ICYMI: Industrial Technology goes Clubhouse (better late than never!)
Recently, Philippe from our investment team — together with our friends Lisa (UVC), Robin (Aveo), and Levent (Paua Ventures) — had a Clubhouse fireside chat about the Industrial Tech space. It was the first of, hopefully, many more to come — but in case you missed it, here’s a quick recap.
Startups in industry tech should take advantage of key trends:
Robotics & logistics in industry tech are getting hot, as shown by German Bionic’s recent $20m investment round with Samsung (disclosure: Join is invested). Covid has accelerated e-commerce, which has led to an increase in decentralised fulfilment. That just means companies are now using smaller micro-fulfillment centers in urban locations to enable faster delivery.
Digitalization in the way shopfloor workers engage with the production environment will take hold in the next few years, and the factory software stack is becoming increasingly integrated (even though it’s still far from where it should be).
Covid has also increased demand for visibility in supply chains, driven by strategic positioning and a stricter regulatory environment. Companies are aware of sustainability concerns and want to better manage the risks linked to multi-sourcing. At the same time, many suppliers are changing their business models based on megatrends and strong global trade. The automotive industry, for example, is switching to lower emissions technologies and faces a semiconductor shortage at the same time. It’s not an easy task to manage your supply chain when you have tens of thousands of suppliers.
Entrepreneurs in industrial technology, fear not. Traditional players in manufacturing, logistics, supply chain, etc. are increasingly opening their ecosystems to startups. Robin at Aveo is creating a new community designed for innovation managers and digital transformation experts in the industry who are looking to leverage digital innovation and entrepreneurship.
What do founders in this space need to fundraise?
Being able to prove that customers achieve a clear, quantifiable (and significant!) ROI using your new product/solution is key. Why? Because industrial customers constantly balance implementation costs and monetary value. Likewise, time-to-value is extremely important for scaling fast. Your customers ideally want to see a fast effectiveness linked to using your product.
Early in the development, product-market fit is not as important as founder-market, founder-product and founder-go-to-market. These fancy buzzwords simply relate to the founding team’s ability to cope with the specificities of the industrial space. Are you obsessed with this space and problem you’re trying to solve? Where does this (healthy) obsession come from? Have you experienced these issues in the past? Can you show enough flexibility and hard work to quickly iterate on the product if customer feedback is not good? In essence: experience, knowledge, speed and grit are key. Speaking the same language as your customers will be of massive help in this conservative industry.
Don’t expect to scale your product across all your customer’s factories or production plants after just one pilot: factories may have different data collection methods, connectivity and application requirements. Investors will be careful when looking at post-pilot timelines.
Lastly, be sure to focus on the right VCs that bring expertise and corporate connections and a strong network. A big brand is not everything. You need a partner that can provide access to key manufacturing leaders — both in terms of lighthouse customers that allow you to test your solution, and expertise sharing. At the same time, the right partner will understand how hard industrial technology is. So be sure to choose a VC that identifies with the very specific industrial challenges you will be facing.
Think about go-to-market and deadly sales cycles in industrial technology
Sales cycles in industry tech are long. Very long. You should focus on customer lifetime value and try to keep churn low, while at the same time providing an innovative product with high upsell potential. A great way to shorten sales cycles at early stages is to team up with channel partners. While doing so may decrease your margins, the upside of it all is that it may increase the scalability of your solution. That’s because system integrators need to demonstrate their ability to innovate to their customers by using your solution.
At Join, we operate in the heart of the Neue Industry. We are constantly on the lookout for innovative industrial tech startups. We provide funding from Seed to Series A stages, as well as a strong network of German and European industrial partners to help you accelerate your development. If you are a European industry tech software startup, simply drop us a line at firstname.lastname@example.org and you’ll hear from us if it’s a fit.