UILabs recently hosted a panel of IoT experts to discuss the future roadmap for IoT. I moderated the discussion and the panel included:
- Ben Forgan, CEO of Hologram
- Brenna Berman, Executive Director of City Digital, UI Labs
- Jenny Fielding, Managing Director, Techstars IoT
- Jim Gagnard, CEO of SmartSignal (acquired by GE) and Chairman of the Illinois Technology Association
- Ty Findley, Senior Associate at Pritzker Group Venture Capital
During the discussion, we addressed the following:
- The “inning” or stage of maturity that IoT is at
- The smart home and what the winners will look like in the space
- How investors assess consumer vs enterprise IoT and suggestions for entrepreneurs with applications for each
- Investor thoughts on the metrics they evaluate for IoT vs. other horizontals like SaaS
- The key opportunities at different levels in the IoT tech stack
- The key barriers to mass IoT proliferation and what’s limiting IoT
- Thoughts on security for IoT and the role of government
- Wrap up w/ Q&A from audience members
UI Labs: Alright, if everyone can come in and sit down, that would be awesome. We’re running a little bit late. Alright! So I want to start by welcoming everyone to #UI Labs. A lot of people are familiar faces who have been here before. A lot of new faces. This is our first sort of formal startup event at #UI Labs. For those of you who don’t know what we do, just very quickly, from a startup perspective, we are a test bed and we have two labs. One is focused on manufacturing. We’re building a future factory on the factory floor. It is going to be a real, a real factory line and we welcome startups to come and hack the line, showcase their products, try and improve production. And we’ve got a great team. If you break something, we’ll fix it. On the other side we have a city lab. We are in the fortunate and unique position to have a relationship with the city of Chicago. So if you’re a startup that can make a building smarter or can make infrastructure smarter in any way, come work with us and you can test your products and showcase your products in the city. So one last thing that we’re doing is we are starting to rent desks. We’re looking for specific types of startups. And I think the way, the emblematic way to describe that is if you are a business guy, it’s 400 bucks a month. If you code, it’s 300 bucks a month. So we, we want to be the place where serious startups come to harden their products, to work with our network, to find customers and to hopefully help the Chicago ecosystem. So I want to thank the #IoT Council and #Techstars IoT for a great day today and hopefully a great event. And I don’t know who I’m handing the mic to. That’s easy enough.
Nick: Okay. Welcome! Let’s talk some IoT. But first, some introductions. So I’m #Nick Moran. I am the host of #The Full Ratchet. It is the, the very first venture capital podcast, also the best rated. It’s been around for about 3 years. And this will be published to the platform. I am also General Partner at #New Stack Ventures. We are an IoT pre-seed focused venture capital firm based here in Chicago.
Jim: #Jim Gagnard, sort of retired tech company’s CEO. I have been in IoT when it was called M2M back in the late 90s before the great bubble burst. Some of you might have read that in history books, I’m not sure. I am still involved with a number of tech companies that are involved in IoT. And look forward to have an interesting chat about the, the next great platform in technology.
Ben : Hey, I’m #Ben Forgan, CEO of #Hologram. We are providing cellular connectivity for internet of things devices as well as cloud and security tools to manage those things once they’re online. So I’m very familiar with the, the concept of M2M. I think, think yeah, M2M, IoT’s been around for a while. It’s just called M2M actually. Yeah. But yeah, so that’s me. Anyways, so I’ll stop talking.
Brenna: I’m #Brenna Berman. I’m the Executive Director here of #City Digital, which is an IoT infrastructure lab. I’m also the coach here of the midwest IoT Council, working with #Jim on that, focusing on bringing IoT here to the midwest to drive an economic growth.
Jenny: Hey, I’m #Jenny Fielding. I’m the Managing Director of #Techstars. You’ve just met my 12 amazing companies, and we’ve been here in Chicago all week visiting and just loving all the incredible resources and the warm welcome we’ve got.
Ty: #Ty Findley, I’m with the #Pritzker Group Venture Capital team. We are the largest midwest VC out here. And we certainly over a 20+ year history founding are funding over 200 entrepreneurs. Believe strongly in the Chicago tech ecosystem and, and IoT is certainly an area of interest for us. Specific to my area of focus is more around industrial IoT events manufacturing and #SightMachine and #Augury are a couple examples of that. But thanks for having me. Look forward to the chat.
Nick: Good, alright! Let’s talk some IoT. So, #Ben, I’m going to start with you. New portfolio company of ours, happy to make an investment in #Hologram. So we’ve been hearing about IoT for decades, I have, in various different forms, various different titles. but where do you think we’re at? You know, we’ve seen a reduction in sensor cost, computing cost, networking cost. You’re a part of that I think. But where do you think we’re at in sort of the life cycle and the evolution of IoT?
