InstaDeep’s acquisition is a classic case of an African startup gone global  • TechCrunch

In January, Germany The biggest vaccine maker, BioNTech, has announced that it has agreed to acquire InstaDeep, a Tunisian-born, London-based AI start-up, for up to £562 million, including a performance-linked tranche investment of £200m.

InstaDeep’s deal – subject to regulatory approval and expected to close in the first half of this year – is quite intriguing, for several reasons. First, when completed (at $682 million, adjusted to US dollars), it will become the largest acquisition deal involving an African or Africa-focused startup, surpassing negotiated prices for Sendwave, DPO Group and Paystack. Second, unlike other high profile acquisitions, InstaDeep is not a fintech. And third, although the early believers who witnessed InstaDeep grow from a local company to a global startup knew there were enough exit options, they didn’t believe the acquisition would happen. so quickly, said Khaled Ben Jilani, senior partner at AfricInvest, one of InstaDeep’s partners. previous investors, on a call with TechCrunch.

In 2019, InstaDeep raised an $8.5m Series A at a $30m valuation, according to sources familiar with the round, which AfricInvest led with participation from New York-based Endeavor Catalyst. and a wide range of business angels in the global AI industry. The investment was AfricInvest’s first involvement in an AI startup, a move based on the founders of InstaDeep selling a global vision to the pan-African private equity firm.

“InstaDeep turned out to be quite different from the other companies in our pipeline because they were actually into deep tech versus applying technology to a certain industry, where basically you become an operator in that industry. They were developing specific technology that could impact many industries,” Jilani noted of InstaDeep’s pioneering technology. “And that was also interesting, especially in Africa, where such companies are quite rare. , when we had discussions with Karim about his vision and strategy, we quickly realized that InstaDeep could grow from an African AI leader to a global player.

InstaDeep uses advanced machine learning techniques including deep reinforcement learning in applications within an enterprise environment that intersects with various industries such as biotechnology, transportation, electronics manufacturing, and logistics. Ultimately, this helps businesses optimize decision-making and improve efficiency.

Karim Beguir and Zohra Slim founded the startup in Tunis in 2014 with “two laptops, $2,000 and a lot of enthusiasm,” CEO Beguir told TechCrunch last year. The startup company – which only received outside capital in 2018 – depended on original AI research published by Beguir, which led to the startup being discovered by specialist clients who then became customers. partners and investors, such as DeepMind, Google and its future acquirer BioNTech.

Can InstaDeep’s global success be replicated in Africa?

As InstaDeep’s customer base grew globally, so did its team. The company has 240 employees in Tunis, London, Lagos, Dubai, Berlin, Cape Town, Paris, Boston and San Francisco. Additionally, InstaDeep’s ambition to become a global company led it to move its headquarters from Tunis to London, which some publications have listed as its home, thereby neglecting its African roots.

“InstaDeep is a global company, but in terms of origin and like the beginnings of the company, there is no doubt that we are African,” Beguir told me on the call. “One of the reasons we founded InstaDeep was to show that there was real potential and real opportunity for AI in Africa. So we want people to see us as an African high-tech startup turned world, which sends a powerful message of hope for the space. On the contrary, InstaDeep has proven that an African company with African talent can successfully serve customers around the world while creating a bridge of talent to match this growth.

On the other side of the table are somewhat naive opinions that support the “Africanness” of InstaDeep. Tunisia, due to its inhibiting government policies, is a hostile place to operate any startup or access venture capital – with the exception of InstaDeep, Tunisian startups raised $17 million last year, according to a report by venture capital firm Partech. Thus, most startups had to take up residence abroad to access funding. Moreover, the influence of InstaDeep in creating AI talent on the continent is not discussed enough. Last year, the upstart played a notable role in helping organize and nurture the AI ​​ecosystem in Africa through Deep Learning Indaba and AI Hack, hackathons and events with thousands of AI talents and 400 researchers present. More importantly, an African startup serving clients outside the continent doesn’t make it any less African; in fact, founders should be encouraged to build software and AI companies that present better exit opportunities than e-commerce, logistics and payments, sectors that international companies only consider as they expand. in a new region.

Picture credits: Tech Safari

The ripple effect of InstaDeep building the world’s first is that it has put Tunisia’s tech ecosystem and, more broadly, Africa’s AI industry under the radar with the news of its acquisition. . Yet, it is too early to assume that because of this, it will suddenly open the floodgates for venture capital in the Tunisian tech or African AI market, which is currently lagging several industries as investment hotbeds on the continent. There is potential however, especially with applications of the technology in various sectors such as agriculture and manufacturing; startups like Aerobotics and DataProphet from South Africa have raised significant funds for this – however, it will take patience before jaw-dropping activity occurs.

Asked if InstaDeep is an outlier, Begiur expressed optimism that more success stories from the African deep tech and AI community would be told sooner rather than later, especially as the market venture capital has become hot for AI-based innovation. When that happens, the CEO says he hopes founders and investors reinvest in the space, which InstaDeep and AfricInvest intend to do moving forward.

“I believe AI is a huge opportunity for Africa and I have talked about it. We often see AI as a technology and a competition between developed countries. In fact, AI is critical to Africa’s success in the 21st century, and the reason is that it is the transformational technology of our time; I think you will see so many examples these days of GPT and beyond its disruptive potential,” continued Beguir, who is half Tunisian and half French. “Most importantly, the barrier to entry for AI is much lower than, say, technologies of the past that were traditionally associated with legacy companies and strong superpowers. As such, it is a great opportunity for the continent.

Last January, InstaDeep raised $100 million in Series B, more than 12 times what it raised in its previous pricing round. Such has been the proactive interest of new investors, including Alpha Intelligence Capital, CDIB, Google and BioNTech, its new owner with whom it began working in 2019 and launched a joint AI innovation lab the following year to deploy the latest advances in AI and ML. developing new drugs for a range of cancers and infectious diseases. Following the investment, InstaDeep was looking to make acquisitions to bolster its data collection capabilities to complement its AI systems before BioNTech rushed in with the acquisition offer, leaving most of the funding virtually untouched. of growth.

“It was crazy. Frankly, we [InstaDeep and early investors like AfricInvest] didn’t expect this to happen,” said Ben Jilani, whose company may be sitting on a conservative exit multiple of 10x+ based on independent calculations. InstaDeep came out at a higher valuation than it ordered for its Series B, according to Beguir.

According to a statement on the acquisition, BioNTech and InstaDeep have already developed several end-to-end AI-based applications trained on public and proprietary datasets in various scientific fields. These include projects to improve the selection of neo-antigens, the optimization of ribological sequences for BioNTech’s platforms and the development of an early warning system to detect and monitor high-risk variants of SARS. -CoV-2 according to their ability to evade the immune defenses announced last January.

“With BioNTech, we have developed a partnership over the years and carried out many successful projects together. We see great opportunities to build the next generation of immunotherapies and become the leader in biopharma and AI. I think it’s an exciting time, and we’ll have more to share in the coming months,” Beguir said of the acquisition without disclosing any new information while adding that InstaDeep will use its Series B funding and its exit money to scale its teams and capabilities across Africa. and globally. “It’s a continuation of what we’ve been doing in many ways,” he added.