SoundHound acquires Amelia AI for $80M after it raised $189M+

SoundHound, an AI company that makes voice interface tech used by car companies, restaurants and tech firms, is doubling down on enterprise services by playing consolidator in a crowded market. The company said on Thursday that it is acquiring Amelia AI, which makes 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’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 the two will together have some 200 customers, including big banks and Fortune 500 companies, and expects to see revenue of $150 million in 2025. Of that amount, $45 million would come from Amelia’s current business.

SoundHound is publicly traded and has had a bumpy ride since listing. When it initially went public via a SPAC merger in 2021, the company had a valuation of $2.1 billion. But in 2023, it laid off nearly half its employees and raised some extra funding to shore up its position. Its market position looks stronger in 2024 — its current market cap is around $1.4 billion compared with less than $300 million in January 2023. However, analysts still expect the company to report a loss when it announces quarterly results today.

The deal will see SoundHound assuming debt accrued 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, and Amelia was founded all the way back in 1998 as IPsoft, during the first wave of internet businesses. Its founder, Chetan Dube, is still its CEO.

For SoundHound, the rationale here is fairly straightforward: Buying Amelia 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.” And since SoundHound focuses on voice interfaces, Amelia’s voice assistant tools potentially gives it a lighter entry point into more customers and business.

Still, the disparity between what Amelia had raised and its selling price is notable.

Mohajer declined to comment on that difference, 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 comes amid a huge movement around AI technology — waves of AI startups are being launched and existing AI companies are racing to scale up, all backed by hundreds of millions of venture capital dollars.

More than $35 billion was invested in AI startups in the first half of 2024, according to CrunchBase data, and overall, 28 AI startups have each raised more than $100 million this year. Meanwhile, big tech and other businesses are set to spend $1 trillion in AI-related capital expenditures in the coming years, Goldman Sachs estimates.

Yet many have begun questioning if the bubble is about to burst. Could the value of M&A dealmaking coming in well below the money being raised by startups 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 this moment to leapfrog its business with acquisitions. In June, it acquired Allset, an ordering platform for restaurants founded out of Ukraine, and before that, it picked up SYNQ3, another AI provider for restaurants, for $25 million in December 2023.

Infrastructure and foundational models continue to hog the most attention, so 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.”