Acacia Research Corp. (ACTG), the patent licensing company run by Executive Chairman Louis Graziadio, is providing up to $50 million in funding to Veritone Inc., a provider of cloud-based Artificial Intelligence media technology.
Newport Beach, Calif.-based Acacia will provide $20 million in initial working capital through a convertible investment, the terms of which were not disclosed. In addition, Acacia will provide up to an additional $30 million contingent on Veritone achieving milestones, which also were not disclosed. The company also said it has formed a strategic partnership with Veritone to leverage Acacia's IP expertise to help Veritone build its patent portfolio and
execute upon its overall intellectual property strategy.
The investment from Acacia is being driven by Graziadio who was named executive chairman earlier this month. Graziadio has been behind an effort on the board to exit Acacia’s struggling patent licensing business and use its $156.8 million in cash to acquire one or more pre-IPO business. He was said by former Acacia employees to be instrumental in forcing out former CEO Matt Vella and former Executive Chairman Robert “Chip” Harris and naming Marvin Key as interim CEO.
"Shareholders have been asking for while about what Acacia plans to do with its excess cash, and this deal gives an answer," said Mark Gober, a senior director at 3LP Advisors in Silicon Valley. "The funding agreement marks a departure from Acacia’s core competency of licensing IP. Other licensing companies have been branching out as well, so it’s not a shock to see Acacia try something new."
A former Accia licensing executive also was not surprised by the investment in Veritone.
"I'm not surprised they're branching out. The way they've been managing the licensing business indicates they want to close the books on it as early as possible. They haven't acquired any new patent portfolios for a while. They're trying to get as much out of the existing assets as quickly as possible and move in a different direction."
Officials from Acacia couldn't be reached for comment on whether Acacia was looking at other investment opportunities and what the investment strategy means for the future of its IP business.
Acacia said its board unanimously approved the investment, "and believes that this partnership with Veritone will be synergistic with Acacia’s innovative business strategy, further supporting Acacia’s strategic focus on viable IP. As a result of this transaction, Acacia is poised to maximize Veritone’s opportunity and directly benefit from their leadership position in the rapidly evolving and growing AI technology space."
Veritone said it will use the capital proceeds to expand its global AI analytics, search and predictive solution for media firms, corporate enterprise, political campaigns and government. Veritone’s first-of-its-kind AI platform renders every second and frame of audio and video content searchable for objects, faces, license plates, logos, phrases, sentiment, voice identification, translation plus additional capabilities that are constantly evolving.
The companies said Veritone’s advanced platform enables unprecedented insight into the fastest growing segment of the world’s data (audio and video) to provide global decision makers with actionable intelligence that was previously impossible or impractical to extract.
The companies cited market research suggesting that the AI market is expected to exceed $70 billion by 2020 and grow at an explosive rate of 54% over the next five years.
“Veritone is led by an impressive and proven management team and is developing one of the most exciting and promising technology platforms that our team has ever seen,” Graziadio said in a statement. “It is estimated that 50 percent of business solutions will incorporate predictive analytics computing functionality by 2020, and we are looking forward to developing strategies with Veritone to expand their global reach.”
Under the agreement, Graziadio has joined the Veritone board.
Veritone CEO Chad Steelberg said the funding from Acacia “validates Veritone’s leadership position in the explosive growth of AI, machine learning and analytics technologies worldwide. It will enable us to expand and enhance our Cognitive Media Platform to meet the insatiable intelligence demand of our clients.”
The companies said Steelberg, and his brother Ryan Steelberg, president of Veritone, co-founded Veritone and are serial entrepreneurs who have built several highly successful internet software companies including AdForce, the world’s largest publicly traded centralized independent ad-serving solution, as well as dMarc Broadcasting, the largest centralized radio advertising network, acquired by Google in 2006.
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