Neuron7, a 5-year-old AI customer service startup, just closed an oversubscribed $44 million Series B round led by Keith Block and 1.5-year-old venture firm Smith Point Capital.
Neuron7 is located in one of the most promising areas for AI technology: customer service. But unlike the ChatGPT customer-facing chatbot startup's plethora of services and services that do natural language search for manuals, Neuron7 is aimed at complex service and repair tasks. The company said its customers include ATM field repair company NCR Atleos, medical device manufacturer Medtronic, and printer and image processing company Lexmark.
“If you are one of the largest medical device companies or high-tech companies and you provide us with millions of work instructions and 15,000 manuals, within four days we will solve your last 100 problems. “If you see this particular error, these are the seven steps you should take,” explains Neuron7 CEO Niken Patel (pictured left).
Neuron7 uses open source language models such as Llama and Mistral to consume a company's product repair manuals, all support tickets, and other support records. It then predicts the possible causes of the problem, helps the technician bring in the appropriate repair parts, and guides the technician through the 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. Call center software companies like Talkdesk are adding knowledge AI to their products. And then there are the existing giants, especially (among others) Salesforce, but also SAP, Microsoft, and ServiceNow, all of which are targeting customer service with AI products.
Neuron7 has addressed incumbents by partnering with all the players mentioned above. ServiceNow's enterprise VC arm is also an investor.
Patel did not comment on Neuron7's valuation after the latest funding, but a spokesperson told TC that the valuation has increased five times compared to the previous round. We raised $10 million in Series A in 2022. Neuron7 has raised just over $63 million to date. Pitchbook's last valuation was $55 million post-money, which if accurate would put the current valuation at about $275 million. (The company declined to comment on the accuracy of Pitchbook's valuation.) Battery Ventures and Nexus Venture Partners co-led the Series A and also participated in this round.
With this funding, the startup has acquired Block not only as a lead investor but also as a board member, Block told TechCrunch. This is more than just a windfall for Patel and his co-founder Vinay Saini (pictured above, right). Mr. Block is best known for his years in sales at Oracle, where he was promoted to co-CEO with Marc Benioff at Salesforce. He left Salesforce in early 2020 (as most of Benioff's potential successors appear to be leaving) and joined co-founders Burke Norton and Chris Lytle in April 2023. Re-emerged as the founder of a new $400 million VC fund.
Unlike typical emerging funds, Smith Point does not do early-stage deals, only early growth rounds. It targets enterprise applications, data, edge technology, and of course AI startups. Given that Block has connections to nearly every large corporate CIO on the planet in his previous roles, founders need a warm introduction to get in his way. (The Smith Point website is nothing more than a landing page.)
“We're very selective,” Block told TechCrunch. “We partner with 10 to 12 companies, which are Series B and C growth stocks.”
So when Neuron7 readied its next round of funding, Patel asked existing investors to introduce him to the VCs most connected to potential customers. The list was short, 10 people. Patel got excited when he saw Brock's name. He created a pitch deck, made a phone call, and the two met in person.
Keith Block, Co-Founder, Smith Point Capital Image Credit: Getty Images (Image has been modified)
Block has been impressed with Neuron7's growth. We currently have 65 full-time employees and grew ARR by 300% last year. While this means the underlying revenue numbers are small, Patel noted that nearly all of the customers are Fortune 1000 companies with a global footprint of the product. Up to 6,000-7,000 users each. The number of users exceeds 50,000. Patel said that 16 to 18 months after customers start using a Neuron7 product, they tend to double the amount they spend on the product.
In a world where much of a company's AI revenue is funneled into pilot programs, Block sees the “AI landscape” becoming the “Wild West,” he said. “Every board asks the CEO what their AI strategy is.” Neuron7 provides “compelling” answers and “very fresh” traction data, he says. I did.
“We see this as a huge opportunity,” Block said. “Services are always ripe for reinvention.”
Note: This story has been updated to add additional total user information.