Ben: So yeah, I mean, I mean I think that, I believe if we’re to phrase it in like innings, I would say somewhere in like the 3rd inning, you know. It’s, if you think about technology waves and, and IoT is certainly a really, really big one. And you know, they tend to crest and then you can ride them down. I think that, you know, 2012-2013 people were starting to understand that this was something that was potentially transformative and not really doing a whole lot about it. I think now there’s still a challenge to actually connect things to the internet. And, and so I think that over the next couple of years as you see those costs fall, you’ll see more and more things connected and we’ll really hit like a sweet spot. So yeah, I would say staunchly like, you know, early-middle.
Nick: #Brenna, any thoughts?
Brenna: Yeah, I know, I think that’s right. And I think part of why it’s early is that a lot of industries, certainly cities, which is where I work, and communities there, there’s people finally getting excited about the use cases, about the actual value that they can be created. So, in my early work it was, you know, a lot of focus on the technology and the excitement of bringing a technology to life. But there wasn’t a lot of realization of the value that that could create for the, the average resident. In my case, walking down the street and making their life easier. And now we see those use cases coming to life. And that I think makes all the difference.
Jenny: I mean we’ve been investing at #Techstars in IoT for over 10 years. So we’ve seen kind of the waves. And I think as you mentioned like 2012 maybe we hit the kind of the, the top of the hype cycle special in consumer. But as, as this gentleman mentioned, it’s been around for a long time. And people are just kind of just renaming it, right? So I, I think we’re pretty far along. And still a lot of open open space to go. But, yeah.
Ty : I would just tag in here. #Jim alluded to it right. In the manufacturing setting you go back to the late 60s, with #Dick Morley putting the logic controllers on the factory floor. So the physics remain the same, sensors sending data to some hub, where we make analytical meaning out of it. I kind of when we have these change I look at it more of a we’re at an industry ford auto in selection of digital at scale. And what, what that means from seeing it both in the, the #GE Ventures perspective as well now as with the #Pritzker Group, the amount of data as you have mentioned, #Nick, that’s coming off the factory floor. We’re just now in the early innings, of actually the pipes and the infrastructure, just extract it, clean it, model it, and even get it ready for the, the highest level of analytical meaning. We’re still trying to, to get to that point where we can really use it for itself. But there’s an enormous amount of value out there for sure.
Jim: I think of things in terms of technology platforms and the, the internet of things is going to be the fabric of what I call the information society. And if you think the internet was pervasive, the internet of things is going to be quantumly just ahead of that. And that’s going to create phenomenal opportunities, a tremendous amount of experimentation, and it will be interesting to see how that plays out.
Nick: Alright, let’s, let’s talk about a tangible application here. So smart homes. I was fortunate to just set up a drop cam, a nest cam, in my house for my newborn. I’d like to hear your thoughts on the smart home, different things that are happening in that sector, and, you know, impact and winners in the space as you see it. Anyone’s free to open.
Ben: Alright, yeah. I don’t know, You know, honestly I don’t, so we, we deal mostly in cellular. So I, I don’t see a whole lot of smart homes stuff. And I actually think that the bulk of IoT will be commercial and industrial. And smart home is, it’s interesting but not necessarily where a lot of the action will take place. Like old school M2M stuff is still significantly more pervasive. But, that being said, I do think it is interesting to speculate. If I had to pick a winner, I was thinking about it like I think I would pick #Amazon, mainly because, you know, now with like their #Whole Foods acquisition and stuff, we’re all going to be, you know, Prime citizens, fed Prime meals by #Jeff Bezos and so on. And yeah, I, I don’t really know, but that’s probably my best guess.
Jenny: I don’t really have an answer to the question, but, you know, people mostly saying, you know, the smart home is the dumb home. And I think, you know, until we sort out security issues and kind of inter op ability, there’s just not going to be a seamless solution. So #Amazon is, you know, maybe going towards one angle and solving, you know, a part of it. But I think there’s a lot that needs to be sorted out.
Ben: I think the economics of it are going to be a big deal. If you think about it. I mean, how do you add cost to all the devices in a home that you might want to have as part of the system. And the other thing is just standards. I think there’s still going to be room for standards too. I know there’s plenty of inter operability now, but like somebody once said standards are a good thing, everybody ought to have one. So.
Nick: Alright, a question for the investors here, #Ty, #Jenny. So what do you guys look at when you’re evaluating metrics as well as sort of key success factors with consumer based IoT versus enterprise?
