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Cykel: is this UK small cap set to make waves in the AI pond?

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In a remarkable debut recently, innovative AI company, Cykel [AQSE:CYK] soared on the Aquis exchange with a share price that traded up more than 100% on the first day of trading. This is not a singular event, but a snapshot of the AI revolution transforming the world. What’s driving this AI surge and why does it matters to investors?

AI hype – justified valuation?

Ever since Chat-GPT’s roll out, AI related stocks have been on a massive rally. We can see this from this graph from Goldman Sachs research:

AI stocks rally

The near-term beneficiaries include makers of semiconductors needed to build AI technology like Nvidia [NASDAQ:NVDA], and cloud service providers with the computing infrastructure to commercialize it, like Amazon [NASDAQ:AMZN], Alphabet [NASDAQ: GOOG], and Microsoft [NASDAQ:MSFT]:

AI Stocks Performance

The recent IPO performance of Cykel aligns well with the PEARLs framework outlined by Peter Oppenheimer, Goldman Sachs’ Chief Global Equity Strategist, for evaluating emerging technologies. This framework identifies key players in the tech evolution:

Pioneers like Nvidia, who are the initial innovators and often early winners, paving the way for subsequent advancements and new generations of pioneering firms.

Enablers, such as Cykel, which play a crucial role in commercializing and facilitating technological innovations. While some enablers in past tech waves, like certain telecom companies during the internet boom, struggled to meet sky high valuations, others, particularly in the semiconductor space, thrived due to substantial capital investments creating entry barriers.

Adapters are firms operating across various sectors that integrate new technology into their business models, potentially reaping significant benefits. As generative AI spreads, sectors like healthcare and e-commerce might witness major transformations through effective AI adoption. Companies in this category will be the main clients for Cykel.

Cykel has emerged as a new enabler in the burgeoning AI landscape. Its remarkable twofold surge in share value post-IPO, with an oversubscription of shares, underscores investor confidence and market interest. The commencement of trading of Cykel’s ordinary shares follows a successful capital raise of £1,750,000, £1,000,000 over Cykel’s target.

What strategies and business models underpin Cykel’s IPO success, and how does it exemplify the characteristics of an ‘Enabler’ in the PEARLs framework?

What does Cykel do?

Cykel is carving out a niche in the AI-driven software landscape with a product that harnesses the power of Natural Language Processing (NLP), akin to technologies like Chat GPT. This software simplifies user objectives into actionable commands across commonly used platforms in various sectors.

Prevalent in e-commerce, sales, and marketing, Cykel seamlessly integrates with major platforms such as Salesforce, Amazon, and Shopify. Moreover, its compatibility extends to Google’s suite (Sheets, Docs, Slides) and Microsoft’s equivalents, making it a versatile tool for a wide range of professions.

An example can be seen here:

Jonathan Bixby, Co-Founder and Executive Chairman at Cykel AI, said:

“Cykel AI will use the power of AI technologies to transform business processes by making mundane digital tasks such as filling digital forms, managing work tools like spreadsheets or booking meetings and holidays infinitely quicker and easier. Where AI is the ‘brain’, Cykel AI will be the ‘hands’ that will make performing tasks in the digital world quicker and easier.”

Consider a sales professional, who would prefer to spend time engaging with clients and closing deals, rather than manually entering data into Salesforce. Cykel addresses this by automating these repetitive tasks, thereby freeing up valuable time for human-centric activities.

The significance of Cykel’s innovation is underscored by a Microsoft survey, which found that nearly two-thirds of respondents struggle with time and energy for their jobs, affecting their ability to innovate and think strategically. Two-thirds of the leaders are already feeling the effects, saying that a lack of innovation or breakthrough ideas on their teams is a concern.

By eliminating time-consuming manual inputs and streamlining digital workflows, Cykel’s ‘Co-Pilot’ feature effectively addresses this issue. What sets Cykel’s Co-Pilot apart is its cross-platform functionality and context-awareness, allowing users to interact with multiple software systems without losing continuity – a notable advancement over other AI solutions limited to single-platform operations.

Product road map

In the context of the PEARLs framework, Cykel’s roadmap and market strategy particularly resonate with the ‘Enablers’ categories.

As an ‘Enabler,’ Cykel’s upcoming product iterations, including the ‘version one’ Chrome extension slated for Q4 2023 and the Beta launch in Q1 2024, are set to catalyze the utilization of AI in various business operations.

The anticipated full launch in Q2 2024, followed by expansion into the UK, Europe, and North America, reflects Cykel’s role in facilitating broader adoption of AI technologies in the marketplace. The ‘tiered freemium’ model aligns with this enabling role, introducing users to AI functionalities and encouraging adoption across multiple sectors. Cykel’s focus on expanding through business engagements and reseller partnerships by Q2 2024 further demonstrates its potential as a key player in the AI landscape.

By targeting sectors with high volumes of repetitive digital work, such as sales and e-commerce teams, Cykel positions itself as a tool for businesses to adapt to the evolving technological landscape.

The substantial market potential, highlighted by the anticipated growth in AI assistance in marketing and sales software, underscores the vast opportunities for Cykel. With the AI Sales Assistant Software Market projected to reach $92.8 billion USD and AI assistance in marketing expected to surpass $145.42 billion USD by 2032, Cykel is well-positioned to capitalize on these trends. The product roadmap and expansion plan indicates a strong potential for growth and drive transformation of modern workstyles.

Experienced leadership team

As of this writing, while Cykel is yet to commence business operations; the expertise of CEO Jonathan Bixby infuses the enterprise with considerable potential. Bixby’s track record is impressive and diverse: he has successfully raised over $500m USD in venture capital and has been instrumental in creating a combined market cap of over $3 billion USD across various start-ups globally. His involvement in more than 10 successful exits further solidifies his reputation as a seasoned, serial entrepreneur.

Bixby’s portfolio of achievements includes brining companies like Clarify Pharma [AQSE: PSYC], NFT Investments [AQSE: NFT], Guild Esports [LSE:GILD], and Cellular Good [LSE: CBX] to their IPOs. Beyond these publicly traded entities, he co-founded KOHO, a Canadian fintech similar to Revolut, and Argo Blockchain, a pioneering crypto company on The London Stock Exchange.

This breadth of experience across multiple industries equips Bixby with a network of connections and a keen sense for identifying talent and forging strategic partnerships. These capabilities are invaluable assets for Cykel, potentially accelerating its growth trajectory in this highly competitive sector.

Cykel is trading at 10.25p at the time of writing. As an early-stage company, Cykel represent a great potential in a venture portfolio. Quoting the CEO again: “To potential investors …, I say – keep an eye on Cykel AI. We are here to make a difference, drive efficiency, and provide value. The future is bright, and we are just getting started.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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