HappyRobot helps enterprises run core operations with AI: Pablo Palafox, CEO at HappyRobot

Hello, welcome back to the Scaling Europe Show. I'm Seb Johnson. Today I am joined by Pablo. Pablo is up bright and early on the West Coast of America, talking to me live and direct on this Monday morning. How are you doing today?

Good morning, Seb. Good afternoon. Thank you for having me.

My absolute pleasure. How are you?

Doing great. We were discussing before how I shouldn't have gone and played soccer that late in the night, so now I'm devastated. I'm extremely tired.

That's what you got to do. That's what you got to do. Tell me about who you are and what you've built.

I'm Pablo Palafox. I'm a guy from near Madrid. I lived together with my 2 siblings. One of those is actually one of my co-founders today. My brother, Javi, ended up in Madrid studying computer science and robotics with one of my other co-founders. Went to Munich, did computer science, then stayed for my PhD in in deep learning. And then we ended up in San Francisco, the 3 of us, Javi, Luis, and myself, building AI for the enterprise. We basically are building the infrastructure to build agents for the enterprise in the real economy. We serve companies in supply chain like DHL or the utility space and telco now, working with very operationally complex industries, putting agents to work. Whenever there's no easy cookie-cutter chatbot that just connects to your knowledge base, where you actually need a platform to orchestrate and govern those agents in the enterprise.

And you're crushing it, right? I think you're nearly 100 enterprise clients. You mentioned some of them. You raised a $44 million Series B led by Base10, which was less than a year after your, was it $15 million Series A? So you've got momentum, you're signing clients, you've got some great—

That's right. We've doubled revenue since the start of the year. Over 100 customers, very happy customers, I would say.

Nice.

Yeah, it's been a really fun ride. It's just been 2 years since we started selling. Started selling April '24. And in those 2 years, we've gone decently well. I'm very excited. I'm very happy for the work the team has put in.

How are you finding it? I mean, I imagine this must be the most, 'cause you went through YC as well, right? This must be some of the most intense years of your life so far going from, you know, zero to one, from one to wherever you are today, right? What's the experience been like?

Yeah, I mean, it's a roller coaster, right? When you are in the early stages, you just wish you can get to that one, that first million. And then you're like, actually, we were able to get there. Maybe we can get to 5 and then to 10 and then to 20. Hey, how do we get to 100? So now we're in that process. We actually had a board meeting recently and it was like, guys, like getting to a certain number is inevitable. How do we get to 10x that?

Wow.

So there's such an opportunity in the enterprise space. Our customers are really excited to put AI to work. in their businesses and they really need the partner to navigate that enterprise, that business, help them, guide them through what makes sense, what doesn't make sense. So it's a huge opportunity. We're trying to build as fast as we can to cater to that.

That's amazing. For those who don't know, maybe who aren't close to the business, can you talk through some maybe like real-life use cases where you're saving enterprise clients time or Adding a lot of value.

Yeah, so we think about our platform and our business really as a very horizontal product that helps a very specific set of niches or verticals. We do that because we go extremely deep in the businesses that we serve. We go and serve all of the core functions of the enterprise. from order to cash, if you will, from helping a customer reply an email to quote their own customers or to give customer service to their customers or to, let's say, provide information of where a certain shipment is, if we're talking about supply chain, onto the back office operations of reading documents, collecting that paperwork and organizing that paperwork, or even collecting payments at the end of that cash piece, no, from order to cash. I'll give you an example in the logistics space, for example. Many of our customers receive, again, thousands of emails every day from their own customers. In logistics, you have intermediaries, right? You have people that are coordinating the movement of things. So let's say we have CH Robinson or Uber Freight. Those are so-called freight brokers. Those folks, they get thousands and thousands of customer inbound. Hey, like how much for moving these shipment, these load from Dallas to Chicago? And then these logistics intermediaries that we serve, they have to reply very, very quickly to that email coming in. with a number. Oh, for Dallas to Chicago is X. So we help them build these systems to really reply extremely quickly to those requests to first, you know, capture that sale. So that's the quoting piece. We do all of that. Once, you know, imagine I am a freight broker. Once I have a load that I move for you, Seb, from Dallas to Chicago, now I need to actually move that load. So now I need to find trucking companies if we're talking about domestic logistics to move that load. So now what I'll do is all of the back office coordination with the trucking companies, track the shipment as we call it. We have agents that are constantly reaching out to those trucking companies by calling them, hey, Mr. Driver, where is my load? Is it in Dallas still? That's bad. I needed to be in Chicago already. So we do that work for those logistics folks. And now we've, we serve 9 of the top 10 freight brokers in the US, 7 of the top 10 US tracking companies, like the actual tracking sites. So we've now expanded from our initial niche of freight brokerage to the tracking space to now serving 5 of the top 10 logistics global companies, like so-called freight forwarders, and even 2 of the largest 3 ocean carriers, like the big boats that I see here in the bay in San Francisco. And that gave us the intuition that, okay, we've actually built a platform that can serve these very operationally complex companies, serve all of their core functions from, again, selling, customer support, operations onto even the money piece, collecting payments from customers. So that is at a glance what we do. To give you, as I mentioned before, we're already working with some of the largest telcos, some of the largest oil and gas and utility companies on pretty much the same type of use cases, selling, customer support, operations and back office, and some form of payment collections. So that is the core 4 items that we typically serve our customers with.

