ElectrifAI’s stable base of recurring revenue makes it a “terrific IPO candidate,” said CEO Edward Scott.
He said the provider of machine learning solutions would likely seek an IPO or sale when annual revenue reaches USD 150m, up from the current USD 50m, sometime after 2021.
The Jersey City, New Jersey-based company is focused on clients in the federal government, healthcare and consumer industries largely in the areas of procurement, fraud, contracts, customer experience and churn.
The executive said ElectrifAI, formerly known as Opera Solutions, is not yet seeking a financial advisor regarding its strategic options. ElectrifAI uses law firms McGuireWoods and DLA Piper, and it uses BDO for accounting.
Scott doesn’t envision a scenario where it would require further investment before a potential IPO or sale. The business is “self-funding,” profitable and cash-flow positive, he added.
Because most clients sign two- to three-year contracts, ElectrifAI has a stable base of recurring revenue, Scott said.
Scott said the 15-year-old company with 250 employees has been approached about a sale previously but “kept its head down.” He added, though, that strategic buyers would most likely come from the healthcare, financial services or consumer media and telecommunications industries.
The CEO said valuations in the sector are “ridiculously high,” noting the 13x to 14x revenue multiple on Salesforce.com’s pending acquisition of Tableau.
Scott said a large San Francisco-based money management firm acquired a majority stake in Opera in October 2018, but he declined to identify the new investor. Scott is a 25-year technology industry veteran with stints at Akamai Technologies and Interxion, and joined ElectrifAI as CEO from San Francisco-based White Oak Global Advisors, where he was a partner, at the time of the transaction.
Public documents state that Opera Solutions transferred patents to White Oak in September 2018. The patents secured debt obligations, and were transferred to White Oak as collateral after a default.
White Oak sold the patents in a 10 October 2018 auction to Opera Solutions OpCo, an entity with the same address as Opera Solutions that was registered to do business in California by Scott. Paul Hastings assisted White Oaks in the auction.
Opera announced 15 July its rebranding to ElectrifAI and that Scott had taken over as CEO.
After the change, ElectrifAI also launched an open source technology platform, which it calls an industry first. The CEO said data scientists prefer open to closed because it enables them to access code and data in any programming language. He added that the “very practical” machine learning solutions provided to its customers either improves profit, performance or reduces their risk.
Scott said ElectrifAI mostly works with Fortune 200 businesses, and some of its largest clients include T-Mobile, Johnson & Johnson, United Airlines, American Express and Mastercard. ElectrifAI also works with the federal government and approximately 200 large hospitals in addition to some insurance and pharmaceutical companies.
The company competes against enterprise internal analytics departments as well as Databricks, he said, adding ElectrifAI differentiates itself because it can “do machine learning at scale” because it possesses “a decade or more’s worth” of chaotic, disparate data.
The company also has offices in San Diego, California, and China and India.