The concept that we can enhance consumer interactions with companies online has been talked about forever. Overall, the outcomes are mixed.
Sierra, Bret Taylor and Clay Bavor’s new startup, believes that AI agents could be the next technology frontier, like websites and mobile apps: essential digital assets for every company that could deliver on the promise of a digital customer experience.
Regardless, the two founders envision AI agents as a new technology category that offers consumers a new way to connect with companies to enhance their experience.
“Our thesis is straightforward. Taylor told Eltrys that conversational AI will become the dominant form factor for brand interactions, not just for customer support but for all areas of the user experience.
Customers may type free-form inquiries and requests into a search box, and the AI agent should interpret and link to the necessary transactional systems. Looking up an order in an order management system or rescheduling a delivery in a scheduling system are examples.
Taylor and Bavor recognize that older systems are harder to connect to. However, most CIOs they’ve spoken to have established APIs that link to these older systems, making Sierra’s communication simpler.
However, Taylor and Bavor acknowledge that human-AI interaction poses substantial concerns. “When you put an AI in front of customers, the value is obviously higher, but the risks are higher, too, with brand misrepresentation and hallucination—all the technical problems that are candidly the hardest problems in AI,” Taylor added.
The hallucination problem, where huge language models make up stuff when they don’t know how to respond to a query, is serious. The response might damage a brand’s reputation.
Sierra is trying to reduce hallucinations, as is everyone else. Company software is built on autonomous agents. That implies no model produces a Sierra agent response. Taylor says it may include as many as seven models, including “the supervisor,” who checks response quality and sends problematic answers back for reevaluation. Taylor says the industrial study on hallucinations continues.
When processing consumer data automatically, there are several regulatory and data protection considerations to consider. Taylor and Bavor claim their agents can handle it too.
Taylor argues that AI is fundamentally different from software, as we’ve known it for 30 years, and needs education to help consumers comprehend its potential and risks. “Part of our go-to-market motion is both mitigating these risks and teaching our customers about how this new type of software works,” he added.
However, that risk creates great potential for the organization. “Anytime there is a sea change in technology, smaller companies can explore that open space, take risks, and try new things,” Bavor added.
Taylor predicted at least five to 10 genuinely new independent business software startups from this AI wave, similar to cloud and mobile. A new technological model is possible. Since conversational AI is new, there is no market leader. He claimed everyone is learning about it in real time because it’s just a year old.
Taylor, OpenAI’s board chair, doesn’t view the two firms as competing or in conflict, but one might say they do. He stated, “We don’t see OpenAI as competitive, and I will obviously recuse myself if there is a potential conflict.”
The creators believe a new platform should have a new price mechanism based on results. Instead of tiered membership costs or usage-based pricing like other software businesses, they want clients to pay solely for issue resolution.
We believe outcome-based pricing will dominate software. AI brings us technology that does the job, not simply makes us more productive. It completes the job, Taylor remarked. They plan to bill the buyer then. The mechanics are still being worked out with early clients.
Despite the two founders’ expertise, Brent Leary, CRM Essentials’ creator and chief analyst, says incumbents like Taylor’s old business, Salesforce, will be hard to compete with.
“Taylor is incredibly intelligent and capable; there’s no doubt,” Leary remarked. Salesforce has institutional knowledge, expertise, and other resources that a startup doesn’t, even if Bret runs it. And these massive firms are investing all their R&D and reconfiguring their operations around AI opportunities.”
Sierra is well capitalized, but not like Salesforce. With $110 million already raised, $25 million from Benchmark, and $85 million from Sequoia, Taylor and Bavor’s credentials and market potential are drawing significant investment. That is a lot of money for an early-stage startup, but these entrepreneurs are unusual.
Ravi Gupta, Sequoia Capital’s Sierra investment leader, says the technology and potential intrigued the company more than the founders’ backgrounds. “Seeing it in action is the thing that was remarkable, and I think it really captured our imagination of what future customer interactions can be,” he said, adding that he wrote a check easily.
Sierra sees a huge chance to revolutionize the consumer experience using AI, but numerous challenges remain. It could be a successful startup if the founders can address the drawbacks of free-form, AI-driven, automated customer service agents while avoiding established enterprise competitors, but like everything else involving AI, it must prove it can do that consistently and at scale.
