1Mby1M Virtual Accelerator Investor Forum: With Daniel Cohen, General Partner at Viola Ventures (Part 3)

Sramana Mitra: I am going to start double-clicking down on your AI investments. Vertical AI is something that we have seen a lot. I have one specific question that I want to stick around with you for a bit.

You may have read my PaaS article. For those of you who are listening and who may have not read the article, my thesis on PaaS is as follows: You have an AI SaaS company starting with a particular use case – a particular functional domain. They have a whole stack underneath that is often opened up as a platform to build up other verticals and functions.

Particularly in AI, this is a promising opportunity. We saw the strategy very successfully followed by Salesforce.com. They dominate the PaaS market today. Other players are following this strategy. Atlassian is doing a nice job and they now have over $100 million in PaaS revenue.

Shopify is also following this strategy. There are a bunch of data companies joining in too like Snowflake, for example. There may be one vertical that you go to market or maybe even within a vertical. You go to market with one case. There are even many other use cases that can be tackled within that vertical.

What are you seeing in your portfolio? How are companies being built? Let’s go over some case studies of interesting companies that are thinking about these strategically. 

Daniel Cohen: You outlined it perfectly in the sense that companies can do that by disrupting vertical markets. You can do that by going through horizontal functions. It’s a little bit of a different strategy on both sides.

We are investors in a company called Verbit. This is one of our favorite examples. They do transcription. Transcription has been an area that has been booming especially in the COVID era because so much is happening online. Universities, legal industries, and healthcare industries use transcription services.

Verbit leverages AI to do a much better transcription at a much lower cost. It’s a service-based industry that did it by putting people that listen and write down what they heard. Leveraging AI, they can transcribe it at a fraction of the cost. You have a market that is dominated by a low-margin business, but now tech is coming in and buying up everybody in the industry and taking up all the customers.

The company has been growing so fast. It’s leveraging a great need with unique technology. What is interesting is once you start working on it, the better you get, the more customers you have. The data in AI is an asset that improves you in the market. You get better at what you do and, in turn, you get more customers. That cycle is what makes them unique. That company has been growing.

We have seen a similar play in a company that hasn’t launched yet. I am not going to mention the name. They are doing something similar but on the HR side. They collect HR information across the company and leverage that to give inside information to the head of HR which is an area that doesn’t have enough data. Leveraging data on employees gives better insight to the HR manager.

Once you launch that and start working with different companies, you leverage the data to get even better insights to oncoming customers. The challenge for these companies is the data start. If you look back historically on SaaS companies, they did a product and they could launch.

These companies need to work on some sort of subset of data before they can launch. That data takes a much longer time to go to market from the initial side. It requires a bigger investment in the seed rounds. 

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Daniel Cohen, General Partner at Viola Ventures
1 2 3 4