Reinventing the Factory Stack — Perspectives from an Early Stage VC

I had the pleasure to do a presentation at the Hannover Messe — the world’s biggest industrial fair — about how I look at the industrial market from an investors perspective. I took this opportunity to also share some learnings from talking to founders and corporate people in that industry.

As a summary, my top three learnings talking to founders are:

• little progress after pilot: one of the biggest problems is that many startups get stuck in the “innovation friend zone”. Corporates have time and can test different solutions before making any commitment. If you sell to the innovation department, there is a fairly high chance that progress after the pilot will be rather slow. You simply cannot afford to wait long so put a lot of effort into pre-qualifying and evaluate which leads can progress the fastest.
• buzzwords: I see many founders who are trying to sell using buzzwords (e.g. AI, deep learning) and not use cases (e.g. troubleshooting, asset tracking, work instructions). People buy a solution for a problem, not a technology. Try to focus strongly on the ROI question, e.g. generate more revenue, time saved, cost saved, etc.
• lean startup approach: while it’s true that many enterprises are slow moving, that does not mean that you have to move slowly too — you can still try to follow a lean startup approach. Don’t be afraid to talk to buyers and users several times per week. I would recommend adapting your learnings fast and iterating on your product based on the ongoing feedback you are getting. It’s also okay to be pushy in order to get to a decision quickly so you know better with whom you should spend time with.

… and my top three learnings talking to corporate people:

• too risk-averse: many traditional corporates are still too risk averse in my eyes. Hiring consultants or starting an innovation unit is very common and fairly easy. Acquiring small companies, also only for the talent (acqui-hires), does not really happen, especially in Europe. I don’t say corporates should do only the latter but I think it’s fair to say that their activities are not equally distributed at the moment.
• attracting talent: innovation cannot happen only inside the company, many great people tend to work for themselves. How will you attract these people? How will you attract top notch developers from leading universities if you are located in the German countryside? I think corporates and SMEs spent not enough time thinking about that.
• little standards: many corporates have little standards about how they work together with startups. Therefore, the process is often different among several departments, communication not clear and it takes longer than it could be — which is frustrating for many founders. I would highly recommend to come up with more standards and concepts around how you want to work together with startups — which is beneficial for all parties in the end.

Thanks again to AWS for having me. Please let me know if you have any feedback or questions, you can find the slides here (you may remember parts of it from my previous post about the Factory Stack):