Parloa raises $21M to add a little automation to contact centers

It's estimated that over $400 billion are spent annually to run customer contact centers around the world. To cut costs, in recent years, contact centers have embraced AI and automation; research from The Harris Poll indicates that 46% of customer interactions were already automated as of 2021.

That's good news for the vendors selling contact center automation software. VCs believe that to be the case, certainly, judging by recent investment upswing. Startups including Invoca, Replicant, PolyAI and Observe.ai have raised hundreds of millions of dollars from backers over the past year alone, reflecting the bullish views of labor-saving customer service tech.

Another winner in the contact center automation boom is Parloa, a German-based enterprise software provider that uses a combination of conversational AI tech and low-code tools to help companies lighten the load on their contact center employees (or so the sales pitch goes). Parloa today announced that it raised €20 million (~$21.67 million) in a Series A funding round led by EQT Ventures, with participation from Newion and Senovo.

The fresh cash, which brings Parloa's total raised to €25 million (~$27.09 million), will be put toward customer acquisition efforts, opening a U.S. office and product R&D.

"AI is waiting in the wings right now to disrupt the multi-billion customer service market for good," co-founder and CEO Malte Kosub told TechCrunch in an email interview. "The status quo in customer service is the same across Europe, Middle East, and Africa and the U.S.: not a good customer experience. So also the speed of the AI adoption in customer service will be the same in those areas."

Parloa began as an internal effort at Future of Voice, a conversational AI agency that Kosub co-launched with Stefan Ostwald in 2017. Kosub and Ostwald built a low-code tool for developing "multi-channel voice experiences" (e.g. Alexa skills, phone bots) for Future of Voice's clients, which they code-named Parloa. In 2020, Kosub and Ostwald sold Future of Voice and recruited the employees that had been working on Parloa to help scale the software independently.

Parloa offers a patchwork of apps and services that, when meshed together via low-code drag-and-drop dashboards, can power contact center automation flows. For instance, Parloa's speech-to-text module -- driven by Microsoft Cognitive Services, Microsoft's set of API-based AI services -- can be combined with Parloa's natural language understanding models to create a phone dialogue tree. Or Parloa's integrations with third-party text-generating models, including OpenAI's recently released GPT-4, could be connected with the aforementioned speech-to-text module to answer commonly-asked customer questions and complaints.

Parloa connects various modules and services to help automate contact centers. Image Credits: Parloa

To put it in more concrete terms, a typical company might use Parloa's tools to create a phone-answering bot that can automatically figure out what a customer's calling about (e.g. changing their billing address) and respond to their questions in natural language. Or it might use Parloa's translation tools to let its customer service agents speak with customers in multiple languages.

Parloa's approach isn't exactly novel -- lots of contact center platforms offer the same type of setup -- but the startup claims that its platform is superior in some ways from a technical standpoint. For instance, Parloa claims its AI tools, apps and modules can reduce spelling errors and other "unwanted conversational patterns" during calls and continue listening during natural pauses in conversations.

"The pandemic was a particular driver for the increased demands on digital customer service, which we as Parloa are helping to automate," Kosub said. "Customer service is as old as business itself. So we are not inventing a new market environment or focusing on small sub-segments, but helping an established multi-billion market with innovative technology."

Kosub wouldn't say exactly how many customers Parloa currently has, save a few big names like Decathlon and German Red Cross. When asked about macroeconomic headwinds like the Silicon Valley Bank collapse, he countered with a stat he argues illustrates one of the reasons the contact center automation market will continue to grow: 71% of agents thought about leaving their job in the past six months, according to a Salesforce study.

"Companies have to deal with a decreasing availability of agents, staff shortages of agents and job unattractiveness -- much of an agent's time is spent on repetitive tasks, like authentication, that could be done by AI," Kosub said.

One might argue that agent turnover is better avoided with higher wages and better benefits as opposed to automation. Among the common complaints from workers in the industry are high production demands and a lack of training; in 2021, call center workers at healthcare giant Cigna went so far as to circulate a petition calling for better working conditions.

Investments in automation are an easier sell, of course -- particularly in a down economy. Parloa's biggest challenge likely won't be finding new customers, but standing out in a crowded field. Kosub says he's up to it, fortunately.

"We weren’t affected by the slowdown or the pandemic at all. Customer service demand is growing and the pressure to be more efficient is increasing as well," he said. "Corporate-wise, we grew from 30 employees during our seed funding to more than 100 in less than 12 months, with new joiners from Google, Salesforce, SAP, TeamViewer and Celonis."