SymphonyAI is looking to grow its portfolio to a dozen companies or more in the next several years as it eyes expansion into new sectors with the help of its own proprietary artificial intelligence platform.
Subscribe to the Crunchbase Daily
The firm’s operating model is somewhat unique, as it looks to buy or invest in companies—as well as incubating some of its own—and then leverages its own AI/machine-learning platform to help those companies grow their markets by building out their applications.
While companies like Google will give companies AI tools to help build applications, an entire proprietary platform is something different in the industry, said Pradyut Shah senior investment partner at SymphonyAI.
“I’m not familiar with any other firm that does this,” Shah said.
The firm’s portfolio now boasts a combined annual revenue run rate of between $300 million and $350 million, Shah said, adding that the firm would like to see that number top $1 billion or more in the next three to four years.
SymphonyAI was founded by Dr. Romesh Wadhwani in 2017. Prior to founding SymphonyAI, Wadhwani founded Symphony Technology Group in 2002, a private-equity firm investing in software and technology-enabled services companies. STG grew from a startup to having $2.5 billion in combined revenue and 15,000 employees. He also was the founder and CEO of software developer Aspect Development, which was acquired by I2 Technologies in 2000 for $9.3 billion.
The Los Altos, California-based operating group has seven companies in its portfolio ranging from retail to industrial to life sciences, Shah said. The group’s current portfolio is made up of: Symphony RetailAI (retail), ConcertAI (life sciences), Symphony MediaAI (media), Symphony AzimaAI (manufacturing), Symphony AyasdiAI (financial services), Symphony SummitAI (IT) and TeraRecon (health care). The group also houses Symphony CrescendoAI, which is where the firm houses its AI platform and looks to create new commercial applications with it, Shah said.
Markets of interest to the firm include the payment space, education, telecommunications and possibly the government defense sector, Shah said.
SymphonyAI looks for companies with growth anywhere between flat to increasing and are breakeven to profitable, Shah said. He compared the group’s approach to that of private equity, with the added difference being the technology the company can layer onto an acquired company.
Revenue is what SymphonyAI looks at the most when looking to add to its portfolio, Shah said. However, since the firm ideally likes to finance most deals using about one-third debt, EBITDA also is important, he added.
Typically SymphonyAI looks at companies with revenue between $25 million and $200 million when looking to enter a new market or vertical, said Shah, adding that companies with a revenue range between $50 million and $150 million is the firm’s sweet spot.
“We can write equity checks of up to $200 million,” Shah said.
The firm also will look to grow through add-on deals to its existing portfolio, Shah said. SymphonyAI normally looks for smaller targets with revenue—ideally coming from software licensing—in the range of $10 million to $50 million, he said.
“We are not sprinkling a little bit of money across a lot of companies but rather making calculated bets,” he said.
While SymphonyAI prefers to take a majority stake in a company when it invests, it will take on a minority interest if it has some operational control or a path to a majority stake within a couple of years, Shah said.
The group also would explore taking on a minority stake in a company if that target produced a commercial opportunity with another one of SymphonyAI’s existing portfolio companies, Shah said. It also would look at leading a funding round for a private company that could lead to a majority stake in the company, he added.
While the firm was relatively quiet this year—last closing a deal in March when it acquired Durham, North Carolina-based visualization and AI medical imaging provider TeraRecon—Shah said the operating group did not slow acquiring due to the pandemic and was actually quite busy looking at targets for most of the year.
Shah anticipates deal flow could pick up early in the new year.
“There are a few things in the hopper which could close in the first quarter,” he said.
Illustration: Dom Guzman
Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.