Visual AI is the Next Frontier

The potential applications for AI are limitless. It’s no longer just a tool for high tech industries, though we know all about that. Just look at how it’s made its way into the mainstream. And the next big opportunity in the application of AI is visual. About 90% of data is unstructured, and much of it is visual content, like images and videos.

Andrew Ng and Landing AI are leading the charge. Again. Is anyone surprised?

We’re not – that’s why we’ve partnered with Snowflake Ventures to further invest growth capital in our portfolio company Landing AI’s computer vision capabilities. This significant partnership will enable customers to leverage Landing AI’s capabilities natively on Snowflake via Snowpark Container Services and Snowflake Native Apps to create powerful, customer-built computer vision solutions that process images and videos at scale, all within the secure, governed boundary of the data cloud.

Landing AI sees the value in using large vision models (LVMs) to process and interpret the terabytes of visual data generated every year. And we see the value their intuitive software platform brings to enterprises that leverage generative AI technology for computer vision to innovate.

Think quality inspection, robotic assembly, and defect detection in manufacturing. Drug discovery, medication inspection, and cell analysis in the pharma industry. Automated checkouts and shelf inventory checks in retail. And that’s just for starters.

We can’t wait to see what’s next for this powerful partnership!

We’ve got big news! Today we are launching the McRock Industrial Software Index—a one-of-a-kind industry tool to track the performance of companies providing software-powered solutions to industrial sectors. Surprised?

You were probably expecting to hear about another big deal closing. Or a new company we’ve added to our portfolio. While that work never stops at McRock, we’ve also been busy watching the landscape for important trends, especially the ones that reveal the greatest opportunities for value creation. If you didn’t already know it, Industrial Software is the place to be, now more than ever before. (We wrote about it the other day.) And we believe the Index will confirm it.

The Industrial Software space is a vibrant arena characterized by a dynamic interplay of competition and collaboration among various players. Notably, established Industrial Software Providers and Emerging Tech Companies play pivotal roles in shaping this landscape. The McRock Industrial Software Index focuses on publicly listed companies within these categories, serving as a benchmark for understanding industry dynamics.

There are 25 companies on the Index with a combined market cap of more than $500B:

• They are growing an average of ~23% year-over-year
• EV/Annual Revenue is tracking to over 10x
• EV/Annual EBITDA is tracking to over 46x

The industry has experienced remarkable growth; at its inception in 2012, there were only 15 companies with a total market capitalization of just over $70 billion. Since that time, an additional 10 publicly traded companies have joined the list and have pushed the total market capitalization by five times to more than $500 billion.

We’ve invested a lot to create this Index. But more than anything, it is the product of the extensive expertise and experience of the McRock team and a testament to the leadership and insight behind our investments in software-enabled solutions for industrial sectors for the past three decades.

Why share the Index now?

McRock has consistently embraced the transformative potential of digital advancements within traditional industrial markets. It’s why we founded the firm. Big industries are undergoing rapid evolution and witnessing promising growth, owing to software’s capacity to yield substantial value through digital transformation. That’s not a surprise to anyone. But despite the widespread adoption of software tools in consumer and enterprise markets over the past decade, industrial sectors were initially slow to embrace digital strategies. This trend is now shifting, and software tools are positioned to play a pivotal role in ushering in a future marked by enhanced efficiency and productivity. The gap in software-driven technological solutions in industrial sectors is finally closing. Hallelujah!

Several factors contribute to the ongoing surge in software adoption across asset-intensive and legacy industries. First, the exponential increase in data volume plays a pivotal role, as formerly unconnected assets join the online sphere, and processes undergo digitization and automation. Next, the escalating trend of virtualization of hardware, driven by technological advancements and considerations related to budget and procurement, serves as another significant catalyst. Lastly, the current trajectory of software development is marked by increasing intelligence and seamless integration, making deployment more straightforward and cost-effective than ever before. In essence, the convergence of these factors propels the continuous evolution of software applications within diverse industrial landscapes.

Although historical performance does not guarantee future outcomes (you knew that would be worked in here eventually, right?) the Industrial Software sector is well positioned to continue its growth trajectory.

We appreciate the opportunity to be a part of this continuously expanding community, and we are enthusiastically committed to offering this benchmark for the growing Industrial Software sector. Over time we will incorporate more companies into this Index as our landscape scouring and trend monitoring continues. In the meantime, grab some popcorn and watch it with us. We can’t wait to see what happens next.

McRock joins co-investors in increasing capital investment in intelligent transportation solutions leader

In case any of you doubted how much we believe in Miovision, McRock and fellow co-investors— Maverix and Telus—are making a second and final tranche in the most recent funding round with a further $36 million in capital. This brings the total investment to $296 million following the funding round announced in April 2023. The additional capital is to help Miovision meet accelerating opportunities in the marketplace.

They’re hot. So hot, in fact, that our co-founder and Miovision board member Whitney Rockley declared during a recent podcast that she “double-dog-dares anyone to try and compete against Miovision right now.”

And no wonder. The convergence of Miovision’s smart transportation technology with the demand from urban planners and the general public for safer, cleaner, more efficient infrastructure is driving interest after years of hard work, preparation, and patience. And of course, the vision of Kurtis McBride, CEO and co-founder of Miovision, who first saw the potential for data-driven traffic solutions.

The real-world application of Miovision’s solutions is what excites the market and fuels financial commitment from investors. “Miovision is bringing brains to the intersection,” says Whitney. “The company is a leader in helping cities, towns and agencies gather multimodal traffic data and deliver the kind of analytics that help their customers manage urban transportation far more effectively. They are helping solve a real challenge and we see a significant, growing opportunity for the company and its solutions.”