Ty: I’ll take it. So in a enterprise, so, you know, it certainly doesn’t start with the technology. I’m very much going to look at the team first and foremost, and a couple of reference, right. That domain specific knowledge means a lot to me, looking at industrial type of applications. Because it is an emerging industry. And it’s, it’s going to take some fighting through those new launches actually to bring that product to scale within an organization. So, you know, if you look at some of the metrics below that, right, you, you would look at revenue and, and bookings growth month over month, all of that stuff. But there are certainly a lot of hardware plus software players out there. And with the nuance of adding that hardware component, you certainly, I want to see, you know, cash efficiency and how you’re, how you’re ultimately going to scale into where you want that hardware to be a platform for software recurring revenues, is usually what I’m looking for. You know, somewhere on the order of magnitude of the million in IRR is ultimately where I will start to say I think I’m seeing that product market fit. So, so a few things that I think about and ultimately I, I certainly would also want to see that product really start to find what it’s market focus is. Because I think again as much nuance as between the oil and gas industry versus, you know, power and water, there are certainly domain specific nuances that it’s not as easy as people think to just take a generalized IoT platform or product for that matter, and just roll the markets. I really like when people dig in and really try to become specific to one vertical or the other.
Jenny: So with consumer, you know, you have to surprise and delight the user, right? And so I think that’s been on the first wave of, of IoT devices has been lacking a little bit. And so one thing that we look for, invested in a connected lot company, they kind of watched the first wave. They watched the augusts and everyone else and took a very different approach. So we’re looking at the pre-seed level, less around metrics and more around team. And so very product focused team who’s been able to kind of watch and learn, is, is really what we’re looking for.
Nick: You know, there seems to be a lot more metric publications and, and information on SaaS companies. Do you use SaaS methodologies and, and SaaS metrics when evaluating an IoT company with a recurring revenue stream?
Ty: I would say it’s really hard to do that. And specially again in my industry focus around manufacturing and industrial, we, you know, we’re just looking for some initial market traction, right? It’s not like we’re going to find a T2D3 company. If you look at Bessemer metrics, it’s just on this wild curve because if, if we go back again to how I think that we’re really just not getting the infrastructure build out for these different technologies to scale within a big industrial enterprise. I think you’re really looking at, I see a pilot with that company in that company. And I’m, I very much appreciate that and I see where you’re going. I’m equally going to evaluate that company you have a pilot with and infrastructure that they have built around their future thoughts and enterprise IoT. Because one or two pilots does not scale an enterprise unless the enterprise first has it’s act together. So I would say back to your question, it’s really, really hard to put it up against the SaaS, you know, type scale.
Jenny: I would add, so I just helped an industrial IoT company raise their series B, and all the metrics I’d say were looked more like series A. So MRR was high but things like margins and, you know, other, other metrics that you’d look like. So I always call them kind of like they’re in their teenage years, right. They’re not quite up to what series B metrics would be. They were, you know, maybe A and a half. So I think you, there’s a lot of leverage that’s or leeway that’s given when people are raising money at the, at those stages. That’s been my experience.
Nick: For those that don’t know T2D3, triple twice double three times, in the first 5 years.
Ty: Yeah, I mean, I think the narrative here is if you hit a million in IRR, we’re hoping that you go on some crazy rocket ship adventure called Bessemer land where you triple your earnings or your revenues twice, and then you double it the next three years, and you’re magically at a 100 million in revenue. So hardware, as my colleague here mentioned, there’s margins to be looked at. And we want to watch this progress. And it’s definitely different than a software based SaaS model. So.
Nick: Good. Alright. So a question for some of the non-investors up here. If you’re working with entrepreneurs and/or coaching entrepreneurs that have an IoT technology with both consumer and enterprise applications, what advice would you have for them on where to focus and how to find sort of that initial traction and, and market fit?
Jim: Well I’ve spent most of my time on the industrial side. And I think you’re going to see the companies that do well are going to focus, the value is going to be more as you move up the technology stack rather than down. Not to say there aren’t good businesses down at the device and hardware side, but there’s going to be a lot more value generated as you move up into analytics and applications and so forth. So with an industrial, I just had a meeting a couple weeks ago and the entrepreneur said well, I think I’m thinking of going after these five industries. And I said why? I mean, what are you learning from five industries. I mean, you’ve, you’ve got to focus if you’re going to deliver analytics you’re going to see a lot of fragmentation I believe. And then you’re going to see things roll up at some point in time. I don’t know if it’s going to be five years from now. But all these analytics players and platform players somewhat survive obviously. But they’re going to roll up. So I’m looking for somebody to focus and win something, okay, where you can deliver real value in an IoT environment. The thing I would argue against, call me scarred by a previous experience, is it’s not just about the data, okay. Really. I mean, you, you’ve got, it’s what you do with the data that matters.
Brenna: I think #Jim’s last point is a really important one, is that specially in the, the city space, we have a lot of IoT companies coming at cities that, that do have that focus if it’s about the data, give us your data, we’ll monetize your data. And actually, the data actually isn’t it. And specially for cities that are making their data public, it’s about the insights and the business value of the data. And if you don’t have that focus of where to deliver the value, you’re going to lose the traction.
Nick: Any other thoughts, other panelists?
