IDAvatars to Move Beyond Healthcare Following Purchase of CodeBaby

Since launching in 2013, Mequon, WI-based iDAvatars has mostly focused on applications for its intelligent virtual assistant software in the healthcare industry. That will likely change following the startup’s acquisition of CodeBaby, which has developed similar technology to iDAvatars’.

CodeBaby’s client roster includes some healthcare organizations, but also companies in sectors like finance, retail, and mobile communications.

“We know that the capabilities of iDAvatars can be used in a number of industries,” says Norrie Daroga, founder and CEO of iDAvatars. “Having CodeBaby’s entry points will allow us to change how marketing is done, using cognitive technologies. It doesn’t matter what the vertical is.”

One factor that led to the deal was that CodeBaby, founded in 2001 and based in Colorado Springs, CO, was not growing at the pace its shareholders desired, Daroga says.

“Historically, [CodeBaby] had a lot of losses,” he says, while iDAvatars has “a lot of growth at this stage of our life. Their shareholders were interested in figuring out a different strategy.”

In a press release, iDAvatars says the combined company will have more than 35 employers, plus 10 contractors. The new entity will be known as iDAvatars, or IDA, and will be based in Mequon. The CodeBaby name will be going away, but most of the company’s employees will continue to work from Colorado Springs or Edmonton, Canada, where CodeBaby also has an office. Daroga will serve as CEO of the combined company. Dennis McGuire, CEO of CodeBaby, will be chief strategy officer.

IDAvatars, formerly known as Geppetto Avatars, has developed software enabling animated characters like Sophie, a virtual medical assistant, to interact with users through natural language processing, facial recognition, and other technologies. Sophie can ask and answer questions, record responses, and pass along information to other systems. For example, patients who receive care from the U.S. Department of Veterans Affairs (VA), which Daroga says is his company’s largest customer, can chat with Sophie online about diabetes management or symptoms of post-traumatic stress disorder.

While interactions with Sophie may have a similar look and feel to those with Kate—one of CodeBaby’s avatars—that company’s characters are not able to store and recall user-specific information, Daroga says. Sophie, meanwhile, is highly personalized to the user and is designed to gather data that will in theory make future interactions more effective, he says.

“CodeBaby’s avatars talk and ours listen,” Daroga says. “So now with the combination, we have a conversation.”

Another difference is technical: iDAvatars has concentrated on developing apps for mobile devices, while CodeBaby’s technology is geared toward the Web. Specifically, it relies on Web Graphics Library, an interface allowing developers to render two- and three-dimension graphics in any Web browser without the need for a plug-in.

According to a report by Transparency Market Research, the global market for intelligent virtual assistant technology is expected to grow to $5.1 billion in 2022, from $570 million in 2014. Large businesses are currently the primary adopters of the technology, according to the report. But as prices come down, small and midsized firms are expected to become a bigger part of the picture.

Both companies are part of the IBM Watson ecosystem, a community of developers working to integrate their software tools with the supercomputer. IDAvatars announced it had joined the ecosystem in September, and CodeBaby did so in March.

Under the terms of the deal, iDAvatars and CodeBaby are together aiming to raise $2 million from investors, Daroga says. So far, about $1.5 million of that total has been committed, he says. IDAvatars had previously raised about $4 million in outside financing, he says

IDAvatars’ revenues totaled about $600,000 in 2015, and that is projected to increase to about $1.5 million for the current year, Daroga says. CodeBaby expects revenues in the neighborhood of $2.5 million this year, he says.

Daroga says he expects the combined company will come close to breaking even this year.

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