AI might be hyped these days as the next billion-dollar (or much bigger) opportunity after that mega round for Microsoft’s OpenAI, but that rising tide isn’t lifting all boats. SoundHound — the speech AI company that provides conversational AI services for automotive, connected home and hospitality applications — laid off 40% of its workforce earlier this month and announced today that it had raised $25 million in equity to fund its position in the market.
SoundHound did not say who is behind the funding, other than to note that it comes from “a diverse range of financial and strategic investors, both from the current shareholder base and new capital providers.”
SoundHound notes that it comes in the form of preferred stock and is convertible into Class A common stock, possibly “on or after the one-year anniversary of the issue date if certain pricing conditions are met.” We’ve reached out to the company to see if we can get more information on that investor list.
We also asked if it could specify how the proceeds will be used. A report last week said the laid-off workers will only receive severance pay if the company raises more money. With this round closed, we’ve asked if that will be one of the uses of the money.
SoundHound was once valued at $1 billion+ when it was a private start-up and seen as an independent alternative to Big Tech-built services like Amazon’s Alexa. (And previously it developed music AI, and many considered it a more powerful and effective alternative to Shazam, the Apple-acquired company that helps identify music.)
SoundHound went public in November 2021 through a SPAC merger at a valuation of $2.1 billion. But…surprise, surprise, the SPAC rating went in the direction of so many other SPACs and not held. SoundHound today has a market cap of $295 million.
That has not been helped by the broader economic climate and the winter that has hit the technology sector in particular. Technology stocks have taken a nosedive over the past year and that hits companies particularly hard when they are still effectively proving their fit in the product market.
SoundHound has signed many major partnerships over the years, including deals with Mercedes Benz, Kia and Hyundai in their expanded automotive efforts and more recently Toast in the hospitality industry, as well as a deal with Qualcomm to integrate SoundHound voice AI into Snapdragon, are working with Snap, and more. But how much of all that has played into products — and especially those that are currently monetizing — isn’t so clear.
The company also provided a preliminary look at full-year 2022 results in its funding announcement, which are okay, but not huge. Revenues will be $31 million this year,”at the top end of its previous guidance, “with gross margins in excess of 70%. “The company expects revenue growth to accelerate to approximately 50% year-over-year in 2023 thanks to its strong customer base, more than $300 million in bookings and increasing demand for its voice AI-enabled customer service products,” it noted. In other words, it continues to give great hope for the future prospects.
We will update this post as we learn more.