Adtech startup Pencil aims for Series A in 12-18 months after $1.5m seed round

SINGAPORE-based adtech startup Pencil has raised S$1.5 million through a seed round led by early-stage venture capital firm Wavemaker Partners, together with SGInnovate and talent investor Entrepreneur First.

With the proceeds, the company is aiming to double its headcount within the next year and to return to the market for further funding in the next 12 to 18 months, co-founder Will Hanschell told The Business Times.

Also taking part in the seed round are NUS Associate Professor Kan Min-Yen and members of Xoogler Angels, an angel network of Google executives in South-east Asia.

Pencil, which currently comprises a 10-person team, will use the proceeds to expand its engineering and customer teams, grow proprietary datasets and extend patent-pending technology.

If and when the company goes for another round of capital, it will probably be to look into new markets and content, Mr Hanschell said. The near-term market expansion plans for the company will be in the region's English-speaking geographies like the Philippines, Australia and possibly India, he added, explaining that the company's current algorithm is trained on English-language content.

"We will probably be speaking to investors again in 12 to 18 months," Mr Hanschell said. "We want to have gone through an inflection point before we get to the point of taking further funding."

The seed funding came as Pencil launched its first enterprise product, Studio, which relies on artificial intelligence technology to help generate personalised advertising content at scale. The goal is to use machine learning and experimentation to create effectively targeted ad content without being overly invasive.

Pencil was founded in March 2018 by Mr Hanschell, a former partner and management consultant at Iris Worldwide, and by Sumukh Avadhani, a deep learning and computer vision specialist who was previously a principal at Google.

The company's clients over the past year include Sephora SEA, POND'S and Mindshare. Mr Hanschell shared that Pencil is on track to achieve S$1 million in recurring revenue by the time of its next fundraising attempt. The company is not profitable yet, and is measuring monthly growth rate and the approval rate that its generated content receives from its customers as its two key metrics.

Mr Hanschell said that Pencil decided to go with US- and Singapore-headquartered Wavemaker after speaking to about 50 to 60 investors as part of an Entrepreneur First programme.

"We really liked their style, their approach, their link to the United States, and we got great terms," Mr Hanschell said.

Wavemaker managing partner Paul Santos said in a statement: "The number one pain point of marketing teams is increasing their returns on investment.

"Almost every solution in the market proposes doing so through greater targeting or better customer profiling. But these approaches are fundamentally limited by the amount of content, be it visuals or text, that one can humanly produce. Pencil takes a new and complementary approach, allowing teams to generate and distribute personalised content at scale using AI."