And what's it like when we live in this tech bubble? Most of us are very AI native, using the best tools, using agents. I imagine a lot of these clients are sort of behind the curve or slower to adopt, which is why they kind of come to you. What's it like when you kind of deploy these solutions? Is it, is this a real game-changing moment for a lot of the people inside the company where they realize what this technology can do?

I'll give you an example. One of our clients, they came to us thinking they had to hire 500 people to do a particular task. Imagine 500 people you don't find like, you know, from under a rock. No, like you have to start hiring.

That's like a Series D company or something, you know, that's like in our world, that's a huge company, right?

I mean, typically they would resort to call centers and They do a great job, BPOs and call centers, but it does take still a lot of time to train them and to keep consistency across those operators. So in this case, it was a use case that entailed calling consumers in the US to let them know about a certain thing regarding their payment with their package. Okay, so imagine you get a call from an agent saying, hey, Seb, if you don't do X and Y, like you're not gonna receive your package. And we built an agent in just a couple of weeks for this client that was essentially reaching out to 20,000 to 40,000 customers in the US every single day. So that is the scale at which we can operate with our customers.

Wow.

From one week to the next, we can have an agent ready that is essentially reaching out to thousands and thousands of customers to make their life easier, to actually help them benefit from AI and not be like, oh, I don't want to talk to AI. These people, most of them were like, oh yeah, amazing. Yeah, I was trying to get that package. Thanks for calling. I really appreciate it. So there's this misconception also of how AI is going to be like, oh, it's going to scare our customers away. We haven't really seen that. Maybe there's always like a residual 5% because we always recommend our customers to say it's AI from the beginning. If it's an email, it's less obvious. If it's a chatbot, it's kind of expected that it's AI these days. If it's a phone call, it's the most like tricky one these days and we always recommend just say it, it's fine. If they want to talk to the AI because they want to get it solved and they know that it can help them with that, They're going to do it. If not, they'll just get transferred to a person and it'll take maybe a few more minutes for them to solve that problem. The next time they come back, they'll know that it's actually better to talk to the AI. So we do thrive on that communication-heavy layer that connects to systems of record to get things done. So yeah, that was the transformation that we've seen in some of our customers, for example.

And as I mentioned, things are flying, you're signing deals, you're raising money. What was the moment where you, I don't know, maybe you found product market fit or things really started to take off where you kind of went from building something scrappy, is this going to work to all of a sudden you're like running with the momentum?

Ooh, great question. So there's been a few of those moments where you feel there's something that is working. We were one of the first companies back in January '24. Building voice agents, which is a very core piece of our product. We pride ourselves in the fact that we've built our own voice agents. And, you know, we did that back in the early AI days. And that already kind of gave us that momentum in that first part of the year in '24. We thought we had a thesis that we could go to traditional businesses and put these AI agents, these voice agents in particular initially to do stuff. We were not sure that was gonna work because again, we were going to traditional businesses. In particular, we started with logistics because of my co-founder Javi's background. And once we went to conferences and we started doing these demos, and I remember Javi and myself, Luis, we kept in the cave coding, right? As our CPO. But I remember like doing these demos to customers, like literally holding a phone and like talking to an AI and they were like, sorry, excuse me, who are you talking to again? Like, who is this? And we're like, oh, this is our AI agent. They're like, holy shit. Like, I wouldn't have guessed. Okay. So there was like some pivotal moments there. So that was the first one where it's like, okay, let's try it out. Let's go to customers and put in production. And that first part of that 2024, we got that momentum really, really quickly. Like it just picked up with a few customers. It was not many customers. It was maybe like 5 customers that we were kind of piloting with, but those folks were extremely engaged. We were able to land one of the top 30 logistics companies in the US.

Amazing.

And they're like that happy middle between not being too big, that they're like, ah, these people, who the hell are they? Just like 3 kids like doing stuff, but also not too small. They actually have the needed volume for us to see some scaling issues even at first. So that was probably like the first moment where we're like, yeah, let's go for it. Because before or during YC back in the last, like September '23, we did YC summer '23. I've told it a few times now that we pivoted away from what we were doing before. We were doing computer vision stuff based off of my PhD in computer vision. We were like kind of going for that world of imaging and stuff. But we pivoted away from that. We were in our pivot hell for a few months. And that first like quarter of '24 is when things started picking up.

