SwiftKey’s Well timed Exit
One other European startup exits to an American tech big. Predictive keyboard app maker SwiftKey, based mostly in London, confirmed right now it has bought to Microsoft. Sources put a worth-tag of $250 million on the deal, though neither SwiftKey nor Microsoft are confirming a determine.
It’s fascinating that such a extensively used app — with installs on some 300 million units, throughout Android, iOS and its SDK merchandise — ought to really feel the necessity to take an exit. Though it appears possible acquisition was all the time the top-recreation for SwiftKey, provided that predictive keyboard tech is (arguably) an anticipated necessity quite than a good-to-have add-on. And given that a keyboard app has no apparent path to turning into a platform in its personal proper, as sure messaging apps have been capable of.
Primary predictive textual content has been round because the pre-smartphone period. And whereas SwiftKey has all the time trumpeted claims of close to telepathic powers of prediction because of its AI/machine studying core tech, it’s arguably been a shrinking differentiator with cellular OS platforms upping their very own recreation in that regard.
For instance, Apple added its personal subsequent phrase prediction function to iOS eight again in June 2014 — even because it additionally opened up the iOS keyboard system vast keyboard to 3rd social gathering devs like SwiftKey for the primary time. The latter transfer considerably elevated the variety of keyboard rivals piling onto SwiftKey’s territory. And whereas SwiftKey has grown lively utilization from some 200 million+ units as of mid-2014 to some 300 million now, a yr and a half later, the opening up of the iOS walled backyard would seem to not have led to the inflow of utilization that SwiftKey may need hoped.
Requested by TechCrunch in mid-2014 whether or not it was gunning to develop into a billion-consumer enterprise, co-founder Ben Medlock steered that type of scale was not “utterly out of vary”, given what he stated have been roughly 300 to four hundred million customers on iOS that may quickly be coming inside the orbit of SwiftKey’s app.
“For those who take a look at the proliferation of touchscreen units I feel there actually is an opportunity of attending to a billion finish-factors,” he stated on the time. “Utilizing the know-how, we at present have someplace north of 200 million [active devices] — that’s via a mixture of our licensing offers and our app downloads… And we’re simply ramping up now to actually concentrate on distribution.”
Within the occasion, SwiftKey has to date managed to realize round third of a billion customers. Most of whom, presumably, are on Android. (Though it doesn’t escape utilization per platform SwiftKey has been on Android since 2010, and iOS solely since fall 2014.)
Over some eight years in existence as a enterprise, the London-based mostly startup raised slightly below $22 million from buyers which embrace Index, Accel and Octopus. So paying again these VCs with a well timed exit was evidently the clearer path right here, vs trying to maintain and develop a standalone app enterprise in an more and more aggressive panorama. Or making an attempt to rework its app right into a extra useful platform play.
In earlier years SwiftKey charged for its app, however as keyboard competitors proliferated it switched to a freemium mannequin, in mid 2014 — providing the core tech without spending a dime and launching a themes retailer as its preliminary content material monetization plan. However promoting coloured keyboard wrappers by no means seemed like a massively critical enterprise mannequin for an app with lots of of hundreds of thousands of productiveness-loving customers. Whilst gifting away its core tech undermined the longer term viability of its present licensing enterprise to OEMs. (SwiftKey couched this as a approach to widen its attain in rising markets the place its licensing mannequin would have been out of attain anyway.)
And whereas it claimed to produce other paid for content material plans up its sleeve, its focus appeared extra on buying new customers by giving its app away than on milking its consumer-base. Which is sensible if acquisition is your finish recreation as a result of then you’re enjoying a pure numbers video games — because you’re promoting potential attain to your purchaser (vs your rivals’ potential attain).
In fact the primary math right here, from Microsoft’s aspect, is calculating how far it’d be capable of unfold its Cortana AI assistant if it’s piggybacking on the prevailing SwiftKey consumer base vs how a lot it’s having to spend to purchase SwiftKey’s attain. However the reality Microsoft’s curiosity in SwiftKey apparently facilities on Cortana does beg an fascinating query of why SwiftKey didn’t transfer to develop an AI assistant of its personal — to reinforce and prolong its predictive keyboard app.
And maybe rework into that searched for platform. Since there are clearly some synergies to be leveraged between predictive keyboard know-how and a digital assistant designed to crunch knowledge to make helpful predictions, as Microsoft has acknowledged.
Why not do this? In a phrase: danger. When confronted with the selection between the simplicity of an exit to an present tech big or the complexity of creating, advertising and sustaining one other product that’s a minimum of one step faraway from your core experience — and which additionally brings you into direct competitors with a number of tech giants already battling to dominate this area (e.g. Apple’s Siri, Fb’s M, Amazon’s Alexa, Google Now, Microsoft’s Cortana…) — properly, it’s straightforward to see why taking the cash was by far the easier selection for SwiftKey’s co-founders.
SwiftKey the product, then, was doubtless a really properly-honed, VC-backed function wanting to promote itself to a longtime tech enterprise. As as we speak it confirmed it has. This exit means that sustaining a standalone app enterprise shouldn’t be straightforward in as we speak’s crowded app marketplaces — and that even with a whole lot of tens of millions of customers monetization can nonetheless pose challenges. However it additionally underlines that the correct strategic decisions can repay fairly handsomely.
As SwiftKey’s co-founders put it in a fairly understated assertion on the acquisition: “We consider becoming a member of Microsoft is the proper subsequent stage in our journey.” In different phrases, in case your exit technique is, nicely, to make an exit, that’s not essentially a commentary on how sustainable or in any other case your standalone app enterprise may need been. Though having a pay-again technique is a should. So maybe it’s a commentary on the relative ease of an exit vs pivoting within the hopes of future worth.
A ~10x exit isn’t too shabby in any respect. Plus it’s assured cash within the financial institution vs the unquantifiable danger of spending to maintain swimming within the seethingly aggressive cauldron of the smartphone area.
So not fairly a swift exit for SwiftKey then, however a well timed one that may have its buyers smiling nonetheless.