In an interview with ECO, Unbabel co-founder and CEO Vasco Pedro reveals what motivated the deal with the American company after negotiating with "three or four potential buyers".
It’s an exit. After years of shopping around, Unbabel has just closed its acquisition by TransPerfect. The American organisation is “the world’s largest translation company”, with around 8,000 employees in various markets and an office in Portugal since 2019. Among the clients of its translation services is TAP Air Portugal.
In an interview with ECO, Vasco Pedro, co-founder and CEO of Unbabel, reveals what motivated this operation, the value of which he does not disclose, but assures that, after negotiating with “three or four potential buyers”, it is the one that best serves the mission of the national start-up, which uses artificial intelligence (AI) to speed up translation.
“The type of acquisitions we were making were relatively small compared to this size. Thinking about it the other way around allows us to have access to TransPerfect’s sales force, which is huge, to have access to a huge number of customers and, therefore, to significantly increase access to scale”, he says.
The “vast majority” of people from the national scaleup are moving to the new organisation, as well as some founders, including the CEO, who will accompany the transition process for a few months.
“Once I have completed my involvement in this acquisition, in this project, I will undoubtedly start another company. I am a builder at heart, and I have no plans at this time to become a VC. The world, incidentally, is in an incredible phase, with immense opportunities. Basically, that’s what’s also exciting me in the post-sale phase, the number of opportunities that are out there right now that I’d like to tackle”, he points out.
After several years of acquisitions, we have known since July that Unbabel was negotiating its purchase with “several partners”. Is the negotiation complete?
What we are announcing today is that Unbabel has been acquired by TransPerfect. It is a total acquisition of Unbabel. Unbabel will become part of TransPerfect.
An exit, then.
Exactly. TransPerfect is the largest translation company in the world, so there are a number of very interesting synergies for both sides here.
Can you disclose the value of this transaction?
Unfortunately, I am not authorised to discuss the details of the transaction for a number of reasons.
Given the synergies you mentioned, will Unbabel disappear as a brand and as a company now that it has been bought by the world’s largest translation company? Or will there be something like Unbabel powered by… How will it work?
In the long term, I don’t know what the strategy is yet. I know that there are no plans for Unbabel to disappear as a brand. Unbabel will essentially be a business unit within TransPerfect. At least, that’s the initial thinking.
TransPerfect has made several acquisitions in artificial intelligence and is feeling clear pressure from around the world to make a move in that direction. More and more customers are asking for it. I think they had a turnover of 1.4 billion dollars last year, they have a huge distribution network, a total of 8,000 employees spread across many countries. For Unbabel, having access to all these customers will have a huge impact; for them, having the Unbabel platform to take many of their customers on this journey of increasing artificial intelligence is also extremely positive.
Until now, Unbabel had been focused on growing its customer base through acquisitions. What prompted this change in strategy?
In practice, for me, a turning point came at last year’s Web Summit, when we presented an internal study on the evolution of AI in translation. It even made the news at the time when I said that I thought that in two or three years’ time, humans would no longer be needed in translation. For me, it was a turning point: realising that there was a huge acceleration in the world of translation towards AI and that we had to find a partner that had sufficient scale to quickly get close to customers. And that on the scale, at the speed we were growing, even making acquisitions, we were still very small in practice, and that was going to put us at a disadvantage. So, from then on, we started to shift and think, ‘Maybe it’s time to find a partner that will allow us to scale much faster’.
The type of acquisitions we were making were relatively small compared to this size. Thinking about it the other way around allows us to have access to TransPerfect’s sales force, which is huge, to have access to a huge number of customers and, therefore, to significantly increase access to scale. Right now, there is already a big race to deploy AI as quickly as possible in a number of industries, and translation is undoubtedly one of them.
So, that was a bit of a turning point for me: realising, ‘OK, the path we’ve been following so far isn’t fast enough, we have to find a much faster path’. And this is the ideal one.
This purchase process became known with the departure of one of your investors. It was reported that Iberis Capital had been informed of the existence of “unexpected liabilities that negatively impact the group’s entities, for example, tax liabilities and existing warrants, among others”. It was also reported, based on accounts from former employees, that Unbabel’s “days were numbered”. Had this acquisition not taken place, would Unbabel’s days have been numbered?
When you start a sale process and look for a partner, it’s a bit of a self-fulfilling prophecy. That becomes the company’s focus. That has to be the outcome. It reaches a point where we are all focused on finding the right partner. And so it was going to be one of the partners we were negotiating with, I have no doubt about that.
It’s also easy to create a lot of drama around this. Most employees don’t know what’s going on, people draw conclusions and make assumptions, but they don’t have access to information about what’s actually happening.
Regarding Iberis, the answer we gave at the time is that Unbabel has no significant liabilities. Any company in the course of its business is likely to have minimal liabilities, normal things, more to do with cash flow and the normal development of its business, but there was nothing there that was significant.
