation was prior to the deal, but according to PitchBook, Amelia had raised at least $189 million, including a $175 million investment in March 2023 from BuildGroup (PitchBook lists several investments, including two of undisclosed value).
Amelia’s customers include BNP Paribas, the pharma company Teva, and Fujitsu. SoundHound said that combined, the two will have some 200 customers, including big banks and other Fortune 500 companies and expect to make 2025 revenues of $150 million ($45 million coming from Amelia’s current business).
SoundHound is publicly traded and it’s had a bumpy ride of it. When it initially listed, by way of a SPAC merger in 2021, SoundHound had a valuation of $2.1 billion. But in 2023, it laid off nearly half its employees last year and raised some extra funding to shore up its position. SoundHound’s market position looks stronger in 2024: Its current market cap is around $1.4 billion (versus less than $300 million in January 2023). However, it is due to report earnings today and is still expected to report a loss per share.
The deal will see SoundHound assuming debt accured by Amelia. The combined company will have $160 million in cash and $39 million in debt when the deal closes.
Both SoundHound and Amelia know something about the long game in AI. SoundHound has been around since 2005, while Amelia was founded even further back, in 1998, in the first wave of internet businesses, as IPSoft. Is founder Chetan Dube, a former academic at NYU, is still the CEO.
The rationale for the deal for SoundHound is fairly straightforward: it will help it move into verticals where it currently doesn’t have much business such as financial services, insurance, healthcare, retail, and hospitality.
“Some of their customers are highly regulated and, as such, those integration requirements are significant and complex,” SoundHound’s co-founder and CEO Keyvan Mohajer told TechCrunch in an email. “Incubating these types of relationships and developing the associated product capabilities would take us years, so this is an accelerant for us.” With SoundHound focusing on voice interfaces, Amelia’s voice assistant tooling potentially gives it a lighter entrypoint to more customers and business.
Still, the disparity between what Amelia had raised and its selling price is notable.
Mohajer declined to comment on that differential, noting that the total amount raised had never been disclosed. “We are excited to have been able to acquire Amelia at a price that made sense for both of our organizations,” he said. “We have a shared belief in our combined upside potential. Amelia has built an amazing product portfolio and has a tremendous customer base.”
This deal is coming at a time when we continue to see a huge wave of AI companies launching, with existing AI companies scaling, all backed by hundreds of millions of venture capital dollars.
In the first half of 2024, more than $35 billion was invested in AI startups, according to CrunchBase data; overall, 28 AI startups have each raised more than $100 million this year. Meanwhile, Goldman Sachs estimates that big tech and other businesses are set to sink $1 trillion into AI-related capex in the coming years.
Yet some (ok, many) have started to ask if the bubble is about to burst. Could M&A dealmaking coming in well below money raised be one indicator?
“There are some who speculate we’re seeing over-investment in companies building foundation models. However, foundation models are just the beginning. We believe there will be a long-lasting wave of value creation for companies that build and scale businesses around AI, and that’s exactly what we are doing here,” Mohajer said in defense of today’s market.
SoundHound is nevertheless picking the moment to leapfrog its business by acquisition. In June, it acquired Allset, an ordering platform for restaurants founded out of Ukraine; before that, in December 2023, it picked up SYNQ3, another AI provider for restaurants, for $25 million.
At a time when infrastructure and foundational models continue to bring in the most attention, it will be worth watching how service-based businesses develop and what value they will hold.
“We have built an amazing portfolio, and we’re scaling in production of our conversational and generative AI solutions with innovation and effective management of hallucination risks,” said Mohajer. “There is a massive opportunity to extend this more broadly. It is not just about building infrastructure, it’s about end customer use cases and integrating different ecosystems to deliver productivity.”
