Providing Further Growth Capital for the AI-Powered Document Intelligence Company

Since McRock led the Series B investment in Texas-based ThoughtTrace back in May of 2020, the company has achieved strong growth. As predicted at the time of the initial investment, renewable energy has become a significant vertical market expansion opportunity for the company.

McRock’s investment thesis around digitizing a physical asset, such as a wind farm, is that to maximize the full value of digital asset management, every aspect related to the physical infrastructure needs to be translated into data so machine learning software can be applied. In the case of the wind farm, this also includes the management of the various written contracts that govern the asset such as land agreements, power purchase agreements, interconnection agreements, insurance, and OEM warranties.

ThoughtTrace’s AI-powered Document Intelligence platform reduces wind and solar operating costs through digitalization, starting with the documents that govern these power assets. In addition to massive productivity gains, customers that have harnessed the software platform have drastically reduced OPEX, minimized corporate risk, and even discovered new opportunities worth millions to the bottom line.

McRock has invested a further $1.2 million bringing our total investment into ThoughtTrace since May 2020 to $7.2 million. The additional investment will be used to accelerate the expansion of the sales team.

At the heart of McRock’s investment strategy is the importance of human-machine collaboration. Robotics and self-improving automation are key pillars of the significant advancement that will occur in the Industrial IoT over the next decade. To further McRock’s leadership in the Robotics sector, we have led the US$33 million Series B financing in San Antonio, Texas-based Plus One Robotics Inc.

Plus One’s mission is to bring industrial robotics into the warehouse. Founded in 2016 by some of the smartest minds in the robotics sector, the company has quickly become the leading provider of vision software for logistics robots. Plus One’s 3D and AI-powered perception software, PickOne, works with any robot arm, gripper, and cloud service to deliver precise hand-eye coordination enabling robots to perform a range of warehouse tasks.

The human-machine collaboration is managed by Yonder, Plus One’s robot supervision software. The system leverages human intelligence to handle exceptions for the variety of items passing from dock to door. One human, or Crew Chief, currently manage up to 50 robots remotely, allowing companies to meet the demands of the 24/7 consumer. This critical collaboration between human and machine is the essence of Plus One Robotics where “plus one” in the company’s name is the human. The Crew Chief prevents the robot from stopping when it encounters a challenging pick and the human’s decision is used to train the AI so the robot knows exactly what to do the next time the same challenge is encountered. Over time, the robot will need less human instruction and each Crew Chief will be able to oversee an increasing number of robots. Plus One’s slogan is “Robots Work, People Rule”.

Other investors in the financing round include McRock’s Limited Partner Kensington Capital as well as TransLink Ventures, BMWi Ventures and Ironspring Ventures. McRock’s Co-founder and Managing Partner, Whitney Rockley, has joined Plus One’s Board of Directors and Vice President, Siddharth Srivastava has joined the Board as an observer.

In September 2020, McRock participated in Clearpath Robotics’ US$34 million Series C financing. Clearpath and its OTTO Motors division, enable the world’s largest companies to create safer and more productive workplaces with autonomous mobile robots (AMR). Clearpath Robotics are the feet and Plus One Robotics are the hands in a warehouse.

Backs Leading European Micromobility Company Dott

Eco-friendly microbility as a tool for reducing the climate impact of urban transportation is not new. What is new and unique, however, is the profitable, IoT-enabled operations model developed by Dott, separating Dott from the pack of overfunded competitors.

Headquartered in Amsterdam, The Netherlands, Dott was founded in 2018 by Henri Moissinac and Maxim Romain, with the mission to transform city travel with clean rides for everyone.

Currently operating in top cities in Belgium, France, Germany, Italy and Poland, Dott in three short years has grown into one of the leading players in Europe, with a live fleet of more than 30,000 e-scooters in 5 countries. As if that isn’t enough, in July 2020, Dott won two of the biggest micromobility tenders in the world, ranking first both in Paris and in Lyon.

McRock recognized the data-driven set of differentiators developed by the Dott team setting them apart from others in the industry. With a fraction of the capital raised by peers, Dott built large, dominant and profitable strongholds in highly prized micromobility markets in Europe, managing 100% of operations in-house since day one. Behind the scenes, the Dott Operating System brings increased safety, stronger reliability for the city, a much better overall user experience and industry-leading unit economics. Dott has been EBIT positive across all cities, even during COVID lockdowns. Lastly, the focus on sustainability is measurable. By reducing its carbon footprint across the entire lifecycle of vehicles – from the supply chain (using the most durable hardware) to street operations (swappable batteries, renewable energy, electric fleet for logistics) to end-of-life processes (“repair, reuse, recycle”) – the company has driven a 56% reduction in CO2 emissions over the past 12 months. When they say: Small ride. Big change, They mean it.

