Earlier in January, Boston-based Silversmith Capital Partners announced that it led a $104 million investment in Syracuse, New York-based Impel Software, which provides Artificial Intelligence (AI)-based customer engagement software for the automotive industry. The deal, which closed in December, was funded in partnership with Boston-based growth equity firm Wavecrest Growth Partners.
Silversmith’s $3.3 billion portfolio includes tech and healthcare companies, and the firm’s investment in Impel shines a light on its strategy for the future.
To find out more about the Impel deal and about the role AI is playing in PE-backed transactions, PE Hub spoke with Silversmith managing partner Todd MacLean, who recently joined Impel’s board of directors.
“We have to be thematic in understanding some of the broader forces that are driving innovation,” MacLean said. “Every investment opportunity we heard about for years had AI sprinkled in there somewhere, but what we learned over time is that there are two parts to making AI effective in a commercial setting.” The first part is the algorithm, or “mousetrap,” as MacLean put it, and the second part is the data that powers the formula.
“At the beginning of the [AI adoption] cycle, I think we saw lots of the former, lots of great tech, but they didn’t have the data to apply it to let it learn,” he explained. “We are now approaching the part of the cycle where companies are now matching their technology to these data sets and producing effective results.”
Impel’s digital engagement platform allows both customers and retailers alike to reimagine the entire omni-channel retail experience, MacLean explained. Consumers have been increasingly purchasing vehicles without ever seeing them in person – especially during the pandemic – and Impel’s software uses AI to compile consumer data and imaging to deliver enhanced virtual experiences for both ends of the transaction.
Impel has been growing – the company more than doubled its revenue over the past two years, exceeding $50 million last year.
Prior to Silversmith’s investment, Impel had already completed two acquisitions and scaled the organization to over 200 global employees. Impel now serves more than 4,000 customers through 100 technology and marketplace partners.
More M&A is in Impel’s future, Silversmith said.
Track record in AI
Silversmith is no stranger to leveraging AI to grow a portfolio company. Another minority holding in Silversmith’s 45-company portfolio, Austin-based Iodine Software, uses the marriage of both AI and big data to power results. The healthcare software business uses AI to tease out insights from clinical records. Iodine gives customers access to millions of clinical records, and the matching of good technology and large swaths of data sets allows the AI-software to learn and get better, according to MacLean.
The strategy led to a partial exit of Iodine for Silversmith. In 2021, Advent International bought a significant stake in Iodine in a deal valuing it at more than $1 billion. Silversmith retained a minority stake in Iodine.
Silversmith’s holding period is typically four to five years, but the firm is flexible on exit timing.
With a possible recession impending, MacLean estimates that there probably won’t be many exit opportunities in the near term but “a lot of times, that’s a great time to build.” For example, layoffs at the big publicly-held tech companies mean opportunities to scoop up talent and build teams at smaller, privately held software developers, like Impel.
MacLean’s advice to portfolio companies boils down to: “Put your head down, ignore the outside world, just try to grow your business, and you can come out the other side even stronger.”