Making sense of Gupshup’s acquisitions

Even with a defined strategy, merging two or more products isn’t easy. This problem becomes more pronounced when merging products of multiple companies. 

For conversational messaging platform Gupshup, which has acquired five companies in the last nine months, the challenge begins now.

“The transaction headline gets the news, but the real hard work begins afterwards. The post-merger integration really takes a lot of things,” says Beerud Sheth, Co-founder and CEO, Gupshup. 

Since September 2021, the San-Francisco, California-headquartered company has acquired rich communication service platform Dotgo, cloud telephony firm Knowlarity, conversational banking company Active.ai, digital shopping assistant AskSid, and customer experience solution OneDirect.  

All of these deals have been a mix of cash and equity. Gupshup hasn’t disclosed more details on the deals. 

With the five companies combining–and the headcount growing to about 1,300 in India and the US, from about 200 in May 2021–the task before Beerud is to meld them into a unified culture, and integrate their capabilities into Gupshup’s product. 

“My personal job has become a lot more about culture and team, to make sure that the teams are aligned and inspired and motivated and excited to do work,” he says. “I never thought that this would become my job as the company grows, but that's what it is.”

ALSO READ

[HS Conversations] Mother, wife and now entrepreneur: Meet Deepika Jindal of the Jindal Steel Family

IPO in sight, but no rush

The acquisition spree aligns with Gupshup’s plan to expand its product offering, as it prepares for an initial public offering by the end of 2022. 

“Our goal is by the end of this year or early next year, at least we will be ready. But the markets also have to be ready,” Beerud says. 

Globally, both public and private markets are facing downturns, with the Nasdaq Composite index plummeting more than 24 percent since the beginning of the year. In the private market, startups have been cutting costs and laying off employees as funding remains dry. 

In India, too, the shares of some tech startups listed in 2021 have been hammered. Paytm and Zomato have crashed more than 50 percent this year, and Nykaa’s share price has dropped by more than 30 percent since January.

“We will do it (IPO) at the right time. There is no crazy rush for it,” Beerud says. “Markets have been very volatile. So, we don't know when the window opens, but whenever it opens, we will be prepared.”

Gupshup offers conversational messaging to more than 45,000 businesses–a client roster that includes Ola, Zomato, HDFC Bank, Truecaller, and Reliance Jio–to engage and interact with their customers.  

The company helps enterprises with over seven billion messages every month. Gupshup is targeting a revenue of more than $250 million in 2022, growing about 83 percent over the previous year. 

In 2020-21, the latest period for which the company’s financials are publicly available, profit surged to Rs 52.54 crore from Rs 36.48 crore in the prior fiscal year, as per documents filed with the Registrar of Companies.

The startup emerged as a unicorn (with a $1.4 billion valuation) in April 2021 after raising $100 million in a funding round led by Tiger Global Management. It raised an additional $240 million in the same round, mostly for a secondary purchase of shares from investors and employees. 

Gupshup has raised more than $380 million up to date from investors including Fidelity Management and Research Company LLC, Think Investments, and Malabar Investments among others. 

ALSO READ

Chatbot platform Gupshup acquires Bengaluru customer service platform OneDirect

A comprehensive product: filling in the gaps

Behind the fundraises and the acquisitions is Gupshup’s vision of building a comprehensive offering:

• connect businesses to their customers through all possible channels, including WhatsApp, Instagram, Telegram, messaging, voice and video chat (more than 30 channels currently);
• provide clients with automation tools for marketing, ecommerce and customer support;
• develop and provide sector-specific features.

Globally, the conversation artificial intelligence (AI) market is expected to grow annually by 21.8 percent to $18.4 billion by 2026, according to a report by research company MarketsandMarkets. 

“The primary reason for the increasing global demand for conversational AI solutions is the need for enhanced customer support and to strengthen customer retention initiatives,” says Sachin Arora, Partner and Head of India Lighthouse (Data, AI and Analytics), KPMG in India. 

The lack of accuracy and inability to identify customer context is what needs to be addressed, he adds. 

When Gupshup bought Dotgo, a New Jersey-based firm, in September, it added RCS–an advanced text-messaging system expected to replace the SMS system–to its portfolio. 

Next it bought Knowlarity in February, capitalising on its voice-based offering. At the time, Knowlarity had 6,000 customers across 65 countries using its cloud telephony, contact centre automation, AI-powered voice assistants, and speech analytics solutions. 

While Gupshup did not disclose the deal value, CB Insights estimates it to be around $100 million. 

Beerud did not comment on the Knowlarity deal size. “It was probably the biggest transaction that we did. The others were smaller,” he says. 

In April, Gupshup acquired AskSid and Active.ai, which are specialised for conversation engagement in retail and ecommerce, and banking and fintech–the top categories for Gupshup, according to Beerud—respectively. 

Its latest acquisition, OneDirect, offers manual and automated agent support, allowing agents a 360-degree view of customers, their past interactions, and other data. 

While there are no more deals in the pipeline, “as a company, you always are (looking at acquisitions),” Beerud says. 

“(Conversational AI) is still in its infancy,” says Arup Roy, VP Analyst, Gartner. “The accuracy of the conversations, the depth and breadth of the conversations that are being enabled through conversational AI platforms need to mature.”

Only when the basics are perfected – including adding right context and personalisation–should companies look for more advancements such as different languages and voice capabilities, he says. 

Until now, Gupshup’s acquisition strategy has been to fill gaps in its overall product. That may change when the company goes for global expansion. 

Gupshup also considers customer overlaps with small companies that can be scaled to its customer base. “When you have overlapping customers, then you know that there are companies out there which need both products working together,” Beerud explains. 

The most important factor in the acquisitions is the team. “We look for teams that have similar culture, that are entrepreneurial, that are eager.”