Australian Enterprise Virtual Assistant Developer Flamingo AI Selling for $100
Australian virtual assistant developer Flamingo AI is selling itself off for $100 Australian dollars after failing to raise enough capital to maintain its services. Rymamay will pay the “nominal consideration” if it is approved by shareholders this summer. The sale will mark the end of the seven-year-old Flamingo and its virtual assistant for insurance and financial technology companies.
Flamingo has had an impressive run until now. The startup was acquired by Cre8tek Limited in 2016, changing its name to Flamingo AI in late 2017, after raising more than $15 million in two rounds of investment with ease. The company is listed on ASX, with the demands of shareholders partly limiting how narrow a cash cushion it could survive on right now. Last year the company had a net loss of $7.2 million and estimated it will only have about $1.4 million in cash when the sale is over, even after cutting employee numbers in half to 21. The news of its losses sent stock prices into freefall, with shares trading at a tenth of a cent before halting on May 18.
Earlier this year, Flamingo had a brief rally after earning a patent for a semi-autonomous AI for answering questions, but it didn’t last. Despite the fire sale Catriona Wallace, who has been heading business development, will stay on the board, while CEO Olivier Cauderlier will continue in his role for now. Otherwise, Rymamay takes on all company’s assets, including customer agreements, intellectual property, and physical equipment.
“As previously announced, the Company has been working hard to reduce its cash burn rate whilst still servicing current clients in Australia and the US and executing its go-to-market strategy for its Intelligent Knowledge Sharing Hub,” Flamingo said in a statement.”Given its rate of cash burn, in order to execute on the current strategy the Company would need to raise substantial capital, which it had been seeking. As it became evident that the prospects of raising substantial capital were unlikely, the Company engaged M&A Partners to seek potential buyers for the Flamingo Ai business. As a result of this process several proposals were received and the proposal from the Purchaser was accepted.”
There are plenty of reasons for Flamingo to have failed, but the current COVID-19 health crisis almost certainly has something to do with it. Economic tailspins and massive unemployment do not translate to success for a still young tech startup, generally. The ballooning presence of AI-powered chatbots and voice assistants might suggest otherwise. WhatsApp chatbots built by the governments of India and the UK and the utility of interactive voice and text chatbots for healthcare providers theoretically would put technology like Flamingo’s right in the crosshairs of companies looking to invest in AI. Trading publicly and owning up to the responsibilities to shareholders makes it harder to take risks or run on a shoestring like private startups. Founders have more control over those kinds of decisions, even if they’ve traded equity for investment capital. A tumultuous market and a need for more lead time are probably not the only reasons Flamingo is going for $100. Still, it does illustrate why an IPO usually occurs only when a startup has relatively robust cash reserves.