Ansarada, a provider of AI for companies to prepare for their biggest deals, raises $18M

The Australian company will use the funding to grow its team in the United States

Financial trends and news by Steven Loeb
March 21, 2018
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As someone who covers the comings and going of the tech world, I am constantly writing about deals, either companies getting big funding rounds or making big acquisitions, but I don't typically delve into what actually has to happen to make those deals possible. 

According to Sam Riley, CEO of Ansarada, a company that uses AI and predictive analytics to help companies make smarter deals, it involves a lot of due diligence, which means combing through financial information, operational information, contracts, employee agreements, historical results, tax information, licenses and a whole bunch of other stuff that relates to the performance and operation of the businesses.

The problem is that takes a lot of time and effort. Also, a lot of companies are not so great at keeping this information up to date, resulting in the need to scramble to get information together before a deal takes places, resulting in lost time and money. The process is extremely inefficient. 

That's why Sydney, Australia-based Ansarada recently launched a tool to solve this problem, and now it's ready to take it global. On Wednesday, the company announced it has raised $18 million in Series A funding to accelerate expansion in the United States and EMEA.

Founded in 2005, Ansarada started out with its virtual data room product, which optimized the way due diligence is done in transactions, such as M&A and fund raising. It was only in October of last year that it launched its AI-powered Material Information Platform (MIP), taking the data it had accumulated over the last decade and using it to empower advisers, investors and companies to unify information scattered across silos and to provide them with a complete overview of business performance. 

"We had one core product, the virtual data rooms, that have run 20,000 transactions, and every time someone has added, edited or deleted something in their product, they’ve basically been training it as to what people should ideally start with. Off the back of all that data, that’s where we’ve created a whole new product that helps people prepare for their most important events, but, more importantly, it helps any business get awareness and knowledge and act on that knowledge to improve their operations pre-deal," Sam Riley, the company's CEO and founder, told me in an interview. 

The benefit of giving businesses these insights is two fold, he said. First, the language that investors and purchasers of businesses speak is often different than the language that businesses structure their material information, and so Ansarada is bridging that gap for them, giving them the information they need to put their best foot forward. 

The other benefit is, that when businesses do sell their assets, they often find out about things, ideally, they should have known years before. Ansarada's product helps them uncover these potential problems long before they would need to scramble to fix them.

"Our view is that businesses should be aware of these risks earlier and opportunities much earlier than when they have deals and that’s what the platform does for businesses. It gives them awareness of things that will have a big impact on their outcomes and they use those things to improve how they perform today. It could be, for example, they don’t have a robust forecast model, and if they did have one they could make better decisions today, they could get more visibility into their operations and that would be great and that would help them perform. If they go raise capital or they go to sell their business, they absolutely need that. As opposed to running around trying to fill gaps come your biggest in your life as a business owner, why not get awareness of these things much earlier and improve your performance?" said Riley. 

There are multiple ways the product can save businesses time and money. First, it helps them with efficiency. Typically, it will take a management team over 400 hours of investment of their time to gather and prepare the information that’s required for their advisors and the process. The MIP reduces that by at least 25 percent.

"If you take the average management team’s cost and apply that over 100 hours, the payback period is as as little as a week. That’s for one event, so the next event could be an audit and the next event could then be a strategic or a risk assessment, so they get to reuse the work that they did before and the ROI just increases," Riley said.

There's also benefit to the business as it allows the company to improve performance even outside of any upcoming major company event.

“You might be surprised how common it is for businesses to have significant contracts that are material to that business that not signed or they’re out of date, and often they sit hidden in the business and they only get discovered when they have to do something important. So discovering those things early totally derisks the business so there’s an ROI on that as well, because it’s no good if your customer that constitutes 20 percent of your revenue, that your actual agreement with them is not valid. So there’s a big ROI on discovering those things as well," he explained.

Finally, there's a financial opportunity, as having information up to date means having to spend less time with advisors, such as accounting, legal, risk and compliance, which results in lowered fees. 

It's all about the data

Launched in October of last year, the company has already signed up over 20 clients on the MIP platform, but it was Ansarada's virtual data room product that allowed the new product to come into life thanks to all of the data it was able to accumulate over years from thousands of clients, including Google, Coca Cola and VMware.

