Translation Industry Game Changer: Our Investment in Smartcat

Why we invested in SmartCat

Globally, the translation services market is valued at $49.6bn, and one that’s been growing at 7.76% CAGR in the 10 years to 2019. Yet it’s also a highly fragmented market, with more than 50,000 translation agencies or language service providers (LSPs) and an estimated 1.5m freelancers. End customers are typically enterprises selling software, products, or services internationally — anything from IT and games development to life sciences and healthcare, or even public sector organizations. They require not just translation, which makes up around 60% of the language services market — but also interpreting, post-editing, and localization like dubbing, subtitling and voiceover work.

And here are a number of pain points:

(i) Search, selection and on-boarding of translation agencies is time consuming and troublesome. They may have various specializations (for example, on tech-heavy texts only), be located in different geos, etc. Therefore end-clients have to use the services of multiple providers with each requiring proper testing and on-boarding.

(ii) Once those agencies and freelancers are chosen and on-boarded, end-clients face a number of further challenges. The pricing of translated texts (which depends on the type of translation, type of text and many other factors), management of multiple providers (documents, tasks & deadlines, quality checks, etc.), payments provisions (cross-border and cross-currency) and many other similar requirements become extremely complicated and time-consuming when managing many suppliers.

(iii) Corporates overpay for translation because they don’t have access to translations previously completed by agencies. Currently they solve this problem only by manually creating in-house translation databases, but that’s time-consuming and ineffective due to the complexity of information in those databases.

(iv) Even though marketing and software tools enable corporates to continuously deliver content to any systems or social network they use to communicate with their clients, translation of content is not automated. Corporates have to extract content from systems they use, exchange it with LSPs, and can only distribute translated content after they have uploaded it back into the system. This also takes time and creates additional expense.

And these industry challenges are just the tip of the iceberg.

Introducing Smartcat..

Smartcat is a B2B SaaS-enabled translation services marketplace — and if you’re a regular reader, you’ll already know that we love marketplaces. Using matching AI, SmartCat connects all types of clients, from translation agencies and freelancers to enterprises, that enable continuous delivery of multilingual content. In addition, Smartcat provides all types of clients with software solutions that automate their routine. Clients can benefit from workflow management and collaboration tools, translations review and pricing automation, payment infrastructure and many other features. Smartcat’s SaaS also allows clients to automatically reuse previously translated content each time they have a new task — which can save up to 80% of their translation budget.

With its infrastructural solution, Smartcat connects and brings value to all types of market players, and thus benefit from network effect: LSPs invite their clients (corporates) and suppliers (freelancers) to the platform to simplify collaboration.

SmartCat also addresses a lot of the inefficiency in the market we covered earlier, and in agencies’ inability to build continuous delivery workflow on their own — allowing the whole process to be automated via API (Application Programming Interface). Such inability also creates an additional incentive for LSPs to bring their clients to the platform as otherwise they are not capable of fully meeting the demand.

This initiative approach from Smartcat makes it somewhat unique from most of the existing market players. Even digital translation agencies, or translation marketplaces, with a strong technological base and backed by VCs, typically compete with the classic LSP market. What makes SmartCat different is that it serves not only Corporates, but also LSPs instead of competing with them.

Currently more than 10,000 customers rely on Smartcat on a daily basis and over 350,000 freelancers around the world are registered on the platform. It serves some of the world’s largest corporate clients (incl. Coursera, Weebly, Amazon, IBM, Kaspersky, and many other) and leading translation agencies. What is even more impressive is that more than 70% of come to the platform organically!

A key indicator of Smartcat business is GMV (gross merchandise value), with total sales received by all clients of the platform –growing by roughly 90% per quarter for the last four years. Monetization is built mainly around a classical transaction model with subscription components.

Since 2016, Smartcat has grown to a truly global company, employing over 100 enthusiastic professionals from all over the world andheadquartered in Boston. Prior to series B round funding participated by us, Smartcat raised over $15m in funding across three equity rounds.

Smartcat continued to develop its product and services further. Over the next year, Smartcat plans to add AI-powered matching tools that will allow LSPs and end-clients to discover suppliers who are the best fit for their requirement, increasing margin up to 30%, and project and quality management tools that will modify workflow to be 70% faster than any other player on the market. Freelancers, meanwhile, will be able to pick best machine-automated translation combination for a particular use.

Smartcat is an outstanding infrastructural solution, that serves all types of market players and brings transparency that is currently missing in large and fragmented translation-services market. With an all-in-one platform that enables continuous translation delivery, and a clear product path, we’re confident in the company’s projections of winning 1.5–2% market share by 2024, and we’re excited to be joining them on this path.