Ty: I think, I mean we’ve had some of this conversation, right? To #Jim’s point, you’ve got to figure out, not, not just, you know, what specific domain as we talked about a couple times, where in the tech stack do you fit? And again I’ll go back to the fact that the kind of the salt and pepper is an analogy something my former colleagues have used around, the extraction, the, the modeling of the data, getting it cleaned in the right setting. How much of the stack do you bite off so that you think you ultimately enable yourself to provide the analytic, that is a non trivial portion to do the bottom part behind the scenes of the stack. But there are novel companies, and I think #Ben you fit in this category, that’s using it a certain way to wedge yourself into where you then have your own set of data no one else does. That’s pretty interesting. But it is certainly impressive to go after the, the full meal deal.
Jim: So I did a little homework exercise here. As part of the IoT council, I am the, I run the, the teams that try to keep the inventory of all the near midwest companies that are IoT companies, do all the case studies, investigate research projects in IoT. And I said well, I got this tech stack, and you can find it on the ITA website, but we’ve got a tech stack of IoT companies. I think we’ve got about 120 to 130 identified in the near midwest. But I took the 12 companies that were #Techstars and as close as I could, some of you founders might argue with the bucket I put you in. But essentially you’re spread across the whole tech stack. Put them down at the device hardware side all the way up to the application. You know, you make a choice, you focus. I would argue that you probably, unless you’ve got one hell of a lot of money, you’re probably not going to cover a lot of sections of the stack.
Nick: #Jim, where do you see some of the biggest opportunities in the stack, from your standpoint?
Jim: I really do believe, let me give you an example. A friend of mine’s invested in a what would sound like a truly boring analytics company. Okay? What do they do? All they do is simple analytics on storm water waste systems around the US. That is it. That is all they do. There are a 100,000 storm water waste systems in the United States. I mean, this is boring as a box of rocks. Okay? But think of the leverage they can get from everything they’ve learned there and somebody’s going to roll that up. So again, I think it’s a find a way to, to win off your knowledge. We talk about domain knowledge, we kind of throw domain knowledge around. But it’s learning the pain that the space you’re dealing with has and being able to show them what they really get out of it. So I think industrial has a long way to go. I think heath care could be phenomenal but I’m kind of in the middle of helping a healthcare company now. And has anybody ever dealt with the technology side of health care? It is, it’s challenging. But I, I think heath care can be huge. There’s a lot going on in tele health. Actually a company that uses some of the technology from my last company has been working at it for 9 years to get to the point where they can leverage tele health in the home. And I think they’re going to get a, a tremendous home run. But on the health care side, you have to be patient. Nothing moves quickly in health care. Industrial I think you can move a lot more quickly. I’m not that knowledgeable about smart cities.
Nick: Maybe we’ll start with, with #Jenny on this one. What do you think are some of the key factors that are limiting progress and/or proliferation of, of IoT, and how do you think those things will be addressed?
Jenny: Well, I think for a long time it was, you know, capital in the system. And, you know, innovative companies. And I think that’s really changing. So I guess my answer being someone that’s invested in seventy startups, many of them IoT, is that, you know, the innovation and the future is sitting in this room. And that’s going to make it’s way into large corporates that are also in this room. So.
Nick: Got to move earlier, #Ty.
Ty: I’m trying, I’m trying! That’s why you partner up with Techstars. I would say that i usually come down to five things, honestly. The first of which is just straight up integration, right? You are taking your industrial technology into sometimes the most gnarly frankenstein set of software that you could possibly imagine. So I often see that underestimated in terms of actually getting your lights on to your solution. The second one would be security. And I probably don’t need to go into too much detail because everyone here understands, right. There are still PLCs out there running on Modbus protocols, that is just shocking. We get national infrastructure that relies on this stuff. So, so maturity there. Business model wise, CAPEX to OPEX is something we always talk about. I want to go sell you my robot as a service, we’ll use that as an example. The people you’re selling in to, I have seen it time and time again, I, yeah I want to try out your robot. And I ultimately just then want to purchase it. I, I don’t want to do this leasing model thing because actually robotic arms are pretty resilient. And I don’t need to buy one or get the latest upgrade. So know when you come to business model with, you know, a high total contract value, I’m going to kind of push back a little bit and say, you know, look there’s some reality to that too. Right? The fourth one I would say is perception. And I think a lot of the conversations I have are around investing and in AI, in automation in the factory. You know, I honestly had someone at a conference who won’t leave, leave our conversation and say have fun eating dinner with your robot friends. And I was like really? Really said that to me. And so I think what I take from that is the onus is on us to ultimately tell to having the data. I have seen it separates the difference between I do not think occupations are, are just going to disappear in the big scheme of things. I think the human will always be involved in what we’re doing for sure. It’s activities that will mature within those occupations. And it’s on our onus to help train those workers for the future, to enable them with the digital skills to equip where we want the technology to go. And then the last one is really just around the talent base. Again it goes into this training ecosystem. We have to evolve the ecosystem. And I think the world of what #UI Labs and the DMDII are doing here are in our backyards. It’s kind of like a crown jewel to have this in Chicago for an investor here. So I, I think those are really the five things over and over and over again I come to conversation with founders. So.
