Deal focus: Rokid attracts interest as household AI heats up

The latest report from the Consumer Technology Association (CTA) declares the impact of voice-controlled digital assistants “cannot be overstated” and tracks a 50% increase in global smart home device sales during 2017 to 27 million units worth some $3.3 billion. Investors with their fingers on the pulse of this segment, however, are looking beyond the hardware itself.

Indeed, one of the home automation space’s latest darlings, Rokid, is being touted more as an artificial intelligence (AI) brand than an appliance maker. The China-based company’s flagship products manage housekeeping tasks such as controlling light, temperature and music through voice-activated interfaces that are all engineered in-house.

“Smart speakers are an interesting category, but the core competency that really interests us is the technology that runs the back end,” explains Gary Fung, a vice president at CDIB Capital. “It isn’t very difficult to produce a speaker product with an off-the-shelf AI voice module, but Rokid is one of only a few companies in China that is actually developing the voice recognition technology.”

CDIB is joining Temasek Holdings, IDG Capital and Credit Suisse in a Series C round of undisclosed size for Rokid with a view to progressing ongoing R&D efforts as a China-focused marketing drive slowly ramps up. The company received a $65 million Series B in 2016 from IDG, Walden International, and Advantech Capital. 

Rokid currently sells two models: a melon-sized speaker known as Pebble and a taller unit called Alien with a display screen and visual sensors. 

There is an expectation that a clutch of smart speaker hardware designs will eventually emerge as perennial favorites among consumers. In theory, this will establish a new multi-tool platform that can support a number of adjacent industries, smart phone-style. Nevertheless, the players with proprietary AI are tipped to see greater success by expanding beyond the personal device space altogether.    

Investor interest in Rokid follows this thinking but with the added encouragement of a less congested market. Although there is substantial smart speaker competition in China, there are not many plausible consolidators with clear potential outside of gadget production. Global leaders Amazon and Google saw their combined smart speaker sales rise 22% in 2017, according to CTA, but historically, neither company has been able to penetrate the country. 

“We don’t currently consider the big US players as competitors because when it comes to the Chinese market, they’ll most likely have to partner with a player like Rokid that actually develops voice technology in the local language,” Fung says. “Meanwhile, Chinese voice software companies aren’t really competing because they don’t make hardware devices. Rokid has positioned themselves so they’re not going head to head with bigger companies, which should help them scale quickly.”   

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• Topics
• Greater China
• Expansion
• Technology
• China
• Growth capital
• TMT
• CDIB Capital
• Temasek Holdings
• IDG Capital Partners