And I was having a look at your job board. You're hiring so many jobs in so many cities. How are you thinking about international expansion?

It's not that many cities actually. It's a few select locations. So in Europe in particular, man, there's so much talent in Europe. There's so much untapped talent. And thanks to obviously our origins, we're able to attract a lot of the, in particular, Spanish talent. So we have a big hub in Madrid and Barcelona. So that is a great source of talent for us. We are now expanding Indeed in London. So we have started an office there. We just hired a few months ago our head of revenue who was reporting to Palantir's CRO for 6 years. So we are able to attract a lot of that. Talent in Europe, which is great. And really our focus is around the US market, the certain geographies in Europe, and then LATAM for us is really big because many of our Spanish customers are basically bringing us to LATAM, Mexico, to Brazil. That's really core for us. And then we have other geographies, for example, in Australia, we're seeing a lot of demand, a lot of pull. where we just decided to open up an office there. But funnily enough, we were brought there by some of our customers initially. Like, it was our existing customers that brought us there and they actually said, well, we actually know other companies you could serve in this market, so do you guys want an intro? So it is a bit of this word of mouth really that we get from customers.

That's great.

Yeah.

Was it like, Being European in San Francisco?

Well, San Francisco is a very open city, open-minded city, if you will. It's very, it's a very fun city. Like, you don't really feel an outsider. You really feel part of the whole vibe. There's a lot of people coming and going. So there's no really, oh, I'm from San Francisco since like 30 years ago. You know, like my family was born here. I mean, maybe you have some of those, but In practice, you just see like everyone coming and going and it just feels like a very fun city, like very, very, pretty much the time to be here, to be honest. Like when we got here in '23, it was maybe a little bit more quiet. Right now it's booming and it's blooming. So it feels great. I mean, I highly recommend coming here. It's relatively expensive, like rent is a little bit high, Yeah. But I remember when we started in '23, we just paid ourselves like probably under minimum salary and you're still able to survive. If, I mean, maybe you cannot, you just have to go to the cheap supermarkets and get some ramen. But I remember after the YC chat from Paul Graham kind of telling us, guys, you just need to be a cockroach. Just survive, just do whatever you can to survive and you'll be fine. So that's what we did. We were cockroaches, I guess, for the first few months and we survived.

And now where do you feel that you're at? You're out of that stage now, things are a bit more relaxed. You're sort of out of that chaos of the early stage.

We try not to relax really. The only advantage, I don't know who told me this, but the only advantage against a big enterprise is urgency. Now, like the only advantage against a big competitor, like some of the hyperscalers even, is urgency. That urgency to get things done is what keeps us going faster than them. So we're definitely out of the sort of like cockroach moment. Like we are, we have, you know, a good amount of cash. We're very efficient. But I almost, whenever we raise a round, I'm like, guys, where's the money? There's no money. Like, don't think there's money here. Just continue operating as before. Yes, you know, we have a few more years now extra of runway, but forget about the money. Like we just got the, You almost get money as a right, or as a, you're earning the right to continue building. Does that make sense? So it's not that you win.

Yeah, I see what you're saying. You know, your 2 rounds were so close together. I guess what unlocked that? What happened there? Was it explosive growth? Were you being preempted? I mean, you obviously raised that big round, you know, $15, $16 million from a16z. What happened in those 10 months that enabled you to then raise, you know, a much bigger Series B?

We more than 10x'd revenue since the A, from the A to the B. So that rapid scaling really was what triggered it. And we were preempted, like both those rounds. So we never really were looking for it. We were just like maybe dancing around like, oh, like what would happen if And then suddenly you get a term sheet or a few term sheets actually. But yeah, it was just that rapid growth. I think there's been a great, it was a great decision for us to also focus on one particular segment because we were able to build again really, really deep for these businesses across the house. So we were able to understand fully their operations and be like, a partner, like their main partner to run their operations. So that unlocked a lot of, I guess, stickiness in a certain way. We were able to be very helpful for our customers. The customer calls that investors were doing were amazing. They were like, customers freaking love you guys. Like, what are you doing? So I think there was that, like, how, what are these people doing? What is this? HappRobot guys are, what are these HappRobot guys doing with their customers so that they love them so much? So there was that rapid growth and that customer love.

Yeah, that must be so powerful to VCs, right? When people can talk to the customers, they get the real validation that we've built something meaningful. Well, Pablo, unfortunately we're out of time. This has been amazing. flying the flag for Europe out of San Francisco, and you're one of the— such a strong set of, uh, Spanish co-founders as well. Um, but look, amazing. Thank you for spending time with me, and best of luck in the next phase of your journey.

Really appreciate it. Thank you so much.