South African artificial intelligence (AI) startup Xineoh has concluded a second round of equity funding worth US$1.5 million as it focuses on growing its team and building out its tech.
The Bloemfontein-based Xineoh, which raised US$2 million in funding back in 2017, uses AI to help brands predict consumer behaviour in order to maximise efficiency and customer satisfaction.
It has now raised an oversubscribed US$1.5 million round at a US$15 million valuation.
Seasoned investment banker Wade Flemons was among the investors, and Hans Hawinkels, who was instrumental in Naspers’ Tencent acquisition, has also come on board as an advisor.
Xineoh chief executive officer (CEO) Vian Chinner said his company offered a viable alternative to solutions from more developed markets.
“It is impractical to get everything out of Silicon Valley. Something like AI requires some degree of consultation with the client. It is difficult to get this type of service from an operation that is a 27-hour flight away,” he said.
There are also intricacies in South Africa that US tech providers may not be able to address.
“A leading tech company such as Watson in the United States is a bit like an F-16 fighter plane. It is highly efficient, but it has to take off in near perfect conditions for it to succeed,” said Chinner.
“By comparison, a MiG can take off on a dirt road and doesn’t need continual maintenance. At Xineoh, we have built a software platform for companies that might have unstructured, unclean data. It’s more robust and flexible and therefore more suited to the local market.”
Flemons said he made the decision to invest in Xineoh because it displays key characteristics of an early stage business that can be successful in the high-growth AI sector.
“Xineoh’s experienced executive and engineering teams, its cutting-edge technology and the astounding results achieved by its algorithm to date are the major differentiators that will drive the value growth for its clients and shareholders,” he said.
Hawinkels said became interested for two principal reasons.
“Xineoh offers a very efficient way of being able to help predict consumer behaviour and it has a great management team led by a very capable person in Vian,” he said.
“In addition, because Xineoh is able to analyse large quantities of data quickly and cost effectively, companies will benefit from such analysis and be able to better position their business or products and save costs in the process.”
Chinner said Hawinkels had assisted Xineoh with building its team as well as highlighting potential clients for the company.
“We have appointed two new board members, Alan Keet, former CEO of Grand Parade Investments and Nolands South Africa, and Xen Lategan, former chief technology officer of Newscorp in the United Kingdom, and are looking to expand our employee base significantly in 2019,” he said.
This is likely to be the last venture round for Xineoh.
“We are close to being cash-flow positive and aim to continue to grow value through our focus on building a leading team, the most prized solutions and ultimately the most valuable insights and predictions for our clients,” Chinner said.