"After a while of running those deals, and seeing that companies are typically unaware and unprepared for them, we accumulated a lot of data and we’ve turned that data into a whole new product that helps businesses be aware of their biggest opportunities and risks, and aligned themselves to what great looks like and take advantage of that,' said Riley.

"It's through running millions of documents through there for tens of thousands of transactions that we've actually acquired the data and knowledge to turn it into this platform."

That required Ansarada to structure its own data to find those patterns and apply machine learning to it, which took a couple of years. Once it had its own data organized, it was able to discover common traits that ran through all of the deals it had overseen 

For example, a year ago the company began testing a hypothesis that bidders who get to the end and negotiate and ultimately succeed in acquiring companies must behave differently than bidder that are not that serious and are just kicking the tires.

"We had the data on both of those people, and we analysed 57 different behavioral attributes in how active their lawyers are, which documents they look at, what questions they asked, the frequency of their log-ins, etc. We ended up with an algorithm that can predict with 97 percent accuracy, as early as day 20 into a deal, which bidders are engaged and likely to make it to end and which of your bidders are not engaged. That means anyone running a deal on our platform isn’t using subjective reporting on an activity metric, they’re taking advantage of tens of thousands of deals to get benchmarking against previous outcomes," said Riley.

Armed with those insights, companies can make smarter decisions on which companies to pay attention to, and to not waste time with the wrong people. 

The new funding

With the exception of some angel funding, this is the first funding that Ansarada has raised in its history, despite being around for over 10 years. 

“Our business has always been profitable from day one and we’ve been able to grow our business reinvesting our own profits out of our own cash flow, so we haven’t taken on external capital. Over 10 years we’ve developed a very strong brand and we’re trusted by the world’s leading companies and their advisers," Riley expained.

"We’ve accumulated a rich set of data and been able to turn that into some very powerful tools that totally will disrupt the way deals are done and they dramatically improve the way businesses can operate. For that reason, the opportunity’s there to scale our business a lot more, hence the need for capital to accelerate that."

The company will use a large portion of the new funding to scale its sales and marketing operation, particularly in the U.S., while another large another portion will go toward continuing to invest in the product, particularly on the AI and machine learning aspects. 

"We will continue our innovative work around AI and machine learning to turn our data into tools that do one of three things: help people make better and faster decisions; automate processes for efficiency; or identify risks to improve the safety of how the business operates. So we’re increasingly investing in natural language processing tools, understanding the structure of all the information we have and turning that into risk reduction, efficiency increases or smarter, faster decision making."

Giving back

Along with the new funding, the company also announced that all advisory fees from the deal will be donated to charity projects in Uganda and Nepal via Adara Partners.

"There’s a company called Adara, and they’re a not for profit that does a lot of work with women and children in poverty in Uganda and Nepal. They run a neonatal clinic in Uganda and they run a lot of education and community health programs in remote regions in Nepal," Riley told me.

"What’s interesting about Adara is the model that they have to fund these projects, is they have actually have a corporate advisory business and they also have a panel of the 12 best deal makers. These are very senior people that have done hundreds of deals and they’re the ex-chairman of Goldman Sachs and managing directors of UBS. Those panel members donate a portion of their time to Adara help them complete transactions and the fees from those transactions for the advisory services, go directly to their projects in Nepal and Uganda. Basically, it’s a very innovative way of doing corporate advisory where you get very, intelligent skilled deal makers to help you get a deal done, but both the deal maker and the company are doing so with the knowledge that, by doing this deal, you’re also helping bridge worlds for those people in Nepal and Uganda. That’s how the model works."

The reason for doing this, he said, was not just for Ansarada to give back but also to influence others to also do the same thing. 

“We wanted to not only do it for ourselves but we wanted to promote it and publicize it and try to influence other companies to do the same. Also we want to influence advisers to consider the model as well, because investment banking advisers really struggle to use their talents and skills to add value to those in need. Sure, they can write a check, but if you’re an investment banker, how do you use your skills in a way that you can add value to other people in need? And this is an actual direct way that they can do that," he told me. 

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