Nick: Just on that, on the CAPEX OPEX point, do you like to see a startup go after an existing line item on a, on a company’s OPEX or CAPEX, as opposed to maybe an intangible productivity benefit or some sort of opportunistic upside? I’d love to hear your take from the business standpoint and maybe #Brenna’s take from a government standpoint on this one.
Ty: I do like that the founder, if you’ll call it, you know, this is the Andreessen term, the idea maze, so that when I’m going to that person that I want to sell this in to. I have ran in my head the idea maze around what that person’s going to position back to me, he’s going to pull out his PNO, he’s going to pull out how much the quarterly budget to spend on R&D is. And I like them to then tell that narrative of why this new as a service model will save you x y and z. And let’s just go ahead and have that conversation off before we get to all the good things about what I’m doing. And then you will ultimately shut me down. So I do, I do like it when they’re direct with them.
Jenny: I think it’s hard if you’re investing in frontier technologies, right? Because you’re, you’re betting something that’s coming, you know, that will be 10- 15 years out. And so, you know, I think it, it just depends where, where you’re interested in putting your money.
Jim: As an operator I’ve learned that the biggest leverage is revenue. And the next is profitability. If you can show somebody how you can help them generate more revenue or more profitability, the intangible sales specially with an early technology and all that, if you have a real early adopter that might work. But pain is your friend. Okay? You want to be a drug dealer. Okay? You don’t want to sell vitamins, you want to sell drugs, okay. And so you look for pain.
Brenna: I think that two levels for cities are around savings and then resident impact, which is sort of the more qualitative one. And it is about, it is about the pain as well. Savings can be a little bit tricky because the budgets for cities are a little bit, are a little bit more complicating. You need to dig in and understand them to be able to quantify those savings with the customer is critical, and helping them understand or you at least understanding when you go in what those savings are going to mean for them because not all savings are the same. Can they repurpose those savings? Because it is possible to go in wherever you’re going into the city and save them money that they can’t repurpose. In which case you actually have not helped them. Because they need to spend that money. They’re going to spend it in the same place. And they’re not going to buy whatever you’re walked in to sell them. Cities will be early adopters. That’s, you know, cities are risk averse. They’re supposed to be, they’re spending tax payer dollars. But one of the reasons that that we’re here is because Chicago is a, is a less risk averse city than some, and we want to find those cities that are willing to go into a pilot not talk about pilots you want to be careful with cities because the US is littered with pilots that cities have done and never gone anywhere. But if you can go into a city and talk to them about the value of the pilot and how you scale from there, you will find cities that are less risk averse than others and willing to take that risk with you as a around an early technology when the value proposition is very clear.
Nick: #Ben, you’ve had tremendous progress. What, what was the original hypothesis for you and then how did you really get to that sort of strong value proposition product market fit?
Ben: Yeah, tremendous. Thank you, thank you for that!
Nick: I don’t want to share your metrics but there’s not
Ben: No, I think, we’ve done okay. I mean, but I don’t know, I think the question you asked around sort of going after consumer versus enterprise and then also talking about what parts of the stack you build. I think for us it took us a long time to actually figure out what we needed to focus on. And I would highly recommend in general for IoT platforms that you, you don’t really count on the fact that like consumers are going to care very much. I think that ultimately for us what’s been really, really helpful is finding people who are deploying interesting applications and focusing on meeting really, really concrete needs rather than focusing on connecting things just for the sake of connecting things. So that’s probably the best. And I think those exist mostly in enterprise, which I guess is why I’m downplaying the consumer concept. So that, that’s probably my best advice in how we’ve, we’ve made progress. But it’s, it’s been a slog but, you know, we’re doing it.
Nick: Good. Alright! We’ll wrap up here with a final question. So #Ty, you brought out privacy and security before. Maybe we could start with you and come down the panel this way. But how do you think about privacy and security? And do you think the government has a role to play?
Ty: I’ll go back again to the example the liable aha moment for me was folks probably were seeing the Aurora generator test back in 2007. And you simple tap in again to a logic controller that’s run by an old protocol. And you can shut down a piece of the American infrastructure. Right? And that takes like year or two to, to rebuild that generator, so it’s non trivial. What I would say though, and we see things like want to cry and, and other things even more modern times. But I am seeing a lot of activity of finally the devops and the security folks are starting to work together as opposed to one passes it off to the other. And at the container level. And a lot of the applications that we’re seeing, you know, just saying that we’re a docker or some of these other items that is where you need to bring that evolution of these new technologies into, the security and IT offices so that that’s pre baked and that you have a solution that at the application or micro service level can without shutting down the process, the manufacturing line is, is certainly not going to have the time to do all this reintegration. So I think there are certainly some, some technologies coming at it at the most granular level that’s really really going to help out with this I think.
