Virtual Assistant Startup iDAvatars to Shut Down, Seek Buyer

Sophisticated virtual assistants could become powerful tools in healthcare, finance, and other sectors, but the market for them is still relatively small and fraught with potential pitfalls—especially for startups.

The story of iDAvatars, a Mequon, WI-based company that develops software allowing users to interact with virtual assistants, is one of the latest reminders. The firm has begun the process of shutting down operations after losing a key customer, founder and CEO Norrie Daroga said Monday.

Launched in 2013, iDAvatars has built a client roster that includes insurers, drug developers, and computer hardware manufacturers.

However, Daroga said that after a “sudden” series of high-level departures at Blue Cross Blue Shield Association—a client that provided more than half of iDAvatars’ revenues in 2017—the health insurer decided to stop buying from the startup. As a result, iDAvatars laid off 10 members of its 11-person team last month. Daroga said he’s currently the sole full-time employee.

BizTimes Media first reported the company’s plans to wind down operations.

Now, Daroga said he plans to sell some or all of the firm’s assets—potentially through an auction—or license iDAvatars’ digital tools to another organization.

“What we have is a combination of pretty good animation and avatar development software that might be useful to other players in the field,” Daroga said. “I don’t want to own it. I’m considering all avenues.”

Virtual assistants are an emerging trend, which suggests Daroga could have luck funding potential suitors. According to a 2016 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 have been the primary adopters of the technology, according to the report. But as prices come down, small and medium-size firms are expected to become bigger buyers.

iDAvatars created several animated digital characters, some of which have names and specific functions. One of them, Sophie, is designed to collect information from patients and respond to their questions during remote telehealth appointments with healthcare providers. Sophie can ask and answer questions, record responses, and pass along information to other software systems. For example, patients who receive care from the U.S. Department of Veterans Affairs, one of iDAvatars’ customers, can chat with Sophie online about diabetes management or symptoms of post-traumatic stress disorder.

Daroga said his company used facial recognition, natural language processing, and other technologies to make interactions with avatars feel similar to speaking with a person.

iDAvatars also developed tools that customers incorporated into their own products. For example, the computer chip and gadget maker Intel (NASDAQ: INTC) incorporated motion-sensing technology developed by iDAvatars in some of Intel’s RealSense cameras, Daroga said.

The startup’s revenues grew at a fast clip in the past five years, leading iDAvatars to in turn increase its headcount, Daroga said. In 2016, iDAvatars purchased Colorado Springs, CO-based CodeBaby, which was developing similar technology, for an undisclosed sum. Prior to acquiring CodeBaby, iDAvatars had raised about $4 million from investors, according to Daroga.

But the company wasn’t able to pick up enough momentum with customers to sustain the business.

Daroga said that last fall, four Blue Cross Blue Shield executives either left the organization or announced plans to step down. In December, the insurer notified iDAvatars that it had decided not to continue paying to license the startup’s tools, he said.

Separately, three organizations that had been using iDAvatars’ software as part of pilot programs told the company they were not yet ready to extend their relationships and … Next Page »

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Jeff Buchanan is the editor of Xconomy Wisconsin. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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