New YC-Backed Startup Could Reshape The Service Industry Through Artificial Intelligence

Ever pound zero on a keypad to escape a phone tree, or scream into a microphone to get someone’s attention at a drive-thru? We’ve all had frustrating experiences like these and, let’s be honest, we weren’t our best selves.

Advancements in artificial intelligence will soon put an end to all this frustration. Chipotle has rolled out an AI assistant to take phone orders at 1,800 locations. Millions of families have welcomed voice-activated smart speakers like Alexa into their homes. And last year’s Google Duplex demo was so realistic that it got people talking about the Turing Test.

Bensen AI is a YC-backed startup founded by David Xiao and Adam Sandler. (Oh settle down, neither cofounder starred in Spanglish.) Their company sells pre-trained AI assistants to restaurants that want to cut back on labor costs, service more customers and provide greater value — all at the same time. Their software makes ordering as simple as having a natural conversation with a home assistant, talking on the phone to a friend or barking combo numbers into a drive-thru speaker system.

Cofounder David Xiao and I talked about his business strategy, what a development cycle looks like for an intelligent voice-based interface and the impending impact of automation on the service industry.

This transcript has been edited for brevity and clarity.

What problem are you solving?

David Xiao: The problem we’re solving is fundamentally a labor problem. So, as you well know, labor is a huge issue in the service industry. That’s the primary driver of cost in a tight labor market like we’re in right now. The need to hire and the need to replace staff due to turnover is really expensive and a huge headache.

So we focus on the hospitality industry. We are helping to automate key parts of that because our technical expertise, as well as our industry expertise, is in order taking. We’ve built Bensen to replace a human order taker through any voice channel, in particular the telephone.

We’re also working on the drive-thru. That’s a huge market. If you look at fast food, up to 70% of their revenue comes in through the drive-thru, and right now that requires a person on the other end of the line. We are working to apply technology to solve that.

That would make drive-thrus so much better. In terms of home use, Bensen works with both smart speakers and traditional phones?

David Xiao: We think that the market for the telephone is actually in the immediate future for us. It’s what we’re most excited about. You know, in a coastal city, we think of food as being ordered through mobile apps. But actually, about half of all food, still to this day, is ordered by phone.

The benefit to the restaurant is clear, but how does this help the customer who places the order?

David Xiao: Yeah, for the customer, it’s consistency in experience. You’ll never get someone who’s in a bad mood or who’s rushing to get home from work. You will always have the kind of brand experience that you’re expecting, whether it’s from a large pizza chain or large fast food chain or whatever.

Correctness is another. Automated systems repeat orders back to their customers, to make sure everything is correct. We have a lot of failsafes in place to make sure that the order is correct. And that’s something that a human order taker might overlook. Because again, they’re in a rush or they’re under pressure to turn over orders faster or whatever. An automated system will never do that. So we think that for the costumer, there will be an improvement in experience as well.

Where’s this space headed in the next 10-15 years?

David Xiao: I see voice becoming one of the primary ways in which we interact with our devices, right? Right now, we still are primarily tapping, swiping, clicking, typing. But in 10-20 years time, I think we will be speaking to them as much as we do any of those other things.

And so the question becomes, who is servicing those requests on the other end of that conversation? And I think that there’s going to be, first of all, a wide variety of different surfaces that are enabled for voice, so it’s not just going to be about Alexa or Google Assistant. It’s going to be over many, many channels.

And I don’t think traditional telephone calls are going to disappear, but they are going to become more automated. That’s kind of the thing that we’re doing. And I think there’s going to be a lot of opportunity as various different stakeholders enter this ecosystem — whether it’s retailers, restaurants, consumer brands, etc.

That’s kind of what we’re excited about because they don’t have the technology to do that. They will want direct access, not filtered through the lens of Google, not filtered through the lens of Amazon.

And if you predict that voice-based interfaces will be one of the primary ways people interact with technology, you’ve got some serious TAM (Total Addressable Market) on your hands.

David Xiao: Yeah, exactly. Exactly.

What segment of the market are you targeting right now?

David Xiao: We usually start with about 10 locations and up. We sell to the corporate brand owner, and we work with them to develop an experience that reflects their brand, and speaks to the kind of experience that they want to provide for their customer. And then we help them roll it out to either their corporate-owned stores or to their franchisees, you know, depending on their business model.

What do your corporate clients love about your product?

David Xiao: The thing that we emphasize, and that we found our clients were most excited about, is the ability to tailor the experience to each brand. And that’s something that we’ve heard a lot of positive responses about.

The other thing that we do that is different than a lot of our competitors, and that I think sets us apart, is we not only work on the telephone. We also follow up with the customer using SMS. That’s an easy way to stay engaged over the long-term with the customer. And that’s really helped drive customers to place repeat orders. We see repeat order rates in like the 70-80% range for certain clients and that’s really exceptional in this industry.

What does a product development cycle looks like for an intelligent voice-based interface?

David Xiao: It varies from client to client, but the first step is to obtain their menu. And that’s usually done through some kind of API integration. Using that, we can then train a custom machine learning model for that client, which is able to identify all the items, options, prices — you know, facts about their menu. And then from there, we can integrate that into the different channels that they’re interested in.

Sounds like implementation is a big part of your business and each restaurant chain is like a new cartridge you load into the system?

David Xiao: Exactly.

Would you say your competitive advantage is product or sales?

David Xiao: Our competitive advantage is definitely product. This is still very difficult technology to work with. There are very few engineers in the world that are able to build a world class voice experience. And even fewer still who are willing to work for a startup and not for Google and Amazon.

The Takeaway

Until I spoke with David, I assumed most people in the United States were swept up in the whole delivery app craze. If Postmates, DoorDash, UberEats and all the others are more prevalent in coastal cities, Bensen AI has an opportunity to gain traction in a large number of domestic markets.

Entire swaths of the country might leapfrog the whole tap tap swipe generation of food delivery apps. So all of the benefits associated with these apps, like push notifications that reveal the location of your driver, will be new to these customers.

This means Bensen AI can leverage existing best practices to win rural and suburban markets. If only for this clever rollout strategy, I’m excited to see how this company grows over time.