Affectiva Acquired: Emotion Detection Software Startup Sold for $73.5M

Smart Eye Acquires Affectiva in $73.5 Million Deal

Smart Eye, a Swedish publicly traded company specializing in driver monitoring systems, has completed the acquisition of Affectiva, a startup focused on emotion-detection software. The transaction, valued at $73.5 million, was structured as a combination of cash and stock.

Combining Expertise for Advanced Vehicle Technology

Affectiva originated as a spin-off from the MIT Media Lab in 2009. The company’s core technology centers around the ability to detect and interpret human emotions. Smart Eye intends to integrate this capability with its established AI-powered eye-tracking technology.

The merging of these technologies presents an opportunity to broaden applications beyond driver monitoring. This includes systems used alongside advanced driver assistance systems (ADAS) to assess driver awareness. The combined expertise aims to penetrate the growing “interior sensing” market.

Deal Details and Structure

The acquisition involves a payment of $67.5 million through the issuance of 2,354,668 new Smart Eye shares. Of these, 2,015,626 shares were issued upon the deal’s closure. An additional 339,042 shares will be released within a two-year timeframe.

Approximately $6 million will be paid in cash following the deal's completion, which occurred in June 2021.

From Competition to Collaboration

Prior to the acquisition, Affectiva and Smart Eye operated as competitors. A meeting at the CES technology trade show in 2020 initiated discussions that ultimately led to the merger.

Dr. Rana el Kaliouby, co-founder and CEO of Affectiva, explained the rationale: “We recognized the potential for competition and concluded that a collaborative approach would be far more beneficial. By uniting our strengths, we can comprehensively address the needs of original equipment manufacturers (OEMs) in the interior sensing space.”

Synergies and Market Position

Affectiva contributes its emotion-detection software, expanding Smart Eye’s product offerings for automotive partners. Conversely, Smart Eye facilitates Affectiva’s transition from research and development to securing production contracts.

Smart Eye currently holds 84 production contracts with 13 OEMs, including prominent manufacturers like BMW and GM. The company maintains offices globally, including locations in Gothenburg, Detroit, Tokyo, and Chongqing, China.

Furthermore, Smart Eye provides high-fidelity eye tracking systems to research institutions, such as NASA, for human factors research.

Focus on Premium Vehicle Manufacturers

Martin Krantz, founder and CEO of Smart Eye, noted that demand for driver monitoring systems initially came from European manufacturers of luxury vehicles.

“We anticipate a similar trend with interior sensing,” Krantz stated. “Early adoption will likely be driven by European premium OEMs, including Mercedes, BMW, Audi, JLR, and Porsche.”

The company also intends to target other premium brands in different regions, such as Cadillac and Lexus.

Expanding Applications and Future Growth

The initial focus will be on passenger vehicles with human drivers. However, the technology is expected to become increasingly relevant as vehicles with higher levels of automation are introduced.

Affectiva’s Media Analytics Division

Affectiva also operates a profitable business unit that applies its emotion-detection software to media analytics. This division, which will continue to function independently as part of the acquisition, serves 70% of the world’s largest advertisers.

The software is utilized to measure and analyze emotional responses to media content.