How customer service AI startup Neuron7 convinced Keith Block to invest
Reading Time: 3 minutesFive-year-old AI customer service startup Neuron7 just closed an oversubscribed $44 million series B round led by Keith Block and his year-and-half-old venture firm, Smith Point Capital.
Neuron7 sits in one of the most promising areas for AI technology: customer service. But unlike the hoards of ChatGPT customer chatbot startups, or those doing natural language searches of manuals, Neuron7 is aimed at complex service and repair operations. Its customers, for instance, include ATM field repair company NCR Atleos, medical device maker Medtronic, and printer/imaging company Lexmark, the company says.
‘If you are one of the largest med device companies or high tech companies, and you give us millions of work order cases, you give us 15,000 manuals, in four days, we will give you a smart resolution hub that says the last 100 times you saw this particular error, these were the seven steps taken,’ describes Neuron7 CEO Niken Patel (in the photo on the left).
Using open source language models like Llama and Mistral, Neuron7 consumes a company’s product repair manuals, all of its support tickets and other support records. It then predicts the likely cause of a problem, helps the technician bring the correct repair parts and walks the tech through a step-by-step repair process.
Still, customer service AI is an area where there is a lot of competition. There are knowledge database AI startups like Zingtree and Talla. There are call center software companies like Talkdesk that have added knowledge AI to their offerings. And then there’s the giant incumbents, notably (and specifically) Salesforce, but also SAP, Microsoft, and ServiceNow, all of whom are targeting customer service with their AI products.
Neuron7 has addressed the incumbents by partnering with all of the above-mentioned players. And ServiceNow’s corporate VC arm is also an investor.
While Patel wouldn’t comment on Neuron7’s valuation after raising this round, a spokesperson did tell TC that the valuation increased by 5x over its last round. It raised a $10 million series A in 2022. Neuron7 has now raised just over $63 million to date. Pitchbook estimated the last valuation to be $55 million post money, which, if accurate, would put its current valuation at around the $275 million mark. (The company declined to comment on the accuracy of Pitchbook’s valuation.) Battery Ventures and Nexus Venture Partners co-lead the Series A and also participated in this round.
Unlike a typical emerging fund, Smith Point isn’t doing early-stage deals, only early-growth rounds. It targets startups in enterprise applications, data, edge technologies, and, naturally, AI. Given that Block has connections with just about every large enterprise CIO on the planet from his previous roles, founders need a warm intro to get in front of him. (Smith Point’s website is not much more than a landing page.)
So when Neuron7 got ready to raise his next round, Patel asked his existing investors to introduce him to VCs that were most connected with potential customers. The list was short: 10 names. When Patel saw Block’s name he got excited. He drafted a pitch deck, made the calls and the two met in person.
Block was impressed by Neuron7’s growth: currently 65 full time employees, 300% growth in ARR last year, which implies a small base revenue number but Patel points out that nearly all of the customers are from Fortune 1000 companies that have deployed the product globally. It counts 6,000-7,000 people as users. Patel said that customers are tending to double the amount they spend on Neuron7’s products 16 to 18 months after they first start using them.
In a world where so much enterprise AI revenue is going toward pilot programs, Block sees an ‘AI landscape’ that’s become ‘the wild wild west,’ he said. ‘Every board is asking their CEO, what’s the AI strategy?’ Neuron7 offers a ‘compelling’ ansswer, and some ‘very refreshing’ traction data, he said.
‘We think it’s a massive opportunity,’ Block said. ‘Service is always ripe for reinvention.’
Ref: techcrunch
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