Listen to This

Listen to This

T&I Lee/Collier Winner

by Jean Gruss | Editor/Lee-Collier

A small software company has perfected software that can analyze thousands of phone conversations.

The CIA is listening, too.

There's a scene in the movie Superman Returns when our superhero hovers in space and hears all the conversations taking place on earth.

What are all these people talking about?

Bridging the gap between fiction and reality is a small company in Fort Myers called CallMiner. It has developed software that can analyze thousands of conversations in a matter of hours and tell you what people are talking about.

"We're recognizing every word and how they said it," says Jeff Gallino, the company's founder, chairman and chief technology officer.

And no, CallMiner hasn't launched a satellite into space to snoop down on your private conversations. It's listening to conversations where you agreed to be recorded, such as when you call the bank to check on a balance or an airline to make sure the plane is leaving on time.

This technology is so valuable and could have so many applications that even the Central Intelligence Agency has become an investor. You can understand why: Listening to thousands of phone calls is impossible without an army of snoops.

But what if you could program software to tag words in thousands of recorded conversations and put them in context in a matter of hours or days? Companies could find out why their customers are calling, whether they're satisfied and use the results to figure out ways retain them or improve service. One day, the government might even use the software to track down criminals or terrorists.

That's what has investors like Dan Rua excited. Rua, managing partner of Orlando-based venture capital fund Inflexion Partners says CallMiner is ahead of the competition in the field of speech recognition software. "Here's a team that knows how to run lean and create value," Rua says. "We look for big ideas that disrupt markets."

Mining for customers

It's hard to imagine, but Gallino and two partners almost sold the software that would eventually become the foundation for CallMiner's business.

After a short stint working with a small speech-recognition hardware manufacturer called ThinkEngine Networks, Gallino and two colleagues from that firm founded CallMiner in July 2002. They were developing software that would eventually become the firm's product called Eureka and they were going to sell it to Dictaphone, which was well known for its dictation machines. But Dictaphone's parent company, Lernout & Hauspie, filed for bankruptcy protection and the deal never went through.

So Gallino held onto the software and started to sell it. Armed with $100,000 in savings, Gallino started looking for customers and partners to help him sell it, while trying to raise money at the same time. "I didn't know how to raise financing or staff marketing," he chuckles.

But Gallino was no stranger to the world of technology. A native of St. Louis, he spent 11 years in the U.S. Air Force after graduating from the Air Force Academy. With graduate degrees in computer science and business, he was responsible for communications for a three-star general at the Pentagon. After he left the Air Force, he became a consultant for Grant Thornton and assisted giant companies such as G.E. Mortgage and Coca-Cola with their online sales efforts.

After the Dictaphone deal fell through, Gallino heard call-center software maker Witness Systems was looking for speech-recognition software to sell to their clients as a test. They gave Gallino a CD with conversations from 1,000 calls and asked CallMiner to identify 80 words.

Gallino went a step further. After all, who cares how many times a word appears in conversation? What's important is the context and meaning. He explained why those words appeared and why they were important, and that landed him a partnership selling alongside Witness, then a company with $40 million in sales.

The partnership with Witness would open the door for Gallino to pitch his software to large companies. But it wouldn't be easy.

Getting paid with frequent-flier miles

Shortly after landing the partnership with Witness, Gallino was munching on a sandwich near a booth the company had leased at a trade show in Las Vegas. Sitting next to him on the floor was Andrea Harris, who as it turns out was then head of quality for Continental Airlines.

Continental received 30,000 calls a day and recorded 5,000 of those. She asked Gallino if his software could determine how many of those calls mentioned the words of partner airline "Emirates".

Gallino offered to go a step further. His software would find other requests by customers that Continental would not have discovered on its own. For example, CallMiner found 25 of every 1,000 calls was about bereavement fares. This surprised airline executives, who had underestimated those kinds of calls and prompted them to reevaluate how they responded to these kinds of requests.

At the time, however, the airline industry was in the doldrums and couldn't afford to pay what CallMiner would bill. So Gallino agreed to be paid $85,000 in frequent-flier miles and in return Continental let him tout his work for the airline to other prospective clients. "You do unnatural things for your first customer," Gallino laughs.

