In its first deal, Smartsheet has announced the acquisition of Converse.AI, which offers a SaaS platform that enables conversational chat bots. The acquirer plans to integrate the technology into its workflow automation roadmap. Converse.AI is part of a wave of bot-building startups that emerged in the past three years. Most are early-stage startups in the process of gaining market traction. Like Converse.AI, some have been purchased by larger vendors looking to add or expand their bot-building and workflow automation capabilities.

The 451 Take

The pickup of Converse.AI is a smart move for Smartsheet in several ways. The target should complement Smartsheet's workflow automation roadmap. Also, both firms share a similar approach in terms of targeting line-of-business (LOB) users, enabling them to build no-code, customizable workflows. The transaction should help Smartsheet accelerate its efforts to address customer demand for more complex work scenarios, while maintaining its focus on offering an easy-to-use yet powerful tool for LOB users.

Context

Smartsheet's acquisition of Converse.AI comes in the early stages of the chat bot market, which has seen few precedent deals. Consolidation in the space so far includes Salesforce's purchase of HeyWire, Cisco's pickup of MindMeld and Baidu's reach for KITT.AI. Of those, only MindMeld carried a hefty price tag – $125m. The rest were modest tuck-ins and with just seven staff members, Converse.AI is likely on the small end of that spectrum.

Converse.AI will continue offering its product and operate as a wholly owned subsidiary of Smartsheet. There are no immediate plans to change the product functionality, pricing structure or service levels that Converse.AI provides to its customers. Its staff, including its founders, have become Smartsheet employees. The deal closed December 28.

Deal Rationale

This move is significant in terms of complementing Smartsheet's workflow automation roadmap. It should help the company address customer demand for product enhancements that better accommodate more complex work scenarios.

For Converse.AI, although still in the early stages, the company had deployments that prove the viability of its technology. It faced an increasingly competitive landscape. In addition to other startups, it vied with large tech providers that are investing heavily in developing their bot-building offerings. These include companies like Microsoft and Google Cloud, which recently announced the launch of Dialogflow Enterprise Edition.

 

Target Profile 

Converse.AI is a young startup focused on conversational workflow automation and natural language processing (NLP). It was founded in 2015 by CEO Tony Lucas and Gihan Munasinghe. The company is based in San Francisco, with an office in Edinburgh.

In 2016 it launched Chatflow, a bot-building, codeless SaaS platform that provides tools such as NLP, user request management, human escalation and integration to messaging and enterprise applications like Facebook Messenger, Twitter, Slack, Intercom, Twilio, Layer Inc and Smooch. Use cases include FAQs, triage questions, automated fault finding, new service offerings, data gathering, route queries and personalized surveys.

A key differentiation for Converse.AI is its positioning among LOB users. While its rivals typically focus on developers, Converse.AI targets LOB decision-makers and analysts with its easy-to-use yet powerful tool with a no-code, drag-and-drop UI.

 

Acquirer Profile 

Smartsheet was founded in 2006 and is based in Bellevue, Washington, with an office in Boston. It currently has over 760 employees. The company has raised more than $120m in funding to date, including its most recent round in May 2017, when it landed $52.1m at a valuation of $852m. Smartsheet claims that it is used by more than 70,000 brands across 190 countries. Reference customers include Cisco, Aramark, World Vision, Netflix, Colliers International and Hilton Worldwide.

The company's core offering is built around the concept of a collaborative spreadsheet for managing group work. Its go-to-market approach can be described as a bottom-up, low-touch sales model driven by its viral sprawl across different lines of business. The company has been ramping up its direct enterprise sales as it has attracted more interest from larger enterprises. Smartsheet offers out-of-the-box integrations to Salesforce, Atlassian's Jira, Google, Microsoft Office 365, DocuSign, Box and Dropbox, among others. The company sees automation as its next big product focus, incorporating features like conditional notifications, approval automation and basic intelligence NLP.

 

Competition

Smartsheet competes with providers of next-generation project management and team workflow enterprise software applications. These include vendors such as Workfront, Trello (acquired by Atlassian last year) and Planview. Messaging platforms like Slack, Facebook and Atlassian's HipChat and Stride may also start to encroach on the segment as they strive to become more process-centric and contextualize communication delivery.
Raul Castanon-Martinez
Senior Analyst, Workforce Collaboration and Communications

Raúl Castañón-Martínez is a senior analyst based in Boston focusing on business communications and collaboration technologies such as enterprise messaging, voice, bots, speech recognition and unified communications. Before 451 Research, he was a product manager at EMOSpeech, analyzing emotion recognition technology.

Scott Denne
Senior Analyst

Scott Denne is a Senior Analyst with 451 Research, where he helps direct the firm's coverage of technology mergers and acquisitions. He also contributes to 451 Research's Customer Experience & Commerce Channel with coverage of the advertising technology industry.

Aaron Sherrill
Senior Analyst

Aaron Sherrill is a Senior Analyst for 451 Research covering emerging trends, innovation and disruption in the Managed Services and Managed Security Services sectors. Aaron has 20+ years of experience across several industries including serving in IT management for the Federal Bureau of Investigation.

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