During the morning session at SlatorCon Silicon Valley 2024, language industry investors Aditya Govil (VSS Capital Partners) and Andrew Doane (K1 Investment Management) formed an Investor Panel moderated by Slator’s Esther Bond.
With VSS and K1 invested in companies from two very different segments of the language industry — GLOBO (healthcare interpreting) and XTM (localization technology), respectively — the panel made for an engaging discussion and touched on some key themes.
Govil, who helped to lead VSS’s investment in GLOBO in late 2021, outlined some of the main growth drivers in the healthcare interpreting sector (which has outperformed most if not all areas of the language industry since then).
He cited high growth in the US’s Limited English Proficient (LEP) patient population as well as strong efforts in the healthcare sector to move to value-based care. Here, evidence suggests that the adoption of language services helps patients’ comprehension of their circumstances, “which leads to better outcomes and lower readmissions,” he said.
On GLOBO specifically, Govil said he sees the company “morphing into more of a patient communications and engagement player,” which means being a provider of choice for a health system’s entire ecosystem, e.g., across acute care, physicians offices, ambulatory surgery centers, as well as home health.
Why the FUD is Fading
Meanwhile, Doane described K1’s initial attraction to XTM, as “a founder-owned bootstrapped business that was growing well, had strong retention rates, and a diverse, blue-chip customer base to build upon.”
After acquiring XTM in early 2021, K1 also added XTRF to its portfolio in its second language technology acquisition, and doubled down on the thesis that Doane put forward: “language technology is increasing its share of the total addressable market.”
XTRF was later integrated into XTM, but not immediately. As Doane explained, “The last thing you want to do on day one is diminish [the value of a company’s brand and customers] by slamming two companies together in an unthoughtful way.”
“There’s tons of evidence and numerous studies around the adoption of language services aiding with patients’ comprehension of what is being communicated from a discharge perspective or care instructions. That leads to better outcomes, to lower readmissions.” — Aditya Govil, Vice President, VSS Capital Partners
The discussion turned to AI, and Govil outlined its potential for use in healthcare interpreting after firstly caveating the “really high bar” in healthcare for adopting advancements such as AI. Using imagery of a quadrant segmented by scenario (clinical vs. non-clinical) and customer type (consumer vs. enterprise), he said, “I think the non-clinical consumer bucket is likely a near-shore disruption. I think the clinical enterprise bucket is where most of the debate needs to happen.”
When an audience member probed deeper about the general perception of the impact of AI on the language industry among investment committees, Doane described a “huge level of FUD: fear, uncertainty, and doubt” towards late 2023 and early 2024. But he went on to conclude, “I think the continued revenue growth and what we’ve actually seen over time has calmed those nerves.”
“There’s a long way to go before there’s no longer a defined human element in the translation process,” — Andrew Doane, Senior Vice President, K1 Investment Management
Earlier, Doane had shared his take on the opportunity to be found in AI and why the hype may soon be waning. “What we found, going back a year ago, was that there were some companies that jumped right in and maybe over-promised and under-delivered a little bit, and maybe got out over their skis.” Ultimately, confidence remains in the longevity of human involvement in language conversion. “There’s a long way to go before there’s no longer a defined human element in the translation process,” Doane said.
After discussing the roles they play in supporting the respective portfolio companies, Doane and Govil were invited to share their take on the current exit environment, M&A deal flow, and the biggest opportunity in language technology and AI investment right now.