Transfluent’s big gamble has paid off. Its fundraising experiment on the Finnish crowdfunding site Invesdor raised EUR 0.69m, or 115% of the target amount, in eight weeks.
As Slator reported on April 20, 2017, the funding round values the company (pre-investment) at EUR 8m, and doesn’t come cheap for investors. But as of press time (16 hours left before the round closes), 178 investors have taken the plunge to own a piece of the startup.
Transfluent’s Founder & CEO Jani Penttinen told Slator the results exceeded their expectations, and would likely bring about 200 new shareholders, in addition to its previous 40 shareholders.
“Approximately 35% of the investment were actually made by two institutional funds — Visionplus Fund I Ky (EUR 0.21m) and Aloitusrahasto Vera Oy (EUR 0.05m),” he said, adding that the average investment is approximately EUR 2,457, excluding the bigger investments by the two funds.
Jari Tuovinen, Co-Founder of Visionplus, an early investor in the company (it led the USD 1m Series A funding in January 2014) explained in a forum at the Invesdor website that the company has committed to subscribing at least pro rata.
“We decided to do our part to help push the campaign to successful completion by subscribing for 8,800 additional shares,“ he said. “The whole idea of this crowdfunding round is to maximize the overall knowledge about Transfluent and also give as many investors as possible access to this round with the same terms as institutional investors.”
Prior to this round, Transfluent’s biggest investors were Penttinen and his wife, Xiaowen Sun, both with 19%, followed by Visionplus (15%), Aloitusrahasto Vera Oy (8%), and Acrium Investment (5.5%).
Since Transfluent is not a publicly traded firm, Penttinen emphasized that there is no way to purchase shares in the company under normal conditions.
“We could have gone the traditional route and looked for venture capital (VC) financing, as we have done in the past, but we wanted to expand our ownership. My vision for Transfluent is to be “everyone’s favorite translation company” and an important step towards that goal was to give everyone a chance to become a shareholder,” he said.
“We could have gone the traditional route and looked for venture capital (VC) financing, as we have done in the past, but we wanted to expand our ownership — Jani Penttinen, CEO, Transfluent
The CEO is now beaming with pride, sharing that he even landed a live TV interview on Finland’s most popular morning show, Huomenta Suomi.
“Having done VC rounds previously, and now crowdfunding, I must say this has been an interesting and quite exciting experience. The amount of attention we have received, especially in Finland has been quite a positive surprise,” he said.
So How Are You Different from Everyone Else?
The path that the Finnish language service provider (LSP) has taken to get its hands into the cookie funding jar is not for the faint hearted as Slator previously reported. Some have raised valid points in the investor forum on Invesdor and the clash of opinions could have doused the public’s enthusiasm for investing.
“I don’t see any clear advantages in your tech. Clearly, One Hour Translation, Straker, and several providers offer the same functionality (on demand, online ordering system + automatic dispatching of the orders),” an anonymous poster said. “Perhaps the oldest provider is Translated.net, which started this trend 15 years ago. Most recently, Lionbridge released OnDemand, which is yet another take on this. In my view, there’s no benefit to the client as to justify using your system compared to others. The tech was already there years ago (Plunet, Memsource, etc.) and enterprise customers were used to it.”
The potential investor went on to ask, “So, knowing your tech is not a clear differentiator, your per word price is high (for most enterprise customers, translation is just a commodity where costs need to be reduced to the minimum), and you don’t chase tenders, I wonder what’s your strategy in order to break the market.”
Tomi Heiskanen, Transfluent’s Chief Technology Officer, fired back: “We are not claiming we are the first to utilize this kind of technology solutions, but the execution of the technology strategy and the fine details matter more than who started it. To many LSPs, the online ordering form is something that has been added as a funnel to the old way of processing orders: by email, by hand. If the technology utilization has not been planned into the operations, it is hard to unlock all the potential.”
Asked what the company sees as the biggest obstacles that would cause the growth estimation for the years 2017–2020 and the pitch not becoming a reality, a Transfluent representative said simply that the need for translations will likely continue to increase and the market will grow, but what may limit the growth is the company’s ability to sell.
“In the short term, it is all about our team’s execution, in the long term, it will totally depend on the management’s ability to recruit the right people to run the sales,” the representative added.
Transfluent reported that revenue in April was up 14% month-on-month, or 327% compared to the same period in 2016. Penttinen disclosed that its biggest market so far now is the US (47%), followed by Finland (26%). It has also started to expand in Asia, with a satellite office in Japan.
“We are also increasing our capabilities for Chinese translation, but the target market is not in China, but instead Europe, the US, and Japan, all of which require increasing the amount of Chinese translations,” he revealed.
Though the company counts the UK and Japan as its fastest growing market, Penttinen said there are no immediate plans to expand into the UK. Instead, Transfluent is looking “to increase its staff managing translations and customer relations to resolve bottlenecks.”
“We have been growing really fast over the past couple of years (300% per year rate), which has resulted in some growth pains,” Penttinen claimed. “We have struggled to keep up with recruiting more translators, for example, which means we have been growing slower than we could have because we simply have not been able to serve all clients.”