McRock participated in Dott’s $85 million Series B funding round alongside several new and existing investors including Sofina, Estari, EQT Ventures, Prosus Ventures, Aberdeen Standard Investments, Expon Capital, Felix Capital, FJ Labs, Invest-NL, and Quadia.

The financing will support Dott going multi-model, launching new micromobility vehicles to European cities, starting with e-bikes in summer 2021. The company will also expand its services into new countries including Spain and the UK.

If you are in Europe and see a Dott e-scooter or e-bike, give it a spin. It’s a small ride for big change.

In this case, just a name and SUPER cool, never-before-seen career accomplishments

This is the story of SkySpecs, the world’s largest provider of autonomous drone inspection services. And where McRock chose to lead $10 Million follow-on financing

The SkySpecs journey began in 2009 when a group of engineering students at the University of Michigan, including one Tom Brady, volunteered on a robotics research project. At graduation in 2012, Brady and some of his classmates co-founded SkySpecs.

Their first obsession – build an anticollision system for drones so they could fly autonomously. With just the push of a button, an industrial-grade drone with a navigation system and a camera would take off quickly and safely perform an inspection of a difficult-to-access machine, building or other infrastructure asset.

This killer app is no seven Super Bowl titles, but it did change the world, in the rapidly growing wind energy sector.

• Wind turbines are tall – as tall as a 32-story building (over 300 feet)
• Located in remote locations and sometimes at sea making human inspection even more dangerous

Until SkySpecs, traditional inspections were done by specialists climbing up and down ropes all day. Today, the SkySpecs fleet of drones quickly, safely and cost effectively captures digital details on damages to the turbine blades. Fixing damages before catastrophic failures of the turbine blades keeps the power flowing. Yes, blades sometimes just snap and drop to the ground.

SkySpecs , now the largest provider of this specialized service, has inspected approximately 30,000 wind turbines in countries around the world.

Close to 90% of new electricity generation capacity in 2020 came from renewable sources with just 10% now powered by gas and coal. This trend puts green electricity on track to become the largest power source by 2025, dethroning coal, which dominated for the past 50 years.

As the world looks to tackle the climate crisis, renewable wind energy is growing increasingly attractive to investors. The number of wind assets changing hands between financial investors, the due diligence of existing wind turbine portfolios and investment decisions into new projects are all predicated on analysis of the overall ‘health’ of a wind farm.  SkySpecs plays a critical role in this environment.

To further SkySpecs growth as the leading digital asset management platform for wind energy, McRock Capital led a US$10 million follow-on financing in February 2021 with participation from Statkraft Ventures, Equinor Energy Ventures, Evergy Ventures, UL Labs, Capital Midwest and Huron River Ventures.

I don’t know about you, but we get way more excited about this Tom Brady’s touchdown for renewable energy and the impact it has on planet earth. Seven Super Bowls is pretty cool too.

The year 2020 was a historic year. While the ongoing global pandemic stayed in the headlines through most of the year, many other social, political, and economic events made a major mark in the history books. As these major events upended markets and economies world over, tech companies and their largest shareholders raised billions of dollars in the public and private markets. This was an unusual turn of events and was unlike anything that we have witnessed in other economic slowdowns of the past. So, what is the difference this time around?

While there are many factors that fueled the Initial Public Offering (IPO) frenzy, we believe this was the first-time investors looked beyond the uncertainty caused by the pandemic and towards solutions. Extended lockdowns and a shortage of human workforce made a compelling case for automation and digitization across all industrial market verticals, including those that have been historically reticent to adopt.  What we discovered over the past year was that any underlying technology that accelerates digitization commands a massive premium.

During the second half of 2020, we saw many high-profile companies like Airbnb, Palantir, Doordash and Snowflake go public. As this IPO frenzy continued, one industrial AI company which we have been tracking prepared to go public. This, of course, is C3.ai, led by the billionaire tech entrepreneur Tom Siebel.

There is enough pre- and post-IPO analysis on C3 available so we will stay away from repeating any of that good intelligence. Rather, lets focus on the lessons that could be valuable to other Industrial AI start ups.

