After a positive start to FY22, technology investment fund Bailador is a strong supporter of AI-translation business Straker Translations.

Earlier this week, technology investment firm Bailador saw its stake in hotel booking software SiteMinder skyrocket to a valuation almost 23 times what the firm invested, thanks to strong support from investors for SiteMinder’s pending IPO.

With an eye for tech companies looking at huge market opportunity and sizeable growth, it’s no surprise another local startup on Bailador’s radar is New Zealand-based AI tech company Straker Translations (ASX:STG).

Straker, which reported a strong start to FY22, significantly increasing its SaaS revenue and reporting an unaudited revenue of NZD$11.4 million in the first quarter, believes the market opportunity in AI translations is three times the size of the opportunity of the music industry, ticking Bailador’s box for big growth potential.

The results came after a successful NZD$25m cap raise which saw Bailador Technology Investments (ASX:BTI), already a major shareholder in STG, increase its holding by $5.2m.

 

Strong growth potential

Paul Wilson​, managing partner of Bailador, says they’re particularly interested in Straker’s long-term potential.

“We’re bullish on Straker because they are uniquely positioned as the leading provider of AI data-driven translations to the c.US$57bn global language translation market,” says Wilson.

“It’s a highly scalable platform that utilises best-in-class technology and over 13,000 crowd-sourced freelance translators to deliver high volume translations with superior accuracy for enterprise customers, whilst generating industry-leading gross margins for the business.

“The superior margins and scalability enables Straker to grow both organically via enterprise sales, and inorganically via value-accretive acquisitions.”

In particular, Wilson highlighted Straker’s plans for over 60% increased revenue in FY22, off the back of a FY21 result of NZ$31.3m, to at least NZ$50m. That target is “highly achievable”, says Wilson, considering Straker’s customer base which includes IBM.

There’s also the Lingotek acquisition, which Wilson believes the market hasn’t yet fully appreciated.

 

Increased SaaS capabilities

Lingotek has delivered Straker new SaaS capabilities, which over the longer term will be a key driver of margin improvements across the business.

Lingotek recently benefited from new contract wins, including Panasonic as a SaaS customer in Europe, and a renewed SaaS contract with sports goods manufacturer Nike for a further year.

Straker’s team, led by co-founders Grant and Merryn Straker, neatly fits Bailador’s mould for the type of company it looks at for investment. The potential for global expansion with Straker’s proven AI-translation capabilities and the scale-up opportunities for SaaS revenue was also enticing, says Wilson.

“We tend to gravitate towards SaaS and marketplace business models because of their ability to scale-up very efficiently in their target markets, have predictable repeat revenue streams and possess measurable metrics which give us great insights and confidence that the business will become highly profitable over time,” he says.

“This was very much the case with Straker when we first invested a number of years ago. Since then I think the growth potential has improved, which is why we invested a further $5m in Straker a few months ago.”

Straker’s current growth plans include a minimum revenue target of NZ$100m over the coming years which Bailador believes the business is on track to achieve.

This article was developed in collaboration with Straker Translations, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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