Access Business Analytics
Four noteworthy announcements over the last two weeks provide several object lessons in how the language services and technology industry works and is evolving: Smartling and Lokalise both received substantial infusions of venture capital (VC), while Summa Linguae Technologies and Unbabel each revealed an acquisition (M&A). Although each announcement was individually interesting, in aggregate they are instructive. In this post we focus on global content management and full-service LSPs, tying them to themes we have been exploring since our 2016 report on a “Pragmatic Global Content Strategy.”
The month isn’t over but there’s been enough deal-making activity to take note. A few more transactions might close before the end of the year, but they may also slide into 2022. For each of the four announcements made so far, we provide the basic detail and a link to the company’s positioning or press release. We also include their mission statements, all of which, not surprisingly, translate into “we help our customers achieve their global content goals” (“Global Digital Transformation: The Customer Journey”). That unique selling proposition (USP) matters to prospects as they seek solutions but tends to be less important to investors than a steady track record of success and solid technology. What will they do with the money or their acquisitions? In the first two cases, the recipients will use the VC funds first to increase their visibility and outreach in new business segments, accelerate and broaden development of translation management and machine learning technologies, and acquire complementary technology and services. For the other two announcements, expanding into more markets and offering more services to existing and new clients are at the top of their to-do lists with their bright new purchases.
What can we learn from these events? First, we identified two lessons in language technology:
Now let’s take a look at the funding models behind these companies. Entrepreneurs at language service and technology companies often finance the creation of their business and initial growth with their own resources or with seed capital from friends, family, debt, and small investors. They then turn to other sources for operating and expansion capital.
These funds might include more of their personal and executive-team money, investment or loans from friends and family, business loans (debt), cash flow (revenue), private equity (PE), venture capital (VC), special-purpose acquisition companies (SPAC), and government funding. Consider VC, private equity, and government funding – all of which have been part of the history of the four companies:
At some point companies evaluate an exit strategy – for example, a liquidity event in the form of an initial public offering (IPO) or acquisition – or in the worst-case scenario, shutting down.
Coming out of 2021, we look to several major forces driving the market for global content: growing demand for information in the local language, across a wide range of written and spoken access points; the absolute requirement of enterprise-class solutions to manage multilingual content scalably and securely; and the breadth of required services and datatypes of required services and datatypes (“20 Trends Driving Global Expansion Initiatives”).
In the coming year we expect to see more LSPs transition to the roles of knowledge process outsourcing (KPO) or global content processing provider (GCSP) as we forecast in our 2017 report on the market. They will leverage the full array of data-driven services and supporting technology we describe in our report on responsive machine translation. The successful move to enterprise-ification will give KPOs and GCSPs a window to disrupt the status quo where the 10 largest players represent only 8.1% of the US$49.28 billion language services and technology sector.
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Focuses on market trends, business models, and business strategy
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