Deal focus: Google offers AI expertise to Elsa

When the right partner comes along at the right time, growth plans can accelerate in a hurry. This is perhaps especially true when it involves a Series A start-up from Vietnam and the second-largest tech company in the world. 

Google is investing $7 million this week into English language education technology provider Elsa via its VC arm Gradient Ventures. Elsa raised $5 million in pre-Series A funding last year and wasn’t looking to raise more, but Gradient came calling last September with an irrefutable offer – talent.

Speech recognition apps are strongly dependent on artificial intelligence (AI), which is one of the toughest technical domains for retaining qualified staff and staying ahead of the capabilities curve. Most of Gradient’s team is comprised of Google engineering veterans with strong backgrounds in AI. 

“We didn’t have to explain to them exactly what we do,” says Vu Van, co-founder and CEO at Elsa. “The moment we mentioned something, they understood. That makes a difference in terms of speed versus an investor that is not as technically familiar with AI. It’s also a good match because we can share knowledge and learn from their early-stage AI portfolio companies.”

Elsa operates a mobile app that detects imperfections in users’ pronunciation and offers help on how to correct the error. This includes advice on moving the tongue and lips in different positions and explaining which syllables should be emphasized. The accuracy rate is said to be 95%. 

The focus on pronunciation, rather than grammar and vocabulary, is believed to address the biggest pain point for non-native speakers: anxiety about not being understood. 

The company, which was founded in 2015, claims to have seen a 3.5x increase in subscriptions in 2018 over the prior year. About four million people now use the app globally, with almost half of the business coming from Vietnam. Gradient is expected to support an expansion this year into India, Indonesia, and Japan, where customer feedback has been particularly buoyant. 

Feedback, teacher recommendations, and community building have been the keys to growing the user base on a light marketing budget to date. This process is expected to gather pace with localization in the more mature internet markets such as Japan, where consumers are more willing to pay for online services and even view free-to-use competitors with some suspicion. 

“Most people, especially in Asia, are used to having products online for free, so it is challenging to get people to realize the value of the product,” says Van. “People who have not broken out of that mentality make comments online asking why they have to pay, but then others come in and explain that for the cost of a meal, it could change your life and open doors of opportunity. It’s not coming from us, it’s very authentic. And it helps a lot with our subscription numbers.”   

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• Topics
• Southeast Asia
• Technology
• Consumer
• Early-stage
• Vietnam
• Google
• Education
• TMT