When doing the hard thing is the right thing

Parloa: When doing the hard thing is the right thing

With boldness and a stunning conceptual leap Parloa conquered the market for AI-powered, voice-based customer service.

As soon as AI started to appear on the horizon, the hunt for use cases was on. Customer service emerged as an early target ripe for disruption: with trillions being spent on answering routine questions, the case for AI-powered online help is clear. The general thesis was that the first place to be disrupted would be text-based communications. Chatbots, in other words. After all, the chatbot was the traditional way to build and test Artificial Intelligence in both research labs and commercial settings. After text-based customer service would be solved, the industry would move on to solving voice-based customer service, replacing phone calls with AI and finally relieving humanity of the dread of listening to elevator music whilst waiting for someone to pick up the phone.

But what if everybody was looking in the wrong place by focusing on chat-based models? The incredible insight of the Parloa team was that training models based on chats was actually harder than training them on voice. The reason is data: simple chat messages simply did not provide enough clues and context for models to train on. Recorded voice messages, however, are far denser in their content and provide many of the contextual clues and nuances that are left out in short, typed messages. The Berlin-based company set out to solve the hard thing first and go straight for customer service calls.

The team at Parloa not only managed to impress us with the validity of the idea, but also conveyed a great sense of purpose and capability to carry out the mission. In our opinion, every great company has in its founding team an inspiring leader who is a true evangelist for the mission of the company, a technical genius who can get the idea to work, and an operations manager who ties it all together. With Malte Kosub, Stefan Ostwald, and Tino Mittelmeier we knew we had found a fantastic team. What’s more, the team already ran a successful consultancy focused on voice tech. Their willingness to sell this business and put all their chips on Parloa showed us they meant business.

Noah built the ark before the storm

Our confidence proved to be well founded when, nine months after our commitment, ChatGPT 3 came out and the landscape suddenly shifted. The AI race kicked into high gear, leading to significant growth for Parloa. But like we always say, “Noah built the ark before the storm.” The technical fundamentals were already in place when the inflection point arrived. The company managed to scale to meet the demand and onboard important customers.

This is not to say things were easy for Parloa in the beginning. Building a voice-based solution was indeed very hard, and convincing the market proved to be difficult. Few other funds besides Newion were willing to take a chance on the voice-first approach. Before we stepped in, the company was almost out of runway; staking everything on a final fundraising round, the team resorted to unorthodox tactics. At one point, Malte switched off his screen during a big fundraising call, allowing a live demo to do the talking. This gambit paid off—the round was raised and Parloa was on a further path to growth.

Boldness is key

It’s the same boldness that now serves Parloa well in the international arena. With the billions, even trillions, thrown around in AI, it is a challenge to stay afloat, especially for European companies. Facing fragmented capital markets with less depth than the American competition, the Berlin-based company could easily have suffered the fate of so many European tech companies: move to the US, sell out, or get crushed by overseas competition. Parloa not only manages to stay ahead of the American competition but also takes them on in their own backyard, expanding significantly in the North American market and winning over blue-chip clients.

What has impressed us so far about Parloa and the founding team is their fantastic ability to do what’s necessary to level up. Milestones like reaching unicorn status or a billion dollars in sales have only served to make the company push just that little bit harder—making tough choices like overhauling the entire sales operation that took them to a billion in order to unlock the next stage of growth. With the global rise of AI, we have a feeling things have only just begun for Parloa.