Perhaps there is some subconscious part of your brain that enjoys calling customer service and navigating their phone menus to get to the right place.  Or perhaps not.

Shai Berger, co-founder and President of Fonolo (www.fonolo.com), is betting that his team’s technology will help you avoid the simple pleasure of customer service phone menus.  We talked with Shai to learn more about Fonolo, the problem they are trying to solve, their revenue generation plans and to talk more generally about developments and innovations in “voice2.0″ and to even get his views on the Toronto startup and venture capital scene.

The entire interview can be found on Fonolo’s ChubbyBrain company profile on the “Inside Info” tab which can be found here.  Excerpts of the interview with Shai are below as well, but we highly recommend you check out the company’s profile to learn more about Fonolo and to read the entire interview with Shai.

Tell us a bit about yourself, your background, what you were doing prior to Fonolo.

I’ve been an entrepreneur for a number of years.  Fonolo is actually the 3^rd startup I’m involved with.  Prior to Fonolo, I co-founded a company called StreamCheck along with the same co-founder I have today with Fonolo - a guy named Jason.  Not only is Jason back as co-founder, but the core team from StreamCheck is so essentially, we have the same group of guys who built a successful business with us last time on the job with Fonolo.

And today, the most exciting area of innovation with the internet is its collision, if you will, with the world of the telephone. Two giant behemoths - the internet and the phone system - have been slowly colliding.  It really started 10 years ago with the emergence of VoIP protocols.  But it wasn’t really interesting the first 8 years of that as VoIP was just replacing the plumbing, and although lots of us were making the phone calls using IP circuits and not knowing it, what has happened in the last few years has been the creative combination that has really started.  We’re seeing folks like Grand Central and Ooma (www.ooma.com) and Vonage (www.vonage.com) that really pushed the envelope on the way you combine these 2 things.  It is an area that is very fertile with room to innovate.

For those who are not familiar with Fonolo, can you give a brief description?

The mission statement behind Fonolo is to make it easier for customers to connect with large companies.  By large company, I mean companies with big call centers and phone menus.  The technical term for phone menu is IVR - Interactive Voice Response system - but essentially, I’m talking about the situation where you press 1 for this and 2 for that.  The companies I’m talking about are airlines, insurance companies, banks, credit card companies and healthcare providers.  Companies that as a functioning adult everyone has to deal with as part of our normal lives.  So there is a very broad demographic which we target and it’s a pain point that everyone understands immediately.  Everybody hates talking to phone menus.  I have yet to meet anyone who doesn’t despise it.  And it’s interesting since we launched this; we knew nobody liked phone menus.  That was obvious to everyone.  What we didn’t realize the extent to which people really really loathe them.  There is just a strong, visceral response to phone menus that people feel.  It’s almost rational.  It’s really not that much time out of your day, but we had an immediate very positive response to what we do.

And what we do is provide you with an alternate way to navigate and connect to the right person when you talk to these large companies.  Our solution is all about deep dialing which we invented.  Deep dialing basically lets you connect to the right spot in the menu without having to press any buttons or say any commands.  The process when you are deep dialing is that you begin with a visual map of the phone system you are calling.  You can view online or through a mobile device.  And essentially, we have transcribed the phone systems for over 500 North American companies, and you can read all the text and see it in a tree like structure and click on any point that you’d like to reach.  When you click, Fonolo contacts that company and we then ring your phone and when you answer your phone, you’re connected to the phone you want to reach.  So you’ve dialed deep into the phone menu.

The creation of the phone tree is something you’re doing via software or algorithms that you’ve created?

Right.  The most important thing to realize is that there is no partnership between Fonolo and the companies in our database.  It’s not like we went to these companies and said, “Hey can we have a copy of your phone menu.”  Even if companies wanted to do that, they could not as there are no standard protocols for publishing the structure of your IVR.  The equipment that runs these systems is in many cases very antiquated, it’s a closed system and it was never designed with the idea that anyone would want to connect with it other than through the standard phone channel.

In order to make this happen, we have built an automated phone system that maps out the phone menus so essentially, we are spidering phone space in the same way that Google spiders web space.

Can you give us some sense for the intellectual property protections, e.g., patents you have for Fonolo?

We have 4 patents in the US and internationally.  And they all revolve around this process of mapping phone menus and deep dialing.  And we think what we are doing is quite novel and quite challenging.  We’ve done a lot in terms of pushing the boundaries of speech recognition technology.  That is obviously a big part of what we do - taking the audio and turning it into text - and so that is a big part o four approach.  One of the big challenges in deep dialing is that you never know when phone menu is going to change because there is no formal connection between us and the company.  So if you want to provide a deep dialing service, you have this real problem of even if you diligently spider through the menus very frequently.  Even if you just validated the phone menu for a company even an hour ago, someone could be dialing right now, and it might have change a minute ago.  So what we do when we are navigating the phone system, we actually are listening as we navigate and at each point as we crawl our way down the tree, we are letting enough audio pass through to ensure we know that that node in the tree has not changed.  So we are processing that speech, converting to text and comparing it to our database and doing that real-time all very quickly in order to make sure we never navigate incorrectly.  And that is one of our central technical challenges.

From a customer perspective, consumers are one side of the equation.  How are you thinking about corporations whose phone menus you are spidering?  Are they going to be buying research, benchmarking?

We have actually had a lot of interest from some of the biggest companies in North America when they saw what we are doing.  They recognized that we can use the same technology to improve the experience for their callers.  So we are talking to a # of big companies about helping them on that front and using our system to improve the experience.  I cannot say too much about that as we don’t have any agreements we can make public, but that is definitely part of the company’s strategy.