Mining for investors

By 2004, CallMiner had landed money from a Tampa-based angel investor he declines to name, had a product and had a customer. "That was a great vote of confidence for the company," says Rua of Inflexion Partners. "It's unusual for a company that took one person's money to make that much progress."

Gallino says a big challenge for Florida startups is finding venture capital because sources of money are more likely to be found in places such as Boston, New York City and Silicon Valley. "Florida is not perceived as a hotbed of innovation," Gallino says.

But Gallino was invited to make an eight-minute pitch at the Florida Venture Forum in Orlando in 2004. "The trick is to convince the first guy in," Gallino says.

That first guy was Rua, who helped Gallino raise the first round of funding, which amounted to $2.8 million. A subsequent round raised $10 million and the number of outside venture investors totals five, including the Central Intelligence Agency's venture fund In-Q-Tel (see related story).

Rua says he's confident with the company's pace of growth so far. Typically, venture investors want to see their returns within a three- to five-year time frame.

But Rua is patient. "If it takes seven years that's fine," he says. "And if it's 10 years, that's fine, too."

"Nothing's off the table," says Gallino, who acknowledges that an initial public offering is one possibility. "The IPO table is strengthening now," he says. "Regardless of the credit crunch, the technology market is past the instability of the bubble."

An evangelical message

Unlike Continental Airlines, Gallino can't talk about some of the clients CallMiner has attracted in the last two years. "I want to brag," he insists, only hinting that customers now include the top five banks and the top three insurance companies in the world. They also include three of the five largest cable companies in the country.

Gallino won't share financial data, but says revenues in the last quarter were almost double last year's total sales. The number of employees has tripled to 39 people.

The goal now is to educate companies about the treasure trove of information that's on their recorded calls. That's hard to do because the technology is so new. "It's an evangelical sale for us," he says.

Competitors are all around, however. They might include customers such as cable companies who could develop their own software after they discover how valuable it is. Or they could be companies such as Google and IBM with virtually unlimited resources. "Google hired 150 language specialists in the last two years," Gallino says. "That's who I worry about."

Gallino is a self-described geek who gets his best ideas when he's outside the office. "The times when I'm most creative is when I'm not in front of the computer," he says. A life-sized cutout of cartoon character Homer Simpson stands squarely in the middle of his office.

At a recent talk with computer students at Florida Gulf Coast University he slips easily into computer jargon with kids half his age, leaving laymen in the dust.

To help him manage the company's growth, Gallino hired Terry Leahy as chief executive officer.

Leahy was previously the CEO of several tech companies, including Stream International, a multi-billion dollar software reseller and technical support provider. "It was time to put in an experienced leader," Gallino says. "The new CEO said that I spent five years building a cult around the concept of audio and speech analytics and now's the time to take my inculcation and turn it into execution."

THE CIA'S VENTURE FUND

Entrepreneurs looking for venture capital may want to consider an unusual source: the Central Intelligence Agency.

The country's espionage agency has a venture-capital fund called In-Q-Tel, which funds promising technologies that might one day help protect the country against enemies.

"Frankly, it's very satisfying because the credibility that we gained when In-Q-Tel selected us was really high," says Jeff Gallino, founder, chairman and chief technology officer of Fort Myers-based CallMiner.

Gallino was pitching his company to investors at the Florida Venture Forum in Orlando in 2004. Following his presentation, a representative from In-Q-Tel approached him and told him the CIA might be interested in becoming an investor. "I was surprised he was at the forum," Gallino says.

Gallino then traveled to Washington D.C. to present his ideas to a room full of people who never identified themselves. "There's no business cards and they ask a lot of questions," Gallino says.

While In-Q-Tel is an investor, Gallino says they don't get involved in business decisions. "Their right is to evaluation," Gallino says. "We give the software to their lab and they play with it and use it."

Dan Rua, a CallMiner investor and managing partner of Orlando-based venture capital fund Inflexion Partners, says In-Q-Tel is a good partner that doesn't meddle in the business. "In-Q-Tel has been very good at making introductions in the government sector and other In-Q-Tel portfolio companies for partnerships."

REVIEW SUMMARY

Company: CallMiner

Trend: Speech-recognition software can now analyze thousands of phone conversations.

Key: One big customer can help sell others.