Published On: Wed, Feb 3rd, 2016

SwiftKey’s Timely Exit

Another European startup exits to an American tech giant. Predictive keyboard app builder SwiftKey, formed in London, reliable now it has sole to Microsoft. Sources put a price-tag of $250 million on a deal, nonetheless conjunction SwiftKey nor Microsoft are confirming a figure.

It’s engaging that such a widely used app — with installs on some 300 million devices, opposite Android, iOS and a SDK products — should feel a need to take an exit. Although it seems approaching merger was always a end-game for SwiftKey, given that predictive keyboard tech is (arguably) an approaching necessity rather than a nice-to-have add-on. And given that a keyboard app has no apparent trail to becoming a height in a possess right, as certain messaging apps have been means to.

Basic predictive calm has been around given a pre-smartphone era. And while SwiftKey has always trumpeted claims of nearby telepathic powers of prophecy interjection to a AI/machine training core tech, it’s arguably been a timorous differentiator with mobile OS platforms upping their possess diversion in that regard.

For example, Apple combined a possess subsequent word prophecy underline to iOS 8 behind in Jun 2014 — even as it also non-stop adult a iOS keyboard complement far-reaching keyboard to third celebration devs like SwiftKey for a initial time. The latter move substantially increasing a series of keyboard competitors pier onto SwiftKey’s territory. And while SwiftKey has grown active use from some 200 million+ inclination as of mid-2014 to some 300 million now, a year and a half later, a opening adult of a iOS walled garden would seem not to have led to a liquid of use that SwiftKey competence have hoped.

Asked by TechCrunch in mid-2014 either it was gunning to turn a billion-user business, co-founder Ben Medlock suggested that arrange of scale was not “completely out of range”, given what he pronounced were roughly 300 to 400 million users on iOS that would soon be coming within a orbit of SwiftKey’s app.

“If we demeanour during a proliferation of touchscreen inclination we consider there unequivocally is a possibility of removing to a billion end-points,” he pronounced during a time. “Using a technology, we now have somewhere north of 200 million [active devices] — that’s by a mixed of a chartering deals and a app downloads… And we’re usually ramping adult now to unequivocally concentration on distribution.”

In a event, SwiftKey has so distant managed to grasp around third of a billion users. Most of whom, presumably, are on Android. (Although it does not mangle out use per height SwiftKey has been on Android given 2010, and iOS usually given tumble 2014.)

Over some eight years in existence as a business, a London-based startup raised usually underneath $22 million from investors which include Index, Accel and Octopus. So profitable behind those VCs with a timely exit was evidently a clearer trail here, vs attempting to means and grow a standalone app business in an increasingly rival landscape. Or perplexing to renovate a app into a some-more profitable height play.

In prior years SwiftKey charged for a app, though as keyboard foe proliferated it switched to a freemium model, in midst 2014 — charity a core tech for giveaway and rising a themes store as a initial content monetization plan. But offered colored keyboard wrappers never looked like a hugely serious business indication for an app with hundreds of millions of productivity-loving users. Even as giving divided a core tech undermined a destiny viability of its existing chartering business to OEMs. (SwiftKey couched this as a approach to dilate a reach in rising markets where a chartering indication would have been out of strech anyway.)

And while it claimed to have other paid for calm skeleton adult a sleeve, a concentration seemed some-more on appropriation new users by giving a app divided than on milking a user-base. Which creates sense if merger is your finish diversion given afterwards we are playing a pristine numbers games — given you’re offered intensity strech to your customer (vs your rivals’ intensity reach).

Of march the basic math here, from Microsoft’s side, is calculating how distant it competence be means to spread a Cortana AI partner if it’s piggybacking on a existent SwiftKey user bottom vs how most it’s carrying to spend to buy SwiftKey’s reach. But a fact Microsoft’s interest in SwiftKey apparently centers on Cortana does desire an interesting question of because SwiftKey didn’t pierce to rise an AI partner of a possess — to enlarge and extend a predictive keyboard app.

And maybe renovate into that sought for platform. Since there are clearly some synergies to be leveraged between predictive keyboard record and a practical partner designed to crunch information to make useful predictions, as Microsoft has recognized.

Why not do that? In a word: risk. When faced with a choice between a morality of an exit to an existent tech hulk or a complexity of developing, selling and maintaining another product that’s during slightest one step private from your core imagination — and that also brings we into direct competition with mixed tech giants already battling to dominate this space (e.g. Apple’s Siri, Facebook’s M, Amazon’s Alexa, Google Now, Microsoft’s Cortana…) — well, it’s easy to see because holding a income was by distant a easier choice for SwiftKey’s co-founders.

SwiftKey a product, then, was approaching a really well-honed, VC-backed underline looking to sell itself to an determined tech business. As now it reliable it has. This exit suggests that nutritious a standalone app business is not easy in today’s swarming app marketplaces — and that even with hundreds of millions of users monetization can still pose challenges. But it also underlines that the right vital choices can compensate off flattering handsomely.

As SwiftKey’s co-founders put it in a rather understated matter on a acquisition: “We trust fasten Microsoft is a right subsequent theatre in a journey.” In other words, if your exit plan is, well, to make an exit, that’s not indispensably a explanation on how tolerable or differently your standalone app business competence have been. Although carrying a pay-back plan is a must. So maybe it is a explanation on a relations palliate of an exit vs pivoting in a hopes of destiny value.

A ~10x exit isn’t too unfair during all. Plus it’s guaranteed income in a bank vs a unquantifiable risk of spending to keep swimming in a seethingly rival cauldron of a smartphone space.

So not utterly a quick exit for SwiftKey then, though a timely one that will have a investors smiling nonetheless.

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