Big bet on AI-powered chat paid off for CEO Mike Murchison

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Mike Murchison is the CEO and co-founder of Ada Support Inc., a leading provider of AI-powered customer support “chatbots.” His Toronto-based company automates millions of chat-based conversations per month for clients such as Pinterest, Facebook, Shopify and Verizon.

Indeed, Canada is on its way to becoming a global leader in the AI customer service sector, he says. Ada last raised capital in May 2021, when it secured $130 million and became a unicorn reaching a $1.2 billion valuation.

Murchison, who named the company after Ada Lovelace, the mathematician who wrote the first computer program in the 1840s, describes himself as a risky investor. Most of his net worth is in Ada, but he is also invested in 40 Canadian tech startups via Union Capital, the angel fund he manages. He also owns a bit of crypto.

Murchison loves to run and is preparing for the Squamish Ultra Marathon. His training philosophy? “There are so many parallels between running and running a company! I’ve learned that in order to run faster you first have to run slowly.”

Where were you born and where did you grow up?

I was born in Toronto, but over the years I’ve lived in different places such as New York, New Zealand and the Caribbean.

Did your parents talk with you about money or success when you were a kid? What did you absorb, either implicitly or explicitly?

I’ve always been a super-curious person, and my parents encouraged me to explore that curiosity and pursue whatever I was interested in.

I definitely didn’t think about money at all growing up, but I was drawn to entrepreneurship early on. My first big learning in that regard was when I started a lawn-mowing business in my neighbourhood. Going door to door I learned how to speak to people and convince them that they could depend on me. It was probably then that I began to understand the power of excellent customer service.

Did anyone else have a big influence on you in your early years?

One of my early influences was my grandfather. He gave me complex puzzles for Christmas every year. Those geometric wooden cube puzzles were incredibly frustrating and took a long time to solve, but I still love them to this day. They are like a meditative exercise for me.

For some reason, I’ve always seemed to gravitate to things that are really hard to do. I understood early on that for me there is a relationship between the quality of the learning opportunity and the difficulty of the task. I always took the toughest classes in school because I love to be challenged.

How did you decide what to study in university?

When it came time to choose a university, I signed up for the international relations program at Trinity College at the University of Toronto. I chose Trinity College simply because it was the hardest school to get into.

We knew we had something special, because no one noticed the difference between the software’s responses and from us responding manually.

As time went on, I became aware of and followed my real interests. I had always been passionate about technology, and I wanted to explore the relationship between technology and people. I switched my studies to cognitive science and human computer interaction. I was obsessed with the idea of making search on the internet a more human experience.

What was your first foray into entrepreneurship?

After university I started a company called Volley, an online community that enabled its members to post requests for help with specific challenges and receive advice and feedback from real people with relevant knowledge and experience. We raised VC funds and put a great team together, but as we grew, customer service became a problem. We just couldn’t respond quickly enough to the demand. We tried to find software to help us solve the problem, but none was available. We reached out to other business owners to see how they were solving similar issues and they said, “We aren’t.”

At that point we realized we had found a much bigger problem that needed to be solved, and so we decided to pivot the company to customer service solution software.

What happened after you had this big idea?

First, we needed to do a lot of field research, so my partner David and I went to work in the trenches with a number of rapidly growing internet companies – we took on the role of customer service representatives.

That gruelling experience taught us three key things: 1) 30 per cent or more of customer questions are quite simple, repetitive and mundane. 2) The customer service reps in these companies (our colleagues on the job at the time) hated the poor quality and craft of the software they were using. 3) Everyone wanted to have the ability to provide more live chat and messaging support, but none of the businesses could afford to provide this. The dilemma? The more people you text, the more the volume of work increases, but you can’t afford to hire more people!

In a nutshell, customers want to talk to businesses but businesses can’t afford to talk to customers. How odd. Why is it when you walk into a coffeeshop people know your name and they seem happy to see you, but technology companies are focused on reducing their time spent with you? This seemed broken to us, and we thought that technology could probably help, and help businesses scale.

We hunkered down to do even more research and to further our learnings, and we became the most productive agents possible. Via sheer brute force of making sure we were responding at the highest level to all customers in the way that they preferred, we were able to effect change. Customer loyalty increased, our colleagues were happier (because we were handling the 30 per cent of the tasks that were boring), and from all of the conversations we deepened our understanding of what makes customers feel satisfied.

Once we saw those results we got to work trying to figure out how to use software to automate what we had been doing manually. We took a machine learning (a kind of AI technology) approach; we had access to so much training data, and we made the machine learning tools easy to use to improve the customer experience.

