LimeChat bats for profitability with AI-powered chatbot built jointly with Microsoft

Bengaluru-based LimeChat has launched a chatbot powered by artificial intelligence (AI) in conjunction with tech giant Microsoft. With this, the startup, whose annual recurring revenue (ARR) is expected to hit $2 million at the end of this quarter, hopes to triple its revenue over the next 12 months. 

AI chatbot startup LimeChat is also looking to turn profitable in the first half of the current year.

“All SaaS (software-as-a-service) companies want to be profitable, and I’m very happy to notice that we’re on a path to profitability… maybe (in) the first half of this year… That gives a founder like me a lot more leverage to think about more innovative solutions and build large R&D (research and development) teams,” Nikhil Gupta, Co-founder of LimeChat, said in an exclusive conversation with YourStory.

LimeChat works with ecommerce brands to help them sell and convert on chat on channels, including WhatsApp, Instagram, and web chat.

Gupta’s optimism stems from the partnership with Microsoft, under which the tech giant will help sell LimeChat’s chatbot to its enterprise customers—a segment the startup will enter for the first time. Gupta said the unit economics of working with larger enterprises is “what’s making the difference” in terms of putting the startup on the path to profitability.

Explaining further, he said that LimeChat will be able to triple its revenue by keeping the same team and not having the need to triple its workforce to achieve the goal. There are two major costs for LimeChat—cloud and salary costs—both of which the startup claims to have brought under control due to its partnership with the tech major.

The startup will be able to leverage Microsoft’s “very large sales machinery, which is a replicable model across all the 192 countries” where it provides its services. The sales playbooks in these regions are 80% similar, and the rest require tweaking to suit specific needs, according to Sangeeta Bavi, Executive Director, Digital Natives, Microsoft India.

“The kind of automation that LimeChat can provide—it’s about 70-75% automation rate or even more than that, and some of the products are far behind that. In terms of business thinking, the clarity of saying, “Hey, you know while we address the SMB and the mid-market segment, the whole idea is that how do we basically start pivoting and looking at selling to enterprises”. And that is also the sweet spot for Microsoft,” said Bavi in a conversation with YourStory.

Under the collaboration, LimeChat has developed its new platform based on Microsoft Azure OpenAI Service, where it claims to offer superior responses to customer queries using the chatbot than its earlier version or any of its competitors. 

Giving the example of Wow Skin Sciences, a homegrown D2C company, Gupta said the brand faced the challenge of “product discovery”. Using LimeChat’s renewed chatbot, it was able to overcome this challenge and drive conversion up by 50%.

Yet another metric is the “confusion rate” that relates to the percentage of answers the chatbot used to get wrong earlier, which dropped from 8-9% to 0.5%, Gupta added. 

LimeChat spent the first six months of last year building the solution and started conducting pilots sometime in July-August with different categories of customers with varied challenges and use cases. Terming the pilots “successful”, Gupta said the team has kept the process cost-effective despite “using inference as a layer” by adopting and developing some techniques such as calling the APIs “at the right moment of time”. 

Inference is where a trained AI model is used to generate unique insights/solve a problem/predict using new data. API is short for application programming interface, which is the process of communication between two applications.

LimeChat is currently working with 300-400 brands, a majority of which have signed up for the new features and functionalities, according to Gupta. 

Bavi said there are no commercial aspects to the collaboration with LimeChat and nor has Microsoft invested in it so far. 

While declining to comment on the number of similar startup partnerships Microsoft has forged in the recent past, Bavi pointed to the increasing number of initiatives in the AI space, saying, “the floodgates have opened”.