Source: Inc.com

https://www.inc.com/rebecca-deczynski/how-a-12-year-old-ai-company-that-boasts-netflix-pepsico-as-clients-raised-25-million.html

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Qloo has been building the technology behind its cultural recommendation AI for more than a decade. Now, it’s set on expansion.

Amid increasing privacy regulations, how can businesses accurately predict their customers’ tastes and make suitable recommendations to them?

That’s a challenge many face — and one that Qloo, a New York City-based AI company, aims to solve. Founded in 2012 by CEO Alex Elias, a privacy law expert, and COO Jay Alger, Qloo (a three-time Inc. 5000 honoree) uses artificial intelligence to help clients like PepsiCo, Universal Music Group, and Netflix better cater to consumer tastes while relieving privacy concerns.

The company says that its tool, Taste AI, can accurately predict the tastes and interests of specific demographics — like which movies would earn the interest of teenagers who listen to Harry Styles and live in Cincinnati, or which podcasts 40-something pickleball players may be drawn to.

As laws such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act expanded consumer privacy protections over the past decade, Qloo found its technology gaining traction. In 2019, the company acquired TasteDive, a consumer-facing cultural recommendation platform. The following year, Qloo landed on the Inc. 5000 list for the first time, at No. 187.

Qloo’s expansive data catalog — which covers a broad range of potential customer interests, including books, travel destinations, media, sports figures, influencers, and more — and its machine-learning model have helped it to grow in prominence. It’s amassed more than $55 million in total funding to date from investors including Eldridge, AXA Venture Partners, Chaifetz Group, Jaws Ventures, MDC Ventures, and a range of individuals across the entertainment and other strategic industries, such as Leonardo DiCaprio, Elton John, and Starwood Hotels founder Barry Sternlicht.

Elias shares how the company secured its most recent $25 million Series C, and what it plans to do with the capital:

What prompted this round of fundraising? When and how did you go about it?

“We’ve thrived as a lean, engineering-centric organization for years, but as the world rushes to embrace the generative AI era, we know we must scale our operations to fully unleash Qloo’s potential. Our Series C supports enhanced engineering capabilities, sales, and go-to-market staff, allowing us to expand the boundaries of our Taste AI technology as the addressable market and use cases proliferate so rapidly. I’d say a reasonable estimate of the overall process was three to four months from when we began having conversations to when we brought the group together

“Every day, our clients share new generative AI ideas and use cases that utilize the power of human language to create something of value. It’s incredibly exciting, and we’re continually reminded how important Qloo’s Taste AI is for getting this next era of consumer experiences right.”

What was your fundraising journey like?

“Qloo is fortunate to have a foundation of long-term existing investors who have continued to support our journey. However, we strongly believe in diversifying our cap table and have deliberately sought out new investors with niche expertise in areas that are strong grounds for commercial expansion.

“Institutional investors like Moderne Ventures are new to Qloo and have deeply entrenched expertise and an LP base that reflects the diversified leadership across the real estate industry. This is a new addressable market for Qloo. Seeking out the right shareholders has been invaluable to accelerating progress in those areas.

“Qloo is atypical as an AI company in that we’ve been building our technology and corpus for over a decade. This makes Qloo a relatively unique profile in the current AI hype cycle and was something we had to address in the fundraising cycle, which we were able to position as a key strength.

“Thoughtful fundraising always takes longer than one would expect, and it is key to build relationships early with prospective investors so that they begin to see an arc form in progress, and that is ever true in a challenged macro-economic environment.”

What do you plan to do with this funding?

“This latest financing allows Qloo to address new commercial surface areas for Taste AI, such as on-device learning and foundational models leveraging Qloo, as well as introduce an accessible, self-service interface later this year to make consumer and taste analytics available to small and mid-sized enterprises and individuals. Qloo will also be pursuing opportunistic M&A using its balance sheet along the lines of the TasteDive acquisition completed, which greatly expanded Qloo’s first-party data moat and corpus of cultural learning.”