Jenny: So I’ll give you an interesting practical data point which is we get thousands of applications for our program. We get no applications around IoT security. So, and I like go around all the time, I’m like if you’re working on IoT security you should apply. It’s really interesting. Entrepreneurs are, are not in masses working on this. And I think, you know, there’s maybe two reasons it seems like consumer IoT we like to talk about, you know, the smart home and how we want it secure. The truth is I don’t think consumers really care. Right? They’re pretty, they’re pretty happy to give away their data if they can get something free. And so, you know, maybe going back to the, you know, is it a vitamin or is it a pain killer, is that maybe, maybe in the home or with consumers it’s more of a vitamin. And I think now that we’re seeing, you know, more interesting use cases around industrial, I would hope more people are taking that more seriously and we’ll see more entrepreneurs working on IoT security. But right now we’re not seeing them.
Nick: You’re the only one.
Brenna: I knew Andy did. Yep. And we’re actually talking about, you know, do we decide to say something about that because not all of it is well informed. So whether or not we think they have a role to play, they think they have a role to play. And I think the balance is going to be does the legislation stymie the innovation. Alright, because they’ve already decided they have a role to play. So the question is, you know, do you whoever they are and do you go to your congressman and lobby them for, for what they say about it now that the legislations already out there, so that that legislation doesn’t slow down the innovation growth of your product.
Nick: Is, is there an analog that we’ve seen in the past like similar role out of technology that the government’s had to play a role in that could limit and/or enable? Any thoughts? Any paneilist?
Ben: Email, the internet in general.
Nick: The internet in general
Ben: I think, I think that, you know, people talk about IoT security a lot. But it, it’s like this notion that it’s somehow new. But it really it’s just internet security applied to devices. And any concept of security, I think this is why there’s a challenge with startups who are technically like “IoT security” because to separate security from the device is, is really challenging. And to just like solve all the security problem for your devices that you’re building, I think it’s like from a go to market perspective is really really challenging. So we take the position that, you know, at #Hologram with everything we do that it should be secure by design and just like, you know, the consumer doesn’t really care but the device manufacturer, when their, you know, devices get taken over by a bot net, is going to care. And so, but, but at the same time, that’s not a reason why they’re going to pay for us. They just want to know that it’s secure. So.
Brenna: I thought the manufacturers care, the media cares.
Ben: Well, they’ll care if you have for example like a 100,000 devices that get bricked. And then all of a sudden your business evaporates. If it’s, if it’s, you know, something that’s industrial and like requires getting data back on a regular basis. If it’s nest thermostat they might not care. They’ll just be like oh we have to send you a new thermostat or something. But, but yeah, so I, I think that ultimately IoT security is just internet security and the real challenge is creating actual software that runs on devices whether it’s legacy devices or new devices. And, and the only way to do that is to, to really, you know, focus on, focus on actually building a holistic solution I suppose.
Nick: Alright. Some final thoughts here from #Jim and then we’ll wrap up with some Q&A.
Jim: So I think privacy is going to be a very interesting area in, in how the government deals with this. I can, without getting into names, talk about the concept of one company that was on a rocket ship of growth because it took Facebook and Twitter feeds and it pretty accurately told the police where bad stuff was happening or going to happen. They were sued by the ACLU and put out of business. So there’s going to be a very interesting play here. What is private and what isn’t and what’s for the general good. The second area that privacy is going to be a challenge is there is so much that can be done again with health care and tele health, but there’s a thing called Hippa. There’s a thing called the privacy of patient information. And yet you’re trying to analyze that. It kind of conflicts with the SaaS model where you’re processing in the cloud or behind a firewall. So there’s going to be tremendous opportunities. But privacy is going to be I think a big issue.
Nick: Okay. Let’s open it up to Q&A. And if you do have a question, if you’re willing to come up to the mics, that would be great. Alright, we got a question up here.
Audience: I’m #Steve Case and I’m a manufacturer, and I had a nice conversation with the digital labs last week about how they could make their, their technology scaleable. When you have a manufacturer, you mentioned pain and revenue, the problem is you have to find a manufacturer who has pain, who wants revenue and is willing to solve the problem that their thing could be a problem. How do you imagine scaling? What you could do for an industrial manufacturer. How do you imagine having those one off conversations in a way where you can really afford this at sales force and that scaleability?
