Industrial SaaS is about to become the most valuable business tool ever

Next gen software will increase productivity, lower inputs and achieve environmental sustainability in face of rising global consumption

Software innovations have been coming in waves, going all the way back to the 1940s. Each generation of software has promised to be a game changer, and for the most part has delivered on that promise. This latest generation is no exception. We’re talking about the emergence of Industrial Software–the digital technology that helps big industries transform how they operate and address critical challenges for their workforce, assets, process and business functions.

How’s it different from software of generations past? Big Data. The immense growth in the volume of data and the connectivity and automation of assets on digital platforms is driving massive adoption of Industrial Software in a myriad of industrial sectors. And then there’s the cloud component. Cloud computing has become increasingly prevalent across verticals; the Industrial Software of today has evolved from on-premises, clunky and centralized offerings to smart, distributed service models. No surprise then that Industrial Software is rapidly adopting the SaaS model and becoming its own category: Industrial SaaS.

What’s especially cool about Industrial SaaS is the accelerated pace of its adoption, in large part because innovators are drawing from the experience of Enterprise SaaS. Like what? Take for example the early adoption of AI-powered analytics in some industrial verticals. While some large Enterprise SaaS companies, such as Salesforce, didn’t start to embrace Big Data until Hadoop was created in 2005, C3.ai–an early leader in Industrial SaaS–had already shifted to analytics before it went public.

There are plenty more lessons to be learned from a critical review of software evolution. You can read all about it in the full version of this blog here.

If you don’t have time for that, just know this: McRock believes that big industries are at a tipping point, facing profound economic and technological challenges and opportunities, and their big advancements are being powered by Industrial Software.

It doesn’t take a crystal ball to see the alignment of technological advancement, market demand and transformational culture shifts in the next ten years creating the best opportunities for companies and investors in this sector to invest, grow and achieve massive success. But our years of experience in navigating and succeeding in this space are certainly helping to make this vision clear.

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People are talking, and not just any people…

McRock’s Responsible Investing Report makes waves

Shell’s TechXplorer, a magazine all about scientific research and technology initiatives within the Shell portfolio featured McRock this summer. Why? For setting a new standard in digital industrial investing. Yes, there is A Right Way.

What started as a vision early in our careers became our mission, when we started McRock more than a decade ago – to change the world by investing in companies that are helping industrial operations run better, faster, cheaper, safer and with lower environmental impact. We also saw the incredible opportunity to bring more diversity to these industries. We’ve seen, first-hand, companies with more diversity in their leadership teams create more value in their sectors and perform better because of that. The way we see it–the right way is good for the world and it’s good for business.

In 2022, we raised the bar with the McRock Responsible Investment Report, where we put tangible, visible and impactful measures in place to implement our investment philosophy, for all the world to see, for us to live up to and for our industry to follow.

Thanks to Shell and TechXplorer for sharing our story. We’re proud to call you our partner.

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The sky’s the limit for SkySpecs

SkySpecs lands $80 million strategic investment

SkySpecs has some serious wind at its back following the $80 million strategic capital raise led by the Sustainable Investing business within Goldman Sachs Asset Management. The financing round also included participation from a subsidiary of NextEra Energy Resources, one of SkySpecs largest customers. SkySpecs provides service and software solutions to make renewable energy the most efficient power source in the world. The new funding will help SkySpecs accelerate the expansion of their software offerings by leveraging their existing foundation of automated high quality data collection and analytics, as well as grow its geographic footprint in order to advance its mission to optimize renewable performance and help displace fossil fuel generation.

“It’s a pivotal time for the future of renewable energy,” said Danny Ellis, CEO, SkySpecs. “The industry is constantly changing, and companies need to be equipped to grow with it. Effective asset management, and the data to achieve it, is key for future success.”

SkySpecs manages approximately 118 gigawatts of renewable energy assets across over 30 countries. The company monitors about 45% of all North American wind turbine blades, with more than 300,000 blades inspected.

McRock led the previous two financing rounds.

We’re not in Kansas anymore

Shohei Nagatsuka, Investment Team

My journey from big corporate to VC life.

I could make lots of cultural references to help illustrate the transformation I’ve experienced over the past few years. Yes, Dorothy waking up in Oz is one. How about Alice falling through the looking glass. Or more recently, Neo stepping into the Matrix.

Those help explain the sensation. It was trippy, to say the least. But what rings most true is the mantra I followed to help me adjust, and ultimately thrive, as I took an enormous professional step away from corporate life to join a VC team in Canada.

Just do it.

Yes, it is the famous phrase that everybody knows, and I’m certainly not the only one who has embraced it as a philosophy to help guide one through life’s challenging times, never mind a tough workout. But I never considered this phrase so much–from both my head and heart–as I have over the past two and a half years since joining the McRock team.

I joined McRock in November 2019. I was working in a corporate position for more than 15 years before that. You would not imagine how different life became. (Think about Dorothy, Alice and Neo.) And I cannot overstate how much my thinking had to adapt, as a result. (Cue all the other analogies about looking at something from a new perspective…like stepping into someone else’s shoes…you get the idea.)

My “old way” wasn’t bad, just different.

Before arriving in YYZ, I worked for an established corporation that had been around for more than a half a century. Their business is big. Their business is global. They have so much manpower and capital to invest. It would be easy to think they can do anything, right? Wrong. The bigger the ship, the harder it is to steer. The larger an organization becomes, the more work that is required just to operate the business. And even more effort is required to try out new things. More, more and more. It makes sense because the exposure becomes more significant, the risk greater, and the expectations higher. This is the corporate world’s inconvenient truth, and we all know it. There is a book about it if you want to read more.