When did you know that Ada would be a success?

We ran the first version of Ada software in one of the companies that we worked for at the time, but didn’t ask permission or even tell anyone. We knew we had something special, because no one noticed the difference between the software’s responses and from us responding manually.

In just eight years, Ada is now the leading provider of AI customer support chatbots, automating millions of chat-based conversations per month for clients such as Pinterest, Facebook and Verizon. We make it simple for anyone, regardless of IT skill, to build and manage an AI chatbot that solves more than 70 per cent of inquiries with personalized content, in over 100 languages.

Technology isn’t inherently valuable; it is only valuable if it solves something, and we have improved the lives of customers and customer service agents. Ada is all about AI, and I think artificial intelligence will have a more transformative effect on society than the internet itself did. With AI we are in a phase that is like the 1995 phase of the internet when no one could have possibly forecasted the breadth of it. I feel that we have a moral and social responsibility to help with that transition, and I’m excited to do that.

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ChatGPT has had the exciting impact of pulling the future into the present for most of the world. This has required a lot of education for us in a short period of time. We are now working closely with the OpenAI team: we’re going all in on using large language models [the technology behind ChatGPT] to empower brands to deliver a customer experience that is far more contextual and intelligent.

We announced a new product suite powered by generative AI on April 18 that includes voice support. We are still very much in the early innings of the worldwide customer service market. There is US$500 billion invested every year – it is hard to overestimate how much of an opportunity remains ahead of us.

Aside from the money you have committed to your company, what is in your investment portfolio?

I’m a very risky investor. Most of my net worth is in Ada, but outside of that I’m invested in 40 different Canadian tech startups via Union Capital, the operator-led angel fund I run, co-founded with Andrew Sider and Andrew Dubowec.

I’m very bullish on Canadian technology, and I started Union because I wanted to offer other founders the support that I wish I had received in Ada’s early days. The limited partners are 200 of Canada’s leading operators, essentially all of Canada’s leading technology companies. This is about being community-led – when Union backs a founder they get support.

Do you have any less risky asset classes in your investment portfolio?

Yeah, I own a bit of crypto [laughs].

What do you do for fun?

I run a lot and I read a lot. I’m training now for my next big run, the Squamish Ultra Marathon.

I read tons of different stuff, but lately our CMO has got me onto science fiction. I just read Project Hail Mary by Andy Weir and Children of Time by Adrian Tchaikovsky. Both are books about the future of the human race in an era where AI plays a much bigger role.

What have you learned about yourself most recently?

I’ve learned that in order to run faster you first have to run slowly. There are so many parallels between running and running a company!

So much of building something great is understanding that old adage, “It’s a marathon, not a sprint.” Put another way, 80 per cent of your training should be running at a pace that puts your heart rate in Zone 2, about 99 to 115 beats per minute, which tends to be a pace that feels really slow. It is critical to have the discipline and energy to be able to train for many, many years. This is true in company building as well. I work very hard but my mentality is to take the long view with my approach to discipline.

What advice would you like to pass along to the next generation of investors?

If I could go back in time and talk to the Mike of 10 years ago, I would have a discussion around the difference between attachment and commitment. Whenever I have run a company that didn’t turn out to be as successful as I thought it would be, it was largely due to me being attached to how I solved the problem as opposed to me being committed to just solving the problem.

As a founder, don’t become overly attached to how you solve the problem. Instead, become maniacally committed to solving the problem in whatever way it takes: Our customers need us to stay agile.

Responses have been lightly edited for clarity and length.

Writer Barbara Stewart is a Chartered Financial Analyst (CFA) with 30 years of investment industry experience. She spent five years as a foreign currency trader, more than two decades as a portfolio manager for high-net-worth entrepreneurs, and for the past six years she has been performing interview-driven research for financial institutions around the world.  Barbara is a keynote speaker for CFA Societies, banks, stock exchanges and industry conferences globally, and she is a columnist for CFA Institute and Canadian Money Saver magazine. She is on the advisory board of Kensington Capital Partners and also is the Ambassador for the Kensington Women’s Forum. In addition, 13 years ago Barbara saw a need to challenge outdated financial industry stereotypes and share positive messages about women and money. Today, Barbara is recognized worldwide as one of the leading researchers in women and finance. Her Rich Thinking® global research papers quote smart women and men of all ages, professions and countries and are released annually on International Women’s Day, March 8. To find out more about Barbara’s research, visit www.barbarastewart.ca.

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