Deal focus: Chatbots position for cross-border expansion

When Rajive Keshup, an investment director at Cathay Innovation, worked at AT&T as a director of corporate strategy and development around 2010, he had a clear sightline on the future of automated telecoms – except it wasn’t meant to be.

Such is the parabolic trajectory of artificial intelligence (AI) development and its practical deployment in communications, that even a global leader like AT&T was looking in the wrong direction as recently as a decade ago.

“We spent a lot of time on voice-to-text and looking at acquisition targets there. We didn’t think people would still prefer picking up the phone to speak with live operators – or as close to live as possible – and solving most of their queries that way. It’s been a pleasant surprise,” Keshup said.

Voice recognition and speech AI has emerged in the meantime as one of the most innovation-driven areas of customer engagement. There has been a short-term spike in AI-enabled call centre activity related to pandemic-driven business process changes, but the longer trend of reducing dependency on large staffs has been the main driver.

Cathay has studied this space for some time, noticing that cross-border expansions are relatively straightforward. Only a handful of languages are used for business interactions in tier-one and tier-two cities, which represent the best markets in terms of e-commerce and the types of consumer services that usually get the chatbot treatment.

There is also the idea that trends such as buy now, pay later (BNPL) are creating new demand for automated customer engagement. Furthermore, companies are not only looking to reduce costs on staff; they are increasingly using AI as a way of analysing customer sentiment, better directing calls, and cross-selling.

Known quantity

Cathay pinged its portfolio companies to probe the market, discovering that several of its investments such as BNPL player FinAccel and insurance marketplace Lifepal – both Indonesian companies – were customers of Singapore’s AI Rudder. Indeed, Cathay had backed Chinese media app developer CooTek – an earlier project of Rudder’s core team – several years prior.

Last week, Rudder raised USD 50m for its Series B round, with Tiger Global Management and Coatue Management taking the lead and Cathay contributing USD 10m. Sequoia Capital India, still the largest external shareholder, also invested. It valued the company at USD 250-350m.

“Very quickly, it became interesting to us as a company that was really solving a portion of the customer experience landscape in a way that a single brand could implement a product globally,” Keshup said. “[Singapore e-commerce company] Shopee is a good example. They pay one fee and have it in multiple geographies and languages. That prompted us to invest.”

Keshup estimates Rudder is the largest player of its kind in Southeast Asia in terms of valuation, funding, and revenue. US-based Gong may be the global leader, having raised more than USD 580m since 2015. In Asia, India has proven the hotspot, with Uniphore receiving a USD 400m Series E in February at a valuation of USD 2.5bn.

Rudder’s differentiator is a tight focus on financial services, which has proven easier to scale internationally than privacy-intensive areas such as healthcare and government services. More than 200 companies use the platform globally and annual recuring revenue was said to have grown 3x during 2021. This was achieved with a sales team of only four people.

Expansion plans

The plan is to grow the team with a focus on cementing Southeast Asian dominance in financial services before pushing harder into North America and Europe, as well as other service areas. Ideally, the company could piggyback on some of its Asian customers that are expanding into the US.

“If you look at the current verticals they’re in – debt collection, appointment reminders, debt payment reminders, basic card services support – the global TAM [total addressable market] for that is large enough for a USD 200-300m revenue company,” Keshup said. “If you layer on additional products and industries, you could make multiples of that.”

A global presence has always been part of the plan. Rudder was founded in China in 2019 as Saiduo Intelligence and quickly relocated to Singapore to leverage the city-state’s advantages in business internationalisation. For Cathay, the company’s cross-border B2B approach was also part of the equation, perhaps especially in terms of an eventual exit.

“When we think about Southeast Asian companies trying to go public, it’s really slim pickings. The SPACs [special purpose acquisition companies] and IPOs have been few and far between,” Keshup observed.

“Then when you look at B2B SaaS [software-as-a-service] companies that have a product-market fit in different parts of the world, you have a longer list of competitors, but you’ve massively increased your TAM and your odds of going public or getting acquired in global markets because you’re a lot more strategic.”

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• Topics
• Southeast Asia
• Technology
• Consumer
• Support services
• Early-stage
• Singapore
• Tiger Global Management
• Coatue Management
• artificial intelligence