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SoundHound Raises $25M Weeks After Major Layoffs

SoundHound has raised $25 million in equity financing from an unknown set of investors. The funding comes only a couple of weeks after the publicly traded voice AI developer laid off half of its staff, which followed a 10% downsizing in November.

SoundHound Equity

SoundHound described the new investment as key to its plans to hit profitability this year by giving it a stronger foundation for funding its business endeavors. That includes its recent renewed focus on restaurants and licensing deals with automotive and smart device makers. The preferred equity is convertible into Class A common stock in a year under certain price conditions. SoundHound said the new money comes from “a diverse set of financial and strategic investors, both from the current shareholder base and new capital providers” but hasn’t shared the source of the money beyond that description.

SoundHound also avoided any explicit mention of the layoffs but cited “recent cost reductions” that will save SoundHound more than $60 million. SoundHound now has about 200 employees, down from the 450-person team it had ahead of the first layoffs, which also included pay cuts for many still employed at the company. The company pointed to those savings, along with some early sales numbers from this year as evidence it achieve its 2023 financial ambitions.

“Additionally, SoundHound pre-announces strong preliminary 2022 results with revenue of approximately $31 million, at the high-end of its prior guidance, and gross margins in excess of 70%,” the company wrote in announcing the new funding. “SoundHound believes that burgeoning market demand and significant advances in technology are creating the conditions for an explosion in conversational AI, and SoundHound’s next-generation products and services are at the center of this revolution.”

Getting to profitability after a stock price fall from $8.72 at its April IPO to today around $1.40 would be remarkable considering the market cap shrunk from about $2 billion to $200 million. Still, it could be exactly what SoundHound need to attract a potential buyer. That may be the real goal according to Voicebot founder Bret Kinsella..

“Many companies are interested in having their own voice assistant, and SoundHound is suddenly a bargain,” Kinsella said earlier this month about the layoffs. “A large telecom provider or device maker would be ideal acquirers… All of the big tech companies have their own voice assistant, so acquiring SoundHound may seem redundant. However, at the current valuation, there may be interest solely based on SoundHound’s portfolio of more than 200 patents. Some companies may want the patents while others may want to ensure SoundHound’s patents don’t wind up in the hands of a competitor.”

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