Artificial intelligence startup Palona AI, which is building an intelligence operating layer for physical businesses, is ready to show what it can do after closing on a $20 million round of early-stage funding today.

The Series A round, which included converted simple agreements for future equity, was led by Ardenwood Ventures and saw participation from CrimsonOx, UpHonest, Turbo, Llama Ventures, Neo, Fusion Fund, Defy and Maynard Webb.

Palona AI, officially incorporated as Proactive AI Lab Inc., launched out of stealth in January 2025 when it raised $10 million in seed funding. At the time, it presented itself as a developer of ultra-reliable customer service chatbots that don’t suffer from so-called hallucinations.

But the company secretly had much bigger ambitions than simply fielding customer calls. Instead, it has built a multimodal agentic operating layer that’s able to understand what’s going on in a physical business in real time and coordinate actions across frontline teams, existing software systems and AI agents.

At the core of Palona’s technology stack is a “capture, understand, act, learn” system. It leverages the startup’s proprietary and patented Interaction Model for Physical AI, which combines vision AI and object detection capabilities to understand how people, places, objects and processes interact over time. By using this spatial, temporal and semantic context, Palona AI can work out exactly what is happening in a physical location, decide if immediate action is required and determine which workflow should follow.

This can provide business owners with tons of benefits, the startup says. It’s targeting restaurants first as a kind of proof-of-concept with a product suite that includes Revenue Expansion, Revenue Intelligence and Operations Intelligence. Each of these tools comes with specialized autonomous AI agents that help to automate various business operations.

For instance, there’s an ordering agent that can take missed phone calls and route orders directly to a restaurant’s point-of-sale system. There’s also a catering agent that can deal with inquiries.

Meanwhile, Palona’s Operations Intelligence tool connects to a restaurant’s security cameras in order to monitor the premises in real time to ensure food safety and cleanliness. If there’s any kind of problem, such as a customer not being served or a waiter dropping plates onto the floor, it will instantly send an alert to the restaurant manager so they can get it dealt with.

Palona founder and Chief Executive Maria Zhang said physical businesses have so far been left behind by the AI revolution, because they need AI systems that can understand what is happening and take actions in real time. “Palona turns demand, operational context and live signals into actions that drive revenue, quality and execution,” she said.

The startup’s technology has already been deployed at the Cali BBQ restaurant chain, where it has had a measurable impact on operational efficiency. For instance, Palona claims that it helped the restaurant to increase its revenue on Father’s Day by more than 20% year-over-year. It has also become the restaurant’s most valuable sales channel, capturing lucrative catering orders that would otherwise have been missed.

“Before Palona, calls we couldn’t answer represented demand we couldn’t capture,” said Cali BBQ CEO Shawn Walchef. “Now we’re converting more of those conversations into orders and identifying catering opportunities we previously had no dedicated process to manage. For an operator, that’s where AI becomes real. It creates measurable revenue while helping the team execute better.”

While restaurants are the initial testing ground for Palona, it believes that its technology can be helpful in just about any physical business where frontline teams interact with customers on a daily basis, including hotels, shopping malls and entertainment venues.

Photos: Palona AI