Mobile pundit Benedict Evans famously said that the ‘smartphone is the new sun’ and ‘everything else revolves around it’. Bengaluru-based AI startup Yellow.ai’s model revolves around the same idea. Its leading omnichannel conversational AI tool helps more than 100 top brands to offer personalized customer service at scale and drive growth. It all began when Raghavendra Kumar Ravinutala and Jaya Kishore Reddy, now co-founders at Yellow.ai, saw the smartphone boom in India after 2011 and realized how user engagement might revolve solely around mobile apps.
At a time when the subject of conversational AI was still nascent in the country, Raghu and Kishore thought of an obvious bridge between mobile apps and enterprises.
How did it start?
In 2014, Raghu, who studied electronics and communication engineering from NIT Warangal, was managing integrated circuit design at Broadcom, the American semiconductor manufacturer. Kishore, who had done his MS from IIIT Hyderabad, was working at Myntra as a software developer.
Raghu says, “I happened to meet Kishore and he was interested in the idea of making a product that would connect users to the core systems of an enterprise.” Both of them began working on the idea and started to build the product that year. Their objective was to develop a mobile app and test it. Taking it up as a weekend side project, the duo built the product within four months. By March 2015, the duo finished a prototype and soft-launched it to a few B2C users even as they continued with their respective 9-5 jobs. By June, traction started to amplify and the number of users doubled every month.
They quit their jobs at Broadcom and Myntra, and the part-time weekend project became a full-time daily mission. When there is a product that fills a major gap in the market, it doesn’t need a budget for marketing. This is what happened with Yellow.ai. Raghu and Kishore went on to speak at numerous conferences, unrolled advertisements on Facebook and Google, and ran some app store optimization, all of which helped them acquire initial users.
Their intelligent conversational bots, trained on vertical market and process knowledge, are formulated into pre-built, ready-to-use bot templates and can be customized for each customer with minimal code.
The B2B surge
The same year, the co-founders launched the B2B model and Yellow.ai was no longer an app where people would only interact. The team offered the same software and platform to enterprises, for voice and chats. The first bunch of customers included the early adopters (startups) of technology from Bengaluru.
“We were pretty hopeful and strongly convinced. Since we saw the pilot making traction at this scale, we were desperate to put in maximum efforts,” Raghu says.
By now, Raghu was marketing and Kishore was building the product. Raghu went back to his college, conducted a hackathon, and got two interns to work with him. Slowly, their team had started to grow.
In 2016, the startup was a part of Microsoft’s accelerator and SAP Startup studio, where they received help in connecting with enterprises. The problem statement was simple: websites, mobile apps, and communication campaigns weren’t helping in converting leads into sales as expected, and this needed to be tackled.
“Our platform was convenient for them. Leads turned 4x, which evidently translated into more sales. The same mechanism solved most customer support issues as well,” Raghu says.
Things sped up when Bajaj Finserv came on board and started using Yellow.ai.
“Adoption was so high that they had a million users in only three to four months. They were making $5 million in revenue and this was growing incrementally, every month. We realized that this was a repeatable phenomenon, and equally scalable.”
As word spread, the growing traction caught the industry’s eye. In June this year, as many as nine investors turned angel to put their eggs in Yellow.ai’s basket. The AI startup’s Series A round was led by Lightspeed Ventures (Yellow.ai is also a part of the Lightspeed Ventures’ Extreme Entrepreneurs cohort for 2018).
The investors included Phanindra Sama, Founder, redBus, and CIO of Telangana State; Kashyap Deorah, Founder of Hypertrack; Anand Swaminathan, Senior Partner, McKinsey & Co.; Prashant Malik, Co-founder, Limeroad; Nishant Rao, former MD, Linkedin India; Kunal Bahl and Rohit Bansal, co-founders, Snapdeal; Monisha Varadan of Zephyr Ventures; and Alap Bharadwaj, APAC Innovation, Google.
Influencer marketing, but within enterprises
The clientele started to amplify with the references Yellow.ai acquired from existing clients.
“Enterprises were realising the kind of RoI they were getting. We saw that most of their customer support problems were solved on the messenger itself, without having to make another call to customer support again,” Raghu says.
With more than 75 enterprises, Yellow now has a huge clientele, including biggies such as Adani Power, Bajaj Allianz, Tata Power, HDFC Bank, Asian Paints, Byju’s, Dr Reddy’s, Unilever, Tata Motors, Accenture, Cisco, Deloitte, Royal Challengers Bangalore, Reliance Infrastructure, PepsiCo, and Aditya Birla Group. The other players in the Indian conversational AI space are Niki.ai, Haptik, Frontdesk.ai, Leena AI, Mihup, Racetrack. The global market for conversational AI, which stands at $4.2 billion in 2019, is expected to grow to $15.7 billion by 2024, at a CAGR of 30.2 percent.
The road ahead
The startup, which was at an ARR of $100,000 in January 2016, now makes revenue of close to $2.5 million. Raghu believes that conversational AI is a pure emerging market phenomenon. He intends to expand the product to Southeast Asia, the Middle East and Mexico, and also amplify multiple channels of interaction. As with most SaaS products and companies, ARR is what matters the most and keeps the ship afloat. The co-founders are keen to triple the ARR and try to be a leader in this space. Besides, the team is hoping to build a strong sales team, a customer success team, and keep maintaining the existing rate of growth.
