Zhuhai, China is an unconventional location for a new investor to cut his or her teeth, yet back in 2012 when I joined Flex as the founder of its Lab IX accelerator and corporate VC, this is exactly where I found myself. My time in Asia was a bootcamp in modern manufacturing, logistics, supply-chain and product design. Curiously, I found that despite the introduction of many groundbreaking technologies, the assembly lines of the iPhone era still closely resembled the assembly lines of the Model T — 100 years later.
One of the biggest misconceptions about manufacturing is that there’s widespread adoption of automation. While it’s true that robot density has and continues to increase, those gains are often skewed in certain verticals or tasks. The truth is, in many factories production is still woefully manual. Where automation does exist, it is rigid and fragmented. This is because capital equipment is costly and inflexible. Current robotic manufacturing systems don’t support rapid change — set once, seldom change. I saw this for myself in China, in a place some consider years ahead of the US in terms of operational efficiency: when it came to flexibility and cost-effectiveness, low-cost labor pools were still the best option to manufacture things.
But what about Industry 4.0 — the so-called fourth industrial revolution? Having progressed from mechanization to assembly lines and most recently automation, we’ve been eagerly awaiting manufacturing’s next act, the holy grail of fully integrated cyber-physical environments. Many of the components of smart manufacturing already exist: robotics, artificial intelligence, vision systems, 3D printing and IIoT, but none of these individual technologies can bring about change by itself. They need to be integrated into a new “universe” — an entirely upgraded infrastructure with digital processes and feedback loops at the core.
This insight inspired the creation of Bright Machines, a company focused on integrating software and artificial intelligence into every phase of the manufacturing cycle to fully realize the manufacturing facility of the future. Bright Machines is already helping some of the largest automotive, electronics and computer brands produce products faster, cheaper and more efficiently.
Today, a little over a year since the company’s launch, Bright Machines announced the introduction of Bright Machines Microfactories, a solution comprised of several seamlessly integrated elements including hardware, software and artificial intelligence. Microfactories can be deployed twice as fast as existing assembly lines and significantly improve production throughput and yield, driving to a lower cost per unit. Furthermore, as Bright Machines continues to deliver enhanced artificial intelligence capabilities, the microfactories will become more intelligent and therefore responsive over time, leading to operational transparency and accessibility. This is Industry 4.0 in action.
A New Model
How has Bright Machines, a Series A startup, managed to disrupt the $2.3T industry that drove 11.6% of US economic output in 2018? By breaking the rules of what it means to be an early-stage company. Industries like manufacturing are large, entrenched and essential components of our GDP. There’s a high barrier of entry for innovative newcomers who often struggle to gain a foothold in complex ecosystems characterized by influential incumbents, deep domain expertise and long-standing customer contracts.
To have the type of impact we envisioned, Bright Machines needed three things: people, technology and scale. By building on an advanced manufacturing engineering group with decades of both domain and technology experience, Eclipse, together with the company’s other founders were able to create a company with unprecedented industry insights and intimate knowledge of complex manufacturing systems. From there, we augmented the team with leading-edge artificial intelligence, machine learning and computer vision specialists, hungry to tackle a huge market with creative, software-first thinking. To lead the charge, we have a co-founder that straddles the worlds of both Silicon Valley and big enterprise — CEO, Amar Hanspal, the former co-CEO and product chief at software giant Autodesk. Amar was the software leader who drove Autodesk’s shift from boxed, desktop software to cloud-based SaaS over the past decade. This team of software, computer science and manufacturing veterans just unveiled the world’s first software-defined microfactory for product assembly.
These moves tackled the people and technology piece.
To deliver scale, Bright Machines needed credibility in spades to make any headway with potential clients. The company achieved this initially by working with Flex to service more than a dozen of the world’s largest brands. From inception, Bright Machines produced millions of electronic and automotive systems every month. The client list has only grown since, as brands witnessed what could be achieved with software-defined manufacturing. To support the inaugural, international 300-person team and continue R&D, the company needed capital. Bright Machines subsequently raised a $179M Series A.
All of this begs the question as to whether Bright Machines qualifies as an early-stage company. From a funding perspective, it’s only raised a single, significant round of institutional financing. However, all other metrics suggest a more mature company: a current team of 400+, supporting nearly 20 product brands on 25 different customer manufacturing lines in seven countries and booking over $100M since the company’s founding thirteen months ago.
This is where existing company descriptions and financing options fall short. Historically, venture capital and private equity have been bifurcated: venture capital existed to provide the financial means for a company to create value from a technology-centric idea, whereas private equity provided the financial means to extract value from existing operations. How do we support companies that don’t fit neatly into one of these categories? Companies that put technology at the front and center of their strategy (such as early-stage startups) yet have access to accelerated growth and scale resources typically found within incumbents. Maybe this means a carve-out of an existing team into a new company. Maybe it’s the fusion of two or more existing startups. Perhaps it’s a combination of the above. Or it could be something creative we haven’t even thought about yet. What we do know is that there are pockets of innovation hiding in places that don’t look like traditional early-stage startups. These finds have enormous potential, and, with the right people, technology and scale, the opportunity exists to build some incredibly exciting, transformative and valuable companies.
It’s time for a new asset class, one that acknowledges the complex world we live in, and that not all startups will follow the well-known path from dorm room to board room. It’s time for a funding option that combines the ambition of venture capital with the operational focus of private equity. It calls for investors with deep domain expertise who can work with founders to redefine industries for the world we live in today. This venture equity philosophy has always been a hallmark of the Eclipse operating style, and now — starting with Bright Machines -it’s a way of investing, too. We look forward to collaborating with more ambitious founding teams to define the best funding option in support of their own, unique combination of people, technology, and scale.