Newest AI Unicorn Afiniti Reportedly Preparing For IPO
We first talked about AI unicorns earlier this year, and now the tech world’s newest AI unicorn is reportedly already looking to make the leap to IPO as early as this year. The news broke last week that Afiniti, which uses artificial intelligence to match call center employees with customers in a sales version of the Dating Game, reportedly hit a valuation of $1.6 billion on April 14.
VentureBeat reported that the Washington, D.C. startup, founded in 2009 as SATMAP, raised $80 million this month at a valuation that has now birthed another AI unicorn. Investors included Switzerland-based GAM Holding, strategic partner McKinsey & Co, the Resource Group and G3 investments. Private investors (and Afiniti board members) include Shine Group’s founder and former chairman Elisabeth Murdoch; Ivan Seidenfeld, former chairman and CEO of Verizon Communications; and Larry Babbio, another former high muckity muck with Verizon.
That would bring total funding for Afiniti to about $167 million. It had previously raised $87.2 million, including a $30 million Series D in May 2016. The $1.6 billion valuation places Afiniti at No. 78 out of 191 on CB Insight’s Global Unicorn Club, which represents a total valuation of $662 billion.
VentureBeat reported that Afiniti confidentially filed for an IPO in late 2016, and consequently we weren’t able to find any immediate evidence, such as paperwork filed with the Security Exchanges Commission, to substantiate the claim. The company itself has apparently been in relative stealth mode, and we completely missed including it on our list earlier this year of eight AI startups improving CRM, or customer relationship management. CRM involves business processes related to everything from sales calls to call center complaints that involve customer interaction. For example, a company called Chorus.ai transcribes and analyzes sales calls and meetings, using an AI technique called natural language processing to distill the most important information.
Afiniti matches customers and employees
Afiniti leverages big data and machine learning to match customers with company agents for the best results. How? As VentureBeat explained, Afiniti compares the caller’s phone number against up to 100 databases. The information contains purchase history, income, credit scores, social media profiles and even census data related to the caller’s location. This is kind of like how AI is being used to build you that new credit score we discussed before. Now here’s where it gets even more interesting. Remember last week how we talked about AI and emotional intelligence? Well that’s exactly what Afiniti is doing here. They are using emotional traits to determine which customer is best suited to talk to which John in Mumbai.
Afiniti then routes the call to an agent, based on his or her own similarly scrutinized background, who would be most effective in dealing with that particular customer. Afiniti refers to this process by the trademarked name Enterprise Behavioral Pairing, and they currently process around 400,000 calls a day to improve their algorithm’s ability to achieve optimal agent and caller pairings. The outcome of each interaction is analyzed and looped back into EBP process to improve performance the next time around. Afiniti claims 42 issued patents with another 60 pending. Learn more about the science from this video:
Data privacy conspiracy theorists among us might be crying foul but this is the brave, new world in which we inhabit. Afiniti’s board of directors might further fuel your paranoia a bit, when you consider the tilt toward political personas. Among the suit and ties not already mentioned are José María Aznar, former president of Spain; former U.S. Treasury Secretary John Snow; former U.S. Senator John E. Sununu from New Hampshire; and former Australian politician Wyatt Roy. Leading the company is Zia Chishti, former CEO and founder of a $9 billion medical device technology company called Align Technology (NASDAQ:ALGN) that he led from startup to IPO on the NASDAQ.
Afiniti claims it generates an average revenue gain of more than 4 percent for its clients, which include T-Mobile, Caesars Entertainment (Vegas, baby!), Sprint, Virgin Media and Vodafone. In a case study of its business with T-Mobile, Afiniti says its AI platforms generate $70 million a year in incremental cash flow for T-Mobile. Employee retention improved by 5 percent and time spent handling calls dropped by 2 percent. It’s nice to see that retention was improved without having to resort to those
cattle tags productivity wearables from Humanyze. Today, T-Mobile consistently ranks as No. 1 in J.D. Power Wireless Customer Care rankings. For Caesars Entertainment, Afiniti says it increased sales by 6.5 percent and delivered more than 30,000 incremental reservations since 2011. No details were available on the number of call girl reservations (Vegas, baby!).
Afiniti IPO has big potential
Online speculation about the IPO bid came at least as early as January of this year when Bloomberg reported that Afiniti was weighing such a move to boost growth. Citing an anonymous source, Bloomberg said Afiniti may sell a 20 to 30 percent stake, aiming for a valuation of about $2 billion. That was before the latest investment round reported by VentureBeat. The Bloomberg report noted that Afiniti has the potential to have one of the largest enterprise software IPOs in recent years. Businesses in the industry have raised about $4.1 billion in the last three years, according to Bloomberg. The largest IPO during that time went to Inovalon (NASDAQ:INOV), a cloud-based big data analytics company serving the healthcare industry. It has a market cap of $1.73 billion but its stock price has fallen nearly -60% since its IPO in February 2015.
Meanwhile, VentureBeat, also working with a Deep Throat source, reported that Afiniti will not be profitable this fiscal year, but expects to turn a profit in fiscal year 2018, which begins in June. The anonymous source also told VentureBeat that Afiniti’s revenues are “growing at a 100 percent run rate”, a statement we took verbatim from their article. We’re not really sure what that statement means, but the Afiniti business model tells all:
So basically, they believe in their value proposition so strongly that they’re willing to be compensated as a percentage of the dollars they save each client. If only we could get Taleo or Workday to adopt such a business model, but it doesn’t seem likely that those HR tools could do stuff like this:
Afiniti AI platform appears versatile
If Afiniti’s AI platform is really as good as the startup claims—and plenty of big-name clients appear to believe in it—then this could be an intriguing and rare investment in a full-on AI company. We can see many other uses for this sort of software tech, from dating services like Match.com to HR departments looking to hire the right team players for their particular corporate culture. Afiniti CEO Chishti has already implied that its Enterprise Behavioral Pairing platform could be used in other sales situations by using facial recognition software to identify customers as they walk into a store, alerting the right employee for the job.
Of course, there’s also the problem of homogenization, where we only interact in the same social bubbles with people of similar backgrounds. And the IPO may not happen this year—or ever. We’ve seen Google, Apple or some other mega-tech company gobble up many a startup before this stage. Or it could take the road less traveled and become the next NVIDIA Corporation, a company with a market cap of more than $55 billion and a stock price that has risen +158% percent in the last 12 months in part due to their focus on AI hardware. Stay tuned because if/when that S-1 gets filed, we’re going to be all over it with another article.
Update 10/25/2018: Afiniti has taken in an additional $130 million at a $1.6 billion valuation from a Series D Round which led to the company confidentially filing for an IPO. This brings Afiniti’s total funding to $267.2 million.
Here at Nanalyze, we complement our tech investments with a portfolio of 30 dividend growth stocks that pay us increasing income every year. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.