ILearningEngines Inc., a Bethesda AI software company that raised $92.8 million through a merger with a special purpose acquisition company in April, is on the hunt for deals.
The firm, founded in 2010, is seeking out companies working in industries where its existing customers are clustered — insurance, healthcare, education, cybersecurity and human resources.
“There are a lot of software companies in the $5 to $20 million range looking to be acquired,” said Harish Chidambaran, its CEO and founder.
ILearningEngines' software helps companies use their internal knowledge, data and resources to build AI tools to train staff and automate processes for increased efficiency. The company counts Nationwide Insurance and Indian online education company Vedhik IAS Academy among its clients.
As the demand for artificial intelligence tools has grown, ILearningEngines (NASDAQ: AILE) has seen increased demand for its services. Its revenue in 2023 climbed 36% from the prior year, to $421 million, the company said in regulatory filings.
Going public was just a “natural step,” said Chidambaran in an interview.
It did so in April by merging with Arrowroot Acquisition Corp., a SPAC led by Matthew Safaii and Thomas Olivier, managing partners for software investment firm Arrowroot Capital, which has offices in Miami and Los Angeles. Arrowroot Capital was the lead investor in a $160 million funding round D.C.-based FiscalNote Holdings Inc. back in 2020.
Chidambaran had been thinking of taking the company public since 2021, but held off amid a broader slowdown in IPO activity.
In 2020 and 2021, merging with SPACs was seen as a faster way for companies to access the public markets. But SPAC deals fell out of favor as regulators began examining SPAC deals more closely and higher interest rates increased the cost of raising capital.
“We’ve been planning this for a while but decided this was the right time to do it,” Chidambaran said of the decision to go public via a SPAC deal.
It helped that its SPAC partner is led by investors who have extensive experience growing companies through acquisitions. ILearningEngines bought Tulsa-based risk management and learning technology firm in2vate in 2022, but has not made any other acquisitions.
“M&A is an important part of our strategy going forward — and they can help us there,” Chidambaran said.
ILearningEngines has a distributed full-time staff of more than 100 people across offices in Bethesda, Dubai, Sydney and three offices in India. The company declined to speculate on revenue or headcount growth in the next year.
Beyond the capital-related reasons, Chidambaran said he hoped going public would help to raise the firm's profile with both investors and potential employees.
“The ability to attract talent, customers and partners worldwide, being a public company really allows you to do all that,” he said.
Its shares began trading at $10.28 on the Nasdaq Capital Market on April 17. They fell to around $4.50 in late May but have since recovered most of their value and were trading at $9.53 per share Wednesday midday. The company’s market capitalization is $1.2 billion.
