In January, Germany Leading vaccine maker BioNTech has announced it has agreed to acquire Tunisia-born and London-based AI startup InstaDeep for up to £562 million, including a £200 million performance-linked tranche investment.
InstaDeep’s deal — subject to regulatory approval and expected to close in the first half of this year — is quite intriguing for a number of reasons. First, when completed (at $682 million, adjusted in US dollars), it will become the largest acquisition deal involving an Africa or Africa-focused startup, at the best prices negotiated for Sendwave, DPO Group and Paystack. Second, unlike the other high-profile acquisitions, InstaDeep is not a fintech. And third, even though early believers who witnessed InstaDeep’s growth from a local company to a global start-up knew it had plenty of exit options, they didn’t think the acquisition would happen so quickly, he said. Khaled Ben Jilanisenior partner at AfricInvest, one of InstaDeep’s previous investors, in conversation with londonbusinessblog.com.
InstaDeep raised an $8.5 million Series A in 2019 at a $30 million valuation, according to sources familiar with the round, which led AfricInvest with participation from New York-based Endeavor Catalyst and a wide range of business angels in the global AI industry. The investment marked AfricInvest’s first involvement in an AI startup, a decision based on InstaDeep’s founders selling a global vision to the Pan-African private equity firm.
“InstaDeep was very different from other companies in our pipeline because they were actually deep tech versus applying technology to a particular industry, where you basically become an operator in that industry. They developed specific technology that could impact many industries,” said Jilani of InstaDeep’s groundbreaking technology. “And it was also interesting, especially in Africa, where such companies are quite rare. And so when we talked to Kevin about his vision and strategy, we quickly realized that InstaDeep could transform from an African leader in AI to a global player.”
InstaDeep leverages advanced machine learning techniques, including deep reinforcement learning in applications within an enterprise environment that cuts across industries such as biotechnology, transportation, electronics manufacturing, and logistics. Ultimately, this helps companies optimize the decision-making process 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 londonbusinessblog.com last year. The bootstrap company – which only received outside capital in 2018 – depended on original AI research published by Beguirwhich led to the startup being discovered by specialty clients who later became partners and investors, such as DeepMind, Google, and its would-be acquirer BioNTech.
Can InstaDeep’s global success be replicated in Africa?
As InstaDeep’s client base grew globally, so did the team. The company has 240 employees in Tunis, London, Lagos, Dubai, Berlin, Cape Town, Paris, Boston and San Francisco. Also, InstaDeep’s ambition to become a global company led it to move its headquarters from Tunis to London, some of which publications are called as his homeneglecting the African roots.
“InstaDeep is a global company, but in origin and just like in the early days of the company, there is no doubt that we are African,” Beguir told me during the call. “One of the reasons we founded InstaDeep was to show that there is real potential and opportunity for AI in Africa. So we want people to see us as an African deep tech startup that has gone global and is sending a strong message of hope for space.” If anything, InstaDeep has proven that an African company with African talent can successfully serve clients worldwide while building a talent bridge to match that growth.
On the other side of the table are somewhat naive views that argue InstaDeep’s “Africanity”. Tunisia, because of the inhibiting government policy, is one unfriendly place to run a startup or access venture capital – Excluding InstaDeep, Tunisian startups raised $17 million last year, according to a report from VC firm Partech. As such, most startups have had to base themselves abroad to access funding. Also, InstaDeep’s influence in building AI talent on the continent is not discussed enough. Last year, the upstart played a notable role in helping to organize and nurture the African AI ecosystem via Deep learning Indaba and AI hack, hackathons and events with thousands of AI talents and 400 researchers in attendance. Most importantly, an African startup serving customers outside the continent doesn’t make it any less African; in fact, founders should be encouraged to build software and AI companies that offer better exit opportunities than e-commerce, logistics and payments, sectors that global companies only consider when expanding into a new region.
The ripple effect of InstaDeep being the first to build globally is that it has pushed the Tunisian tech ecosystem and, more broadly, the AI industry in Africa under the radar with the news of the acquisition. Still, it’s too early to believe that it will suddenly open the floodgates of venture capital into the Tunisian tech or African AI market, which currently lags behind several industries as hotbeds of investment on the continent. However, there is potential, especially with the applications of the technology in various sectors such as agriculture and manufacturing; startups such as South African Aerobotics and DataProphet have raised significant funds for this – however, patience is needed before some breathtaking activity takes place.
When asked if InstaDeep is an outlier, Begiur expressed his optimism that more success stories from the African deep tech and AI community would be told sooner rather than later, especially as the venture capital market has become red-hot for AI-based innovation. When this happens, the CEO says he hopes founders and investors invest in the space again, something InstaDeep and AfricInvest want to act on to move forward.
“I believe AI is a huge opportunity for Africa and I have always talked about it. We often see AI as a technology and a competition between developed countries. In reality, AI is essential to Africa’s success in the 21st century, and the reason is that it is the transformational technology of our time; I think today you will see so many examples from GPT and beyond of its disruptive potential,” continued Beguir, who is half Tunisian and half French. “But more importantly, the barrier to entry into AI is much lower than, say, past technologies that were classically associated with legacy companies and powerful superpowers. As such, it is a great opportunity for the continent.”
Last January, InstaDeep raised $100 million in Series B, more than 12x the previous prize round. That was the proactive interest of new investors, including Alpha Intelligence Capital, CDIB, Google and BioNTech, the new owner with whom the a joint AI innovation lab in 2019 to leverage the latest advances in AI and ML to develop new drugs for a range of cancers and infectious diseases. Following the investment, InstaDeep was looking for a number of acquisitions to ramp up its data collection capabilities to complement its AI systems before BioNTech came in with the takeover bid, leaving most of the growth funding virtually untapped.
“That was crazy. Frankly, we [InstaDeep and early investors like AfricInvest] didn’t expect this to happen,” said Ben Jilani, whose company may be sitting at a conservative 10x exit multiple based on independent calculations. According to Beguir, InstaDeep went out with a rating higher than what it commanded for its Series B.
According to a statement on the acquisition, BioNTech and InstaDeep have already developed multiple end-to-end AI-based applications trained on public and proprietary datasets in various scientific domains. These include projects to improve neoantigen selection, ribological sequence optimization for BioNTech’s platforms, and the development of an early warning system to detect and monitor high-risk SARS-CoV-2 variants for based on their ability to escape the last heralded immune defenses. January.
“We have developed a partnership with BioNTech over the years and completed many successful projects together. We see great opportunities to build the next generation of immunotherapies and become the leader in biopharmaceuticals and AI. I believe this is an exciting time, and we will have more to share in the coming months,” Beguir said of the acquisition without disclosing any new information, adding that InstaDeep will use its Series B funding and exit money to further its scale teams and capabilities across Africa. and worldwide. “It’s a continuation of what we’ve been doing in many ways,” he added.