It’s Responsible Investing in action.

Canadian autonomous robotics rockstars ready to fly

Let’s list the many reasons this latest deal is one for the McRock success story scrapbook:

1. This marks the sixth successful strategic sale from McRock’s Digital Industrial portfolio.
2. It’s our second successful exit in 2023 and we’re only three quarters of the way through!
3. Another Canadian basement startup to international success story.

Someone grab us a tissue box because we’re bursting with tears of joy for Matt Rendall, Ryan Gariepy, Brian Webb and the team at Clearpath, and its Otto Motors division. And bravo to Rockwell Automation for recognizing the huge opportunity to take this operation to the next level. This is the kind of significant investment needed to leverage the full potential of Clearpath’s digital transformation and AI technology and scale it into the world-class robotics leader we know it should be.

McRock became an investor in Clearpath Robotics in September 2020 as part of a US$34 million Series C financing deal. Our co-founder Whitney Rockley also joined the Board at that time. Five McRock investors—Caterpillar, Mitsubishi, EDC, BDC and Kensington Capital—are also backers in the company . It takes a village to raise a robotics leader with mission-critical material handling tasks for major fortune 500 companies, including GE and Toyota.

Clearpath is automating the dullest, dirtiest and deadliest jobs

Clearpath Robotics was founded in a Kitchener, Ontario basement by four University of Waterloo grads with a vision to become the global leader in mobile robots. They built an operation that today employs around 350 people who help create safer and more efficient work environments. Their technology includes AI navigation software and robotics to allow automation of movement-based tasks in factories, warehouses and operational sites. Clearpath robots are now on the move on every continent, including possibly the world’s most hostile work environment—Antarctica.

Remember what we said in our 2021 & 2022 Responsible Investing Reports? “If the Digital Industrial had a rallying cry it would probably be ‘better, faster, cheaper, safer’.” It’s still true today, especially in light of the harsh reality that labour in North America remains scarce and more expensive than other markets, like Asia. So, the demand for automation in the industrial world has never been stronger than today. And yes, we’ll agree that Clearpath’s self-driving forklifts are totally cool. But it’s their vision for smart operations that are better, faster, cheaper and safer that made it a desirable target for acquisition. We can’t wait to see where they go next.

It’s the end of another chapter for us. But what a great book that’s being written about the many successful start-ups and tech innovators that are helping to make the world a better place for everyone.

Alex and Antoine learned early, when they are passing cookies around, take the cookie

This cookie analogy may be our favourite from all the acquisition announcements we’ve made recently. And we’ve made a few! Poka’s acquisition by IFS is sweeeet for co-founders Alex Leclerc and Antoine Bisson; it confirms their recipe for creating digital tools to optimize industrial operations was a winning one. And when this cookie presented itself—the opportunity to sell—they knew the time was right to take it.

IFS is a global supplier of cloud enterprise software. It is recognized by industry analysts as a leader in helping companies orchestrate their people, customers, and assets across Enterprise Asset Management, Field Service Management, ERP, and Enterprise Service Management in its core industries.

It may be the end of McRock’s part in this journey, but this amazing milestone represents the continuation and acceleration of Poka’s mission. With the backing of IFS, Poka now has an even stronger foundation for growth.

Alex grew up in his family’s cookie factories—for real. The Leclerc cookie company has been around for more than 100 years; he saw first-hand how inconsistent performance across the company’s operations could lead to waste and quality issues. He leapt at the chance to create a custom digital solution and invited his childhood friend Antoine, who happened to be good with computers, to help. They built a modern software solution to help factory workers collectively learn from their mistakes on the shop floor and build knowledge that would lead to continuous improvements. It worked in the cookie factory, so surely other industrial businesses could benefit from this, too.

Next thing they knew, they were entrepreneurs.

The name Poka comes from Poka Yoke, the Japanese term for mistake proofing

The secret ingredient in Alex and Antoine’s success with Poka was recognizing opportunity when it appeared and seizing it—whether it was the initial opportunity to commercialize their internal tool or to accept financial help and guidance from investors like McRock to build the business into what it is today.

We also pride ourselves in having learned to take the cookie when they are being passed around. For us, one of the best cookies was embracing the importance of capturing the human workforce as part of the Digital Industrial Revolution and the opportunity it creates for the investment community. When we closed our most recent venture fund—McRock Fund II—in the summer of 2019, we went deep to identify the best emerging companies in the connected worker space. We found Poka and invested in 2021. Two years on, connected factory worker solutions are in strong demand and the number of privately held tech companies in the space are becoming scarce.

We are also proud to have contributed more than capital to the Poka venture. These relationships are what drive us to show up every day; watching leaders like Alex and Antoine thrive is why we chose to build McRock differently from other VC firms.

“Words cannot express how grateful we are to have had you as investors on our wild journey,” says Alex. “Your unwavering support, guidance, and belief in our vision have been game-changers for us. You’ve gone beyond just throwing in cash; you’ve shared your wisdom, experience, and expertise every step of the way. Your passion and genuine care for our entrepreneurs and your own team makes McRock really special.”

Well gosh…

Alex and the team built Poka with a goal to help their manufacturing clients turn every production problem on the factory floor into an opportunity to build collective knowledge, learn, and improve. That’s a philosophy the McRock team could easily get behind, and we’re thrilled to have assisted another Digital Industrial company taste sweet success.