Microsoft Chatbot Spinoff Xiaoice Reaches $1 Billion Valuation

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China-based AI chatbot developer Xiaoice increased its valuation to $1 billion in a funding round led by Hillhouse Capital Management, a boon for the provider of voice and text services used in digital assistants, consumer electronics and cars.

The company, split off from Microsoft Corp. last year, raised more than 500 million yuan ($77 million) in a Series A round, Chief Executive Officer Li Di said in an interview Wednesday. GGV Capital, IDG Capital, NetEase Inc. and Northern Light Venture Capital were also among participants.

Xiaoice, which bills itself as the world’s most popular social chatbot, said the funds will go toward product development and expanding its app businesses in China and Japan. Smart assistants of Huawei Technologies Co. and Xiaomi Corp. devices use the company’s technology, as do in-car systems of several Chinese automakers.

Launched by a team led by Li at Microsoft in 2014, Xiaoice claims more than 660 million users. Users can have conversations with the chatbot on social media, and it has evolved through the years to even be able to write poetry, sing and compose.

The chatbot is also included in 450 million smart devices globally. Its service is available in five languages, including English, though the company remains focused on Asia, in particular the Greater China region, Japan and Indonesia. Over 60% of worldwide AI-human interactions are conducted with Xiaoice’s technology, according to the company.

Xiaoice focuses on four main verticals: finance, sports, automobiles and content production. In September, it plans to announce new social network products in China and Japan to broaden its offerings.

The company had more than 100 million yuan in sales for the fiscal year 2020 and it plans to double its revenue in the year ahead, Li said. Xiaoice intends to go public down the road, Li said.

Harry Shum, former head of Microsoft’s AI efforts, is the chairman of Xiaoice. The U.S. software giant retains an unspecified stake in the company.

©2021 Bloomberg L.P.

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