Jim: Well, first it, it does depend on the market to, to what you decided to focus. If you are up at the enterprise level, large companies, well then you can afford a direct sales force and you can build out a way to sell and support that. If you choose to go for small and medium business, which for many tech people has been a graveyard selling to small and medium businesses, you, you do need to find a way to combine some direct sales and some very efficient lead generation. That’s absolutely essential to do that. And the other thing I would argue is I think if you’re going to play in the industrial space, you should one of the benefits of focusing is you can very quickly build out metrics and things that you can apply across the industry. And the smartest thing you can do is, is early on build out a survey that develops some metrics that you can share that fit the industry. Because people like some security. They, they, they don’t like it making a decision that, that could be a failure for them. They’re looking for comfort. So I would argue that you do that. As far as the small companies go, that’s a very challenging, very challenging sales model.
Nick: Other questions, questions from the audience? Yeah, got one over here.
Audience: Hi guys, #Don Cooper here. Could you maybe comment where you see like wearables being positioned and kind of a shout out to I was at #TechNexus yesterday, they were great, actually #Tom Emerick came back here for kind of a returning age about the wearables group. And #TechNexus had a great presentation on kind of I guess it was some kind of sponsored study and first responder wearables. This is all around the work environment, workplace. So it was kind of on the, you know, enterprise side. But from fitness to sort of the, you know, proximity the meeting, sort of, you know, how do bring people together with wearables. There’s obviously the medical technologies and, you know, through here at #UI Labs they looked at automated reality and other things like that. So it would be human, human augmentation as it relates to IoT or kind of the wearables in general. Any comments on that? Thank you.
Jim : I think there’s a, there’s an interesting conflict built in when you talk about wearables and data. On the one hand, plethora of data. Okay? And I, I looked through one example with a real deal with let’s say a very well known wearables company. Okay? And the very well known wearables company said look at all this data, we’ve got to do something, something about it. And there was a book written about 14 decades ago called The Innovator’s Dilemma. And why big companies can’t innovate, why companies that are focused on one area can move to another area. And this company really wanted to figure out what to do with the data. And they never got anywhere. Why? Because they manufactured and sold wearables. So I think there’s going to be an interesting challenge for wearables companies to do something with that data. There’s tremendous value in that data. And if anonymize it, it can be even more valuable I think. But it’s making the leap to doing something with the data that I think is going to be the challenge.
Brenna: There’s a,
Nick: Any other thoughts?
Brenna: Yeah. Just speaking on some of the use cases. There’s some really interesting wearable use cases, like you mentioned some of the public safety use cases around the body worn cameras and things. Outside of the public safety at the enterprise level in cities, specially around building inspections, etc., the ability to have real time data to enhance those inspections, which streamlines the work force. Right? Because right now you have a specialized inspector for every system in a building. Which means, you know, dozens of different kinds of inspectors. Instead of having one inspector in a building and a specialized inspector sitting back at a center and pushing data back and forth and having wearables that are collecting information to enhance that inspection process, would make inspections faster and much more efficient. And so there’s, there’s uses where, where those, where wearables can actually enhance the, the process of, of many city processes and how those workers are behaving out in the field. Even beyond public safety. And those are a couple of the use cases that we’re looking at here in the Lab.
Jenny: I think on the consumer side it’s been a bit of mixed bag, right? So, you know, on the health side I think there’s been a lot of kind of disappointments. You know, if you look at quantify itself Americans are getting, you know, fatter and less healthy and that they’re buying more bracelets to tell them that I guess. But like on a more positive note, one of our most successful companies that went through my program tow and, three and a half years ago, it’s a company called #Owlet. And it’s a sock that monitors vitals for newborns. And, you know, getting back to, you know, is this a nice to have or a must have, you know, many parents feel like this is a must have. So I think if the pain is there, a wearable can be a really interesting solution.
Nick: Yeah, even #Fitbit, which is lauded as a universal success, went through significant challenges in the private markets. Had to go through insider rounds and a lot of challenging experiences before they kind of had their path to IPO. So, I think they’re also a good example though of finding a key need, #Fitbit. #Fitbit found a key need and used that as a beachhead to sort of build out a huge business. And we’ve made two investments in wearables oriented companies. And both of those are doing the same things. They’ve found a key need, a key application, they could, that they can really build traction in, and they’re using that as beachhead to build much bigger value across a range of applications. Other Q&A, okay, we’ve got one over here.
Audience: My name is #Scott Sargis. #Ben, originally early on in this convention, you, you alluded to #Amazon, you know, the acquisition of #Whole Foods and how they could energize that. Could you all, you and everyone on the panel, comment on how #Amazon is going to ramp up #Whole Foods in general with technology and in specific with IoT?
Ben: Oh yeah. I don’t know. I really have no idea, but I think it’s fascinating. I think if you just consider not just #Whole Foods, but if you just consider what the, I mean, I hope, I hope that, this is a little embarrassing but like I haven’t, I live above Mariano’s and I’ve been two, three times. And this is mainly because I order literally everything online.
