Modernizing the Mining Industry
Our mission at Riot Ventures is to support entrepreneurs leveraging “Deep technologies” to disrupt large physical industries. While we’re constantly evaluating new sectors and technologies of interest, our core areas of expertise are robotics, digital manufacturing, biomanufacturing, defense tech, construction automation, communications infrastructure, applied AI and logistics.
Given our focus on inherently physical sectors of the economy, over the last few months we’ve been spending time looking into the mining industry.
We’re new to the mining industry, but it has many similarities to other spaces we invest that are undergoing a considerable amount of technological modernization (manufacturing, construction, defense, etc.). These deeply entrenched old industries have been operating relatively unchanged over the last 30+ years while the rest of the world experienced a digital revolution.
Considering how massive the global mining industry is and how dirty/dangerous/repetitive much of the work is, we expect to see a large number of successful startups apply automation and data to dramatically improve mining productivity in the near future.
As we continue evaluating investment opportunities in this space, we’ve observed a few key strategies being used by the best entrepreneurs:
1. Increase Productivity, Don’t Decrease Costs
Many mining startups we’ve seen are focused on eliminating relatively small operational inefficiencies and exploration costs. We have broadly seen these companies struggle to reach a meaningful scale. We believe that it comes down to the magnitude of the impact and the ultimate decision maker for the solution.
“Relative” is the key term here: the mining industry is motivated by impact in the millions of dollars on a per-project basis, not the thousands or even hundreds of thousands. If a new technology can’t dramatically increase output, it will languish as a lower level priority.
A production site manager rarely gets a bonus if they save an extra $100K on expenses through more efficient equipment utilization on a project. Conversely, they’re the ones most likely to lose a job if something goes wrong or if they’re spending money on something that isn’t providing value.
The successful solutions we’ve seen are being sold through corporate-level executives. These are the stakeholders most likely to see direct benefits of dramatically increasing profits and most likely to have the internal leverage to test an unproven technology.
2. Go Medium Before You Go Big (Or Small, For That Matter)
Medium-sized mines are the perfect target for your first customers. We’ve seen startups targeting small mines and we’ve seen startups targeting the BHPs and Rio Tinto’s of the world. The startups that we’ve seen be the most successful start somewhere in the middle.
There are some obvious reasons to avoid targeting the largest mining operations in the world as a startup. First is that they’re slow adopters of technology. Most never want to be the first investor or operator of anything unproven. To get your product through all the ins and outs and corporate restrictions of a large mining operation can take years, and all the while, your funding is drying up. Additionally, if you fail at the top, the word spreads. Sure, it’s great to bag Rio Tinto as your first customer, but if something is wrong with your tech, you might be out of the market forever.
Smaller mines aren’t hindered by the slow-moving corporations, and there’s considerably lower risk associated with starting there first. However, smaller mines don’t have a whole lot of money to pay you or a whole lot of operational infrastructure to beta test new solutions in the field.
Medium mines are the perfect balance of the two. They’re hungry to move up in the world, and as such, they’re eager to innovate and can allocate resources towards effectively deploying new technology. These customers are also more open to the experimentation (and the requisite cyclical trial and error process) that comes with working alongside an early-stage company.
Hope this proves helpful for anyone building a business in the space! Feel free to reach out with any questions or comments at andrew@riot.vc. We’d love to chat with you about your startup!