Lesson 1: Scale = Partnerships + Reference Customers

By the end of FY20 (ending April 30, 2020), C3.ai generated $156.7 M in revenue alongside of a 71% YoY growth rate. A major revenue driver for C3 was, and continues to be, its strategic partnerships. For instance, its partnership with Baker Hughes, the large oil and gas services company, is both a customer, investor and a partner to C3.ai. It represents $51 M of C3’s total $157M revenue ($39.5M as a customer and $11.5M as a reseller) and as we learnt in their recent Q3-21 earnings call this partnership is set to bring $450M in revenues over the next five years. C3 has entered other strategic partnerships in defense (Raytheon), and tech (IBM, AWS, Google, and Microsoft), which has helped them scale.

When it comes to reference customers, C3 has been focused on large fortune 500 customers in each of its verticals like Shell, 3M, U.S. Airforce, AstraZeneca, and others.

Now, we all can acknowledge that attracting strong partners and large customers is hard. But how did C3 manage to do it? They realised early on that skills have “gravity” and so they invested in training and education.  Once they trained a partner, a system integrator, or a customer on how to use their solutions, the solution got sticky making it hard for them to switch. So, help your customers unlock that black box of analytics and empower them to understand it.

Lesson 2: Land + small Level-Of-Effort = Expand

Land and expand strategies are very common with industrial customers although executing on them is hard.  In case of C3, the average ACV jumped from $1.2M in 2016 to $12.1M in 2020. With an average 3-year contract, they made ~$4M per contract per year, which is impressive.

For an AI company, the difference between land & expand versus land & flat comes from the level of effort the customer must spend rolling out the solution. If a customer must lend its domain expertise for months or years to train your models, then the time-to-value for them is too long to stay invested. In the case of fortune 500 customers, those large organizations will often have challenges integrating siloed data streams that are required to hydrate your models. C3 has done a fairly good job in attracting talent which has helped them build internal domain expertise and reduce dependency on its customers. They also do a decent job in setting customer expectations on time to deployment.

In a nutshell, the simpler and more transparent you make it for your customers to realize value, the easier it gets to expand those customer accounts.

Lesson 3: Platform + Applications rather than Platform vs Applications

Founders that are building an AIoT platforms for enterprises invariably face the question of whether they should offer apps to customers.  To be clear, these applications serve as a marketplace of pre-trained AI models that can be applied to a particular problem across different customer accounts in a vertical. All major cloud service providers have such marketplaces, but the jury is still out on whether they have been successful. Today, C3 offers its customers the C3 AI Suite (a platform) and C3 AI applications (the pre-trained models).

Industrial customers look for feature proximity when they engage a technology vendor. Prospecting, selecting, and onboarding each vendor is an expensive and time-consuming exercise for them. So, if they are deploying an enterprise AI platform, they need to be smart and selective as to the number of application vendors it works with. While it is unclear what percentage of C3’s recurring revenue comes from its platform vs applications, it certainly allows its customers to quickly deploy pre-trained models to standard challenges across industries. This approach works well for specialized application vendors too, as they can focus on solving specific use cases without being dragged into solving relatively easier problems.

Bottomline is that if you are a platform vendor, think about the standard challenges your customer faces and solve those head-on with applications.

Lesson 4: Software + Services = AI

The jury is still out on whether we can have industrial AI companies with no professional services. While it does not appear obvious, it is important to limit your professional services revenue. This is because the positive impact comes at a cost (literally). When you continue to expand your professional services revenue, your gross margins can take an unnecessary hit, which is not a great place to be when talking to investors and acquirers. For C3, revenue from professional services includes the fees associated with the implementation of C3 AI Applications. In FY20, professional services represented just 14% of their total $157M revenue. C3 controls its services revenue in two ways. First, it partners with system integrators like IBM who can deploy their solution and secondly, it trains customers to build and deploy AI models in production by themselves.

While the exact same approach may not work for other AI companies as enterprise adoption in antiquated verticals still has a long way to go, but with focus on your core product you are likely to grow profitably.

So, are you building the next big thing in the Industrial AI world?

For years, the Industrial AI software industry has been looking for a posterchild, a company that could be held up as an example of a high-growth business with a large scale that solved urgent customer pain points and made money for its investors along that way. C3 was well positioned to grab that spot and in a flash has turned a once unremarkable sector to the public market investors into a space worth their attention and money. For now, C3 is that posterchild, but this is just the beginning as there are so many industrial customers and use cases that can benefit from innovative solutions driven by technology & AI.