Nick: #Instacart, from the #Mariano’s right below you.
Ben: Maybe. I might have done that a couple times. But, but no, so I think when you talk about like the future of, of the, like the way this plays out, right, ultimately is that, you know, you can, and this is why I actually picked #Amazon, right, is that would you actually really care about smart home stuff doing like does it need to adjust your thermostat or whatever. I don’t know. I think really you care about is stocking your home with things. And #Amazon’s able to do that for you. And presumably they’ll make it easier for you to do that with food. So that’s my best answer.
Ty: I’ll, I’ll take a swing at this one. What I’ve found interesting about #Amazon is so they now have a freight forwarder. They now have I don’t know how many airplanes on lease for their own air, air transport. We all see these little #Amazon trucks running around Chicago now doing their own deliveries. From a supply chain perspective, and this correlates itself into industrial use cases and where the future of warehousing and distribution within warehousing goes and everything’s getting hyper local and easy to be here like, like 5 minutes from now. I think they picked up 400 or so distribution notes that if they play their cards right, and they put the right automation if you’ll call it that, distribution tech is kind of a, a hot space I’m really looking into. I think that could be a very interesting distribution play. And I think ultimately now I think my, my price and my Instacart delivery from, from Whole Foods, if they keep the relationship, hopefully it will come down too. So I think it’s a good thing. Yeah.
Audience: #Angie with Techstar. So clearly a lot of the startups here are international, from Denmark to Portugal to Germany. So it sounds like IoT is definitely an international phenomenon in terms of every country’s thinking about it. You all have very interesting perspectives I’m sure you think about this a lot. But where would you benchmark the US in terms of how we think about IoT from a cities perspective, a government perspective or even a commercial perspective?
Brenna: So the city one’s pretty easy to answer. If you want me to go first. Because we’re about 10 years behind, where Europe is and where your sort of developed countries in Asia are. That’s sort of the easy answer. Developing countries have the beauty of leap frogging, which we don’t here because we’re saddled with age old infrastructure, both technical and physical infrastructure. And I think because of our government structure, which is just not as, as centralized and socialist as it is Europe, it takes us longer to build the stakeholder buy in for large, for large city deployments of any kind of centralized solution. So it’s slower to build here. But there’s been large increasing investments in cities in the US large and small that are closing that gap. But Europe and developed cities and in Asia etc, South America is on par with, with North America, it’s about 10 years behind.
Jim: In my last industrial deal I found Europe, and even to a certain extent China, were just as open to what we were doing in the predictive analytics space. I don’t know, I do know that since I really do think IoT is this fabric that’s going to affect everyone, I think there’s going to be just as many opportunities outside the US as inside the US. I think the US might be a little bit ahead in innovation and funding in this area versus what’s going on in, in Europe and maybe some other parts of the world.
Nick: Any other comments? I’m just thrilled that #Jenny brought so many European based IoT companies here, because,
Jenny: I mean, I’m going international.
Nick: It’s tough to find them out there. I’ve got a few venture partners in Europe and they have trouble finding IoT deals. So clearly you guys have done a good job. But,
Ty: I have, I’ll just quickly add, it’s, it’s been fascinating partnering with #Techstars last couple years at the aggregate data level. We, we, you literally scour the earth looking for the top premier class, and seeing the numbers as they shift year over year in itself has just been very interesting to see that global impact specific to where we have spent our time looking in IoT. So I would certainly, if, if you are interested, it’s some fascinating data you guys put together from all the, all the searching you guys do.
Nick: One more question, alright!
Audience: Alright. Hi, my name is #Ziber Heim, I’m an undergraduate studying engineering at North Western. And as someone who’s interested in smart cities and IoT, there’s not really an IoT degree. So what’s our educational background or something that I can do to prepare myself to enter the IoT field?
Nick: I’m not, I’m not doing that one.
Jenny: Well, what are all your backgrounds?
Ben: Yeah, I’ve got a couple, I mean, I would, I would say, say computer science. There’s like what is it, computer engineering.
Audience: Make that design engineering
Ben: Okay yeah. Yeah. I mean, I, just, just build stuff, that’s the best, best thing to do.
Jim: I don’t know how much North Western is doing in this area. I went to Illinois Tech, got a double E degree and they’ve been doing things in micro grid and a lot of other things for quite a while. So I’d look for those projects. I know North Western has had so a lot entrepreneurial stuff going on. Don’t know exactly if anything would fit. But like he said, build stuff and dive into it.
Jenny: I don’t think it really matters. I was a history major. So I mean, you know, you follow your passion and what you want to do, and your degree is, you know, is your degree, You’re at a great school and whatever you study like you’ll make it happen.
Nick: Okay. I think that wraps things up. Thanks to all the panelists for, for coming. And thanks, thanks to you all for the Q&