Edtech Chatterize banks $1 million to roll out its AI-enabled language chatbot in China

Language-learning edtech Chatterize has raised just shy of $1 million in seed funding, as it gets ready to ramp up its rollout in China.

A recent graduate from Startmate accelerator program, Chatterize’s technology provides chatbots designed to help Chinese students learn English through conversation.

The NZD$1 million ($941,000) seed funding round is led by New Zealand investment group Icehouse Ventures, and also includes backing from Eleanor Venture, an Aussie tech investment syndicate headed up by Startmate mentor Kylie Frazer.

Co-founders Lane Litz and Beleza Chan released an MVP of Chatterize’s Talk Town product in February this year, as a ‘mini-program’ on the WeChat ecosystem.

Since then, it’s racked up some 35,000 users, Litz tells SmartCompany.

It’s still pre-revenue, she explains. But that’s all part of the plan. The MVP was designed to test the market — to see whether kids would actually enjoy speaking English with a chatbot.

“It allows us to reduce the barrier to entry for users, because WeChat has 1.3 billion monthly active users.”

The seed funding will allow the founders to build out the proprietary app, which will be monetised based on different subscription levels.

So far, the team has been focused on proving out the cost of acquisition for unpaid users, understanding what leads to those users sticking around, and — perhaps most importantly — on testing the technology.

The software uses artificial intelligence and speech recognition technology – specifically for Chinese children speaking English, Litz notes.

“This is a bit of a hard go for a speech recognition platform.”

However, now the startup has “checked all of our boxes”, it’s time to build a standalone app with additional functionality.

The WeChat program will effectively act as a user acquisition channel, Litz explains.

“It makes it much faster,” she says.

“Taking the product to the users, as opposed to trying to drive the users to the product is probably always your best bet approach.”

And, once those users are on board, the opportunity in the Chinese market is massive, she says.

“The Chinese online English education market is one of the largest and fastest growing edtech markets in the world.”

Within the next four months or so, Chatterize hopes to have the proprietary app on the market. In six months’ time, Litz is targeting between 5000 and 8000 paid users.

“We’re looking to make about $2 million in revenue in 24 months, and that is 15,000 paid users,” she adds.

This founder is dreaming big, and dreaming fast.

“In the Chinese market, while there’s so much potential, moving quickly is extremely important,” she says.

“First-mover advantage, looking at speed and scale right out of the gate is really important to us.”

Trusting your gut

Having launched and gone through the Startmate accelerator program all during the all-encompassing global crisis that is COVID-19, Chatterize also completed its entire seed funding round remotely, Litz says.

“We saved a lot of money on travel expenses,” she jokes.

“It just goes to show really how much can be done remotely and via video conferencing technology,” she adds.

“It was actually much more efficient and much faster that way.”

And, when she gets around to Series A funding and beyond, she wouldn’t write off doing it the same way again. Although, she hopes — as we all do — that it wouldn’t be for the same reasons.

“People have realised that working remotely and using technology as a communication tool — which is really what we’re all about at Chatterize — is not just possible, but it can be more efficient,” she says.

“I would hope that that’s the reason … as opposed to the reason being that the coronavirus is still around.”

The past few months have undoubtedly been a strange, and often difficult, time for all startups. For those that launched just before the COVID-19 lockdowns, and are still in their earliest stages, one could assume things have been particularly tricky.

Chatterize however, as a remote-first business anyway, was in a good position to manage it. Litz is based in New Zealand, while Chan is based in China, and the startup has employees in China and the US.

The pandemic has led to some lessons learnt, though. In the early days of Chatterize, Litz was often fielding questions and feedback about her globally disparate team.

She spent a lot of time “really having to talk to people and explain why that worked”.

Of course, as soon as the pandemic struck, the doubters changed their tune.

“The truth is that, as a founder, at times you understand better than anyone else what works for you and what doesn’t,” Litz says.

It’s about trusting your gut, your intuition and your experiences.

“While feedback is always really well intentioned, as a founder you can get a lot of it,” she adds.

“It’s important to listen to it, of course, because operating with blinders on is easily the fastest way to kill your startup,” she explains.

“But also, a really fast way to hurt your startup and your own confidence is to listen to every piece of advice everyone throws at you.”

By the time the virtual capital raise came around, Litz found she wasn’t having to explain the team structure, and how it works for the business. Rather, she was able to show how well the distributed team model had been working for them.

“We were Zooming before Zooming was cool,” Litz says.

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