Don’t get me wrong. There is a place in this global economy for big corporations. I know that to materialize something huge–like international-project-scale huge–you need big person power, you need big capital, you need corporations. They are critical to the infrastructure of our society. But I also know it’s not the only way, and there is plenty of wiggle room for the small and nimble organizations to make a big impact.

And so the corporate guy arrived in Canada, feeling more than a little scared because of the uncertainty, but ready for the challenge. There was no textbook. There were lots of new people. It was a completely new environment. The only thing I could immediately rely on was McRock’s investment team. They had brought me in for a reason and I needed to trust that they would support me through the transition.

I remember my very first meeting in McRock’s offices, and what Scott MacDonald, the co-founder and the managing partner of the firm, told me. I think it was something like, “We will throw you into the pool so you start swimming.” No, he would not physically throw me into the pool in Toronto in the middle of November. That is wrong in a humanitarian way. What he meant was, he would throw me into an environment where I had no choice but to start performing. No warm-up. No runway. I thought he was bluffing (like he is so good at poker!), but he wasn’t.

Strap in folks, we’re in for a bumpy ride!

Here’s what I immediately learned about life in VC land: Things move fast. So much faster, and with good reason. Start-ups do not have the luxury of time. They are burning cash. So VCs have to move fast. Take the risk. Do the controlled bet.

Want an example? The first in-person due diligence I participated in was just before the pandemic started in early 2020; that deal was successfully executed in a few months’ time during the pandemic, and now as we are finally coming out of the pandemic, we have successfully exited the deal. See what I mean about fast?

This was NOT how we did things in my corporate life. This was an eye-opening experience, and of course, I failed miserably many times as I was getting my feet wet. I froze during meetings. The outputs I created were completely wrong. I could not meet expectations. But the team was always supportive, and patient, so I could try again. And again.

I want to thank the team for that support and patience, for taking the risk in me, and for throwing me into the pool so I had no choice but to swim. I have learned so much already, and I’m still learning. Yes, I’m still channelling “just do it”. It is the fastest way to learn if you can stomach the risk. But I also learned at the end of the day there isn’t as much risk as you think. You will survive, it might just be scary!

And, again, I need to stress that I’m not saying either the corporate or venture capital way is better than the other. They are two different animals. I actually now strongly believe things will work better if they could co-exist. I think they can learn from each other as I did. But the challenge is how to convey this idea effectively to both.

Now let’s convince the big guy to learn from the small.

Bear with me as I invoke one more analogy. Pushing this idea of corporations learning from VCs is like a Martian trying to convince an Earthling that Mars is a better place to live. They have never been to Mars, nor ever left Earth for that matter. They know how Earth works, and that it more or less runs things smoothly. Why would they change that? But they also want more progress. And so the Martian may benefit from suggesting that Earthlings can’t achieve that without venturing into space.

What does this look like in real life? I have a vision of corporations experimenting with the smaller-scale and nimble approach of VCs. Consider starting small to test success before running head-first into full out scale-up. Yes, it may fail. But the failing will cause less damage and the learning will also be fast, and that can be channelled into the next opportunity. Ultimately, the risk and learning will lead to the faster successes, like a successful start-up does. Do the controlled bet. The corporation that can digest this idea, and ultimately adopt it organization-wide ahead of its competitors, will stay ahead in the race. Yup. Just do it.

ThoughtTrace Logo

They were here for a good time, not a long time.

Thomson Reuters to acquire ThoughtTrace

And truthfully, we can’t say we’re surprised. We saw the incredible potential in the entrepreneurial spirit behind ThoughtTrace when we invested in May 2020. It was only a matter of time before someone else saw the value in the family-business-turned-AI-startup and wanted in. Theirs is a story of hard work, adaptability, and ultimately, vision.

Ironically, Nick Vandivere’s parents, Brian and Renee, may not have realized what they were starting when they founded their business in 1990; it provided companies a way to physically manage voluminous paper-based records. And as computing technology advanced, they adapted, making a big leap into document digitization. Managing physical paper copies was becoming a thing of the past and the functionality and simplicity of searching and storing electronic documents was clearly the way of the future.

Nick didn’t immediately join the family business. He initially chose a different path as an Officer and Platoon Leader in the US Army’s 3rd Infantry Division. Twenty years after his parents founded the family business, he saw an opportunity to usher in the next technology revolution in document management–artificial intelligence–and joined the family firm. Nick’s idea was to develop AI software to unlock the secrets in contracts and documents. It would read and provide insights in the legal minutiae, saving significant amounts of time and reducing risk.

Brian and Renee embraced their son’s AI software vision (they are entrepreneurs, after all) and adapted once more. Nick took over the daily operations as CEO of the renamed business–ThoughtTrace. In 2019, McRock led the growth financing in ThoughtTrace to help the company expand its AI product offering for new vertical markets in sectors such as renewable energy.

The market paid attention. Nick’s AI-powered document understanding and contract analytics platform caught the eye of Thomson Reuters (NYSE, TSX: TRI), one of the world’s most trusted providers of answers to professionals in law, tax, compliance, government, and media. They immediately recognized the value of ThoughtTrace’s AI. Thomson Reuters has been injecting AI and machine learning into their value creation and delivery stack for years. The acquisition of ThoughtTrace will further advance their trusted insights that are at the core of how professionals get their jobs done.

Nick is beyond excited about the potential for ThoughtTrace within the Thomson Reuters family. His own family couldn’t be more proud of what he created. As for us at McRock, our journey with this amazing team was less than two years. It’s an occupational hazard, really. Backing intelligent, passionate and visionary entrepreneurs means those partners are often only here for a good time, not a long time. It’s bittersweet, but Canadian rock band Trooper was right.