I can’t comment much on the Iberis issue. It’s an internal matter and doesn’t make sense, but it was blown out of proportion. It was an internal email from one investor to other investors, from an investor who has the right to have his position on the investment, which was not to do it, and that’s very normal in the development of this process. The whole drama surrounding the situation was a bit unfortunate, it didn’t correspond to what was happening internally. It was just annoying because we were in negotiations with three or four potential buyers and this type of news always makes them ask, ‘wait, what’s going on?’. But we never had anything to hide at that level.
But was the strategy always to find a partner to ride the AI wave, or did it also involve a more robust investment round, as was discussed? Was that what was being discussed with Iberis, with your shareholders?
We always have to consider everything. In other words, the main focus has shifted to finding a partner, precisely for that reason. But we are always open to current partners wanting to invest or not. My role as CEO is to consider all possibilities. We cannot say, ‘We will not be open to this or that’, when there are internal investors who can propose solutions A, B, or C. But the focus has shifted to ‘how can we increase scale and impact’, which has always been Unbabel’s vision from the beginning. So that’s what we were looking for, the partner that would allow us to get there faster. And TransPerfect, the world’s largest translation company, is the best possible outcome to achieve that goal.
You said you negotiated with “three or four” potential buyers. Can you tell us who they were?
No.
Did TransPerfect’s office in Portugal influence the decision? In 2023, Unbabel had around 450 employees, 180 of whom were based in Lisbon, where you had your tech, marketing, and sales hub… What will happen to these people?
The vast majority of Unbabel employees will move to TransPerfect. There is always some overlap, there are always some duplicate positions that need to be resolved, but the vast majority of people — i.e., product, technology, research, sales — will move to TransPerfect.
It was also reported that you had undergone a restructuring process. Did you have to “streamline” the company to make it more appealing?
No, not necessarily. What has been happening, and is happening more and more in the job market — I am currently in Silicon Valley and this is also happening a lot here — is that companies are becoming more efficient by using AI. There is market pressure in this direction, because when competitors increase efficiency, they are able to offer more competitive prices, and this spreads to all companies. In our case, that’s exactly what happened: an increase in the company’s efficiency and an attempt to align people’s efficiency capacity with the resources we had. It was a normal part of the process, not specifically to make the company more appealing.
There is always a complicated dichotomy in that we have to wear several hats. We have a company to manage, the company has to continue to operate in a way that makes sense, and at the same time, we have to be in the process of selling, talking to different partners. The two things are related, but they cannot be 100% dependent on each other because otherwise it becomes impossible to manage the company.
You said that the “vast majority” of people at Unbabel are transitioning. Even before this acquisition, João Graça, co-founder and CTO, left Unbabel for Shilling. Are the remaining co-founders staying with the company, or is it time to say goodbye to the company they founded?
It’s a mix. Of the other founders, one will continue, I will temporarily accompany this transition, my goal is for it to be successful. Some will continue, others will not, but it is indeed a new phase for the company. Obviously, TransPerfect will not need a CEO from Unbabel. That’s normal.
It is a 13-year project that is now undergoing a change, an exit, and is entering a different phase. On the one hand, it will have much more stability, within a much larger company, with the capacity to have a very direct and immediate impact. On the other hand, as founders, it is a cycle that is coming to an end, not immediately for me, but my goal now is to hand Unbabel over to good hands, ensure that everything is working, that the integration is done well, etc. And then I’ll see. I’m not ready to announce the next steps yet.
Unbabel was always touted as the next unicorn. Does this exit feel better than achieving that status? Is this exit a success or does it feel a little bitter?
No, I think it’s a success, without a doubt. I’m very happy with the outcome. This is a good moment for Unbabel, it’s a very positive thing that will allow Unbabel to continue on its path and have the impact for which it was created.
It has been a bit of a crazy journey over the last 13 years at Unbabel, with ups and downs, with a lot going on, with Covid in the middle, with the world changing. Artificial intelligence is the thing all over the world. There is a great transformation in the world and in us.
I think there are times when unicorn status would be fantastic, but then what I see — and I’ve always felt this a little bit — is that, deep down, it’s all theatre. In other words, whether we have unicorn status or not, what matters is the impact we have on people, on those who work at the company, on those who use the product, on the world in general. From that point of view, I have been constantly proud of the culture we have created, of the memories people take away from Unbabel’s time as a startup. It has been emotionally very intense, sometimes exhausting, but it’s part of the journey.
Has the transition period you will be overseeing already been defined?
We have allocated a few months at the beginning, which are necessary, but I will monitor things and we will evaluate. Right now, that is my focus, to ensure that Unbabel is well supported within TransPerfect and that it actually executes the vision that led to this deal.
And after this, are you thinking about the VC world or do you still want to start companies?
Definitely. Once I’ve completed my involvement in this acquisition, in this project, I will definitely start another company. I’m a builder at heart, I have no plans at the moment to be a VC. The world, in fact, is in an incredible phase, with immense opportunities. Basically, that’s what’s also exciting me in the post-sale phase, the number of opportunities that are out there right now that I’d like to tackle.