You’ve noticed a couple of reviews on ChubbyBrain for Fonolo.  The consensus view is great service, gets rid of a customer pain point, but how will it make money.  The ideas from users include (1) charging users for use of the service or on the other side (2) research and consulting as we talked about as well as (3) becoming a lead generation mechanism for providers.  From a revenue model perspective, where are you going?

I think those are valid ideas.  I think your readership is very smart group of people, and we’re considering all those paths.  The consumer service will always a free level of service which I can say for certain.  We are exploring various premium services we can add on top of the current service and charge a monthly membership.

Advertising/lead generation is also an angle but I’d put that last on our list.  It is furthest down the road.  In today’s market, and just in general and just to make any amount o serious revenue from advertising, you need a tremendous amount of traffic.  I think that is a common myth with a lot of startups that advertising is a way to support any type of operation.  Other than an individual blogger, you can make some spare change with traffic.  But unless you have a major property with a huge draw, you’re not going to make the kind of money you need to sustain any kind of real team.

We have a unique ability to target ads because of the nature of our service and we’ve had some interest expressed in that and these are things we certainly will consider.  We’ll have some exciting announcements in the next quarter.

The issues in the economy.  There is not a lot of data to tell, but is there any relationship between your service’s adoption and the economic cycle?

On the consumer side, this is a pain that is always there and will continue to be there.  People need to deal with various supplier regardless of the state of the economy.

On the corporate side, in terms of helping companies make their customer experience better.  An economic downturn plays into our hand as companies definitely want to keep the customers they have and reducing churn, increasing loyalty.  And improvement to customer service is always a way to make those metrics better.

Furthermore to the extent that our technology makes call center operations more efficient and I can’t get into too much detail there, but to the extent that we make it more efficient, that translates into a cost savings, obviously in a recessionary environment, companies have a strong incentive to find cost savings wherever they can get them.  On the corporate side, the environment is playing very well into the product we are putting together.

You had some critical thoughts with reference to Google Voice in your blog so would love to get your comments about them.

I think Google Voice is a very strong offering and I was an early user of Grand Central.  I have two criticisms of them.  One is the main reason I’m not a Grand Central user which is that I cannot get a Canadian phone number.  And that is not so much their fault as it is the regulatory environment in Canada making it very difficult for services like that to be offered here.  The same reason I cannot use Ooma here even though I have an Ooma box.

By the way, in terms of things I find interesting, I find it very exciting that Ooma has released an upgrade that ties their box into Google Voice features.  And the speed with which they got it out the door - less than 2 weeks after the unveiling of Google Voice - is very very impressive.  And I think it says that although a lot of people have written off the whole Ooma idea as misdirected, but it’s definitely got some life left in it and it’s definitely taking some interesting turns.  Definitely too soon to write off Ooma.

So back to Google Voice.  #1 is this Canadian issue.  #2 is the fact that you have to get a new phone number.  Actually, #2 comes in two pieces.  A) You have to get this new phone number which is a challenge and you have to reprint your business cards and get everyone to call you on that #.  And B) is the fact that your outgoing calls don’t display the same caller ID as your Google # and that breaks a central paradigm of how we use the phone.  If I call you from my cell phone, you expect to be able to hit redial and hit me back, right?

And both of these problem (2A and 2B) are not the fault of Google Voice as they’re the result of the way the phone system is built.  And it is a central problem in the space we call Voice2.0.  It is very difficult to inject new functionality in a clean and elegant way into the voice network.  So for example, if we look at what Fonolo is doing in terms of deep dialing and visual navigation which is all very cool.  But the way we make it work is through this slightly awkward callback approach where you have to click and we have to call you back to connect the call.  And look at what Google Voice has to do.  They have this very nice set of features that they add to the voice experience, but to do it, they have to assign you a new # and break this whole caller ID paradigm.  You’ll see this with every voice2.0 innovation as we have a very difficult challenge in term so integrating with this closed system.

In terms of other startups to keep an eye, there was a very interesting announcement last month about a service called TokTok and these guys have an interesting approach to solve this voice channel problem and it is through partnering with carriers and creating an opportunity for voice driven, voice-activated services to exist on the phone line, and because it is coming from an established company selling to carriers for a long - Ditech Networks specifically - I think it’s definitely something worth watching.  And it might be a solution to this problem that we don’t have the ability to innovate on the voice channel.

And finally, a little bit about Toronto and its startup scene.  How is the scene there and what are the benefits of being situated in Toronto and what are the drawbacks from a startup perspective that you encounter?

I love Toronto as a city.  It is fantastic place to live and there is a very vibrant startup community here.  We have Mobile Monday and Wired Wednesday, and they’re always filled with really great startups.   Our number one drawback is the lack of venture capital, seed stage and otherwise.  And that is a result of #1 this isn’t Silicon Valley.  There will never be another Silicon Valley as it’s a one a kind phenomenon.  But even looking at NY or Boston, Toronto doesn’t come close to the amount of funding available.

What is sad about that is that there are a lot of great startups that reach the prototype stage but which then head south for funding reasons.  And that’s a sad thing for Canada as we’re losing a lot of good talent.  And I hope that is something we can fix.  The government for its part is doing some very interesting things.  The provincial government recently announced a $200 million for funding of startups that they ‘re going to distribute to various programs.  And hopefully our venture capital community which in the last year has disintegrated to almost zero will start to stage some sort of comeback.