Bloemfontein startup secures $2m funding from Canadian investment bank

Bloemfontein-based startup Xineoh is making waves internationally thanks to its unique algorithm, which has already generated in excess of $30-million in revenue for clients across the globe, attracting the interest of investors, with $2-million received in backing to date in 2017.

The startup has developed a series of algorithms that help connect the right buyer to the right producer — in a similar way to how Amazon.com and Netflix taps into user behaviour to predict potential purchasing behaviour and serve users bespoke information likely to incite conversion.

Xineoh CEO and founder Vian Chinner told Ventureburn that King and Bay West, a investment bank in Vancouver, helped the startup, which was founded in 2014 and currently has 14 full-time staff (of which eight are developers), to raise the funding.

Chinner said the deal came about after he began searching for an investor in Canada, which has a more active venture capital market than South Africa, and sought out the investment bank.

“The funding is happening by virtue of a reverse takeover of a cash shell they held (which is listed on the Toronto’s TSX Venture Exchange).

“The net effect is that the old Xineoh, is taken into the cash shell and the old Xineoh receives 75% of the shares in the shell, therewith raising $2-million at a $10-million post money valuation. The shell is going to be renamed Xineoh Technologies,” said Chinner.

It means that 25% of the new entity will be owned by those that subscribe to shares in the capital pool created by King and Bay West, he said.

‘The funding is happening by virtue of a reverse takeover of a cash shell the Canadian bank held’

He said of the amount, $800 000 was raised in December and made available to the startup. “The remaining $1.2-million is committed, it becomes available automatically when the final paper work and audits are filed. Everything is ready and signed off and should be closed by the end of the week.”

He said the funding will be used to expand the startup’s engineering and content creation team and to complete the building and marketing of VideoLlama, a one-stop personal shopping assistant for video streaming. He said the first version is quite close to public release and he expects it to be released next week.

Set to be rolled out initially in the US, the new service taps into the likes of Netflix, Amazon and Hulu to find users the best possible streaming deals, and uses Xineoh’s algorithm to offer up calculated recommendations based on future, rather than past, behaviour.

“The major problem with streaming services today is that they tend to offer up recommendations based on how much you will like a specific movie or show,” said Chinner.

“And while they aren’t inherently wrong, they don’t necessarily offer up real value for viewers. With VideoLlama, we’ve tapped into our algorithm to serve up realistic recommendations based on the behaviour of others, serving the types of movies or shows you’re likely to stream based on the time of day, your company and various other latent variables.”

‘Tinder for video streaming’

Like a Tinder for video streaming, VideoLlama enables users to swipe left or right based on their preferences, and specify various viewing parameters — for instance, whether they’re watching with a partner or a child. The algorithm then retrieves the relevant titles, and quickly begins to further refine its offerings based on an individual’s expressed preferences.

In the coming months, Xineoh plans to tap into a series of other sectors, with a specific focus on the property sector, which Chinner believes is rife with opportunity.

“Property is a high-investment purchase, and given the economic environment, real-estate portals now need to entice users within the first 10 seconds if they have any realistic hope of sustaining interest,” he said.

“Using our algorithm, these sites will be better able to serve users’ homes based on what they’re actually looking for, tapping into known associations to produce a refined, concise offering far more likely to result in conversion.”

Xineoh claims that it’s algorithm prediction rate currently sits at about 14.5% — compared to the rate of three and eight percent of competitors – and that a previous version of its algorithm has already been used by one of the world’s top real-estate portals to reduce its cost-per-lead by 60% to 80%.

While the startup’s US partner opened an office last year in Portland to serve the company’s clientbase who are mainly US based technology firms, the main operation is still based in Bloemfontein.

On being one of the few startups to come out of Bloemfontein, Chinner added: “I think we are the startup scene”. He noted however that the startup has benefited from the University of Free State’s strong applied mathematics department, which has developed good talent from which the startup has hired.