Why we invested in XTEND, and why we doubled down just as COVID-19 hit us

”Are you doing defense?!” “TPY is into drones now, ha?”

Well, the answer is a bit more complex…

Just prior to the COVID outbreak we made an initial investment in XTEND (this video gives a nice overview of its vision).

To those asking us what’s the rationale behind our investment, I will try to synthesize the very basics of our thesis.

1. The beauty of a robust tech platform supporting multiple potential use-cases

In general, the platform/use-case play in startups is tricky.

At one extreme, a pure horizontal technology platform play can be a formidable force. This is because almost every single dollar deployed by the startup, goes to development, which can help create an IP-based defensive moat around it. See as one example, DeepMind, a horizontal AI platform which ended up being acquired by Google for (reportedly) more than $500m, four years after inception.

Ultimately though, it’s a binary play: you either make it very big, as a de-facto standard in your industry, and become attractive to acquirers who want to plug in your ‘engine’ into their commercial workflows, or you’re left stuck with that shiny engine you’ve built, realizing it has no commercial relevance or application.

At the other extreme, there is the singular use-case startup, going after a niche vertical market.

The advantages of such play are straightforward: such startup can demonstrate product-market-fit very fast, build traction, and create a defensible commercial moat, if not necessarily a deep tech one. Most earlier stage startups we come across fall into this category.

What we saw in XTEND is an opportunity for a compelling hybrid model. XTEND’s underlying technology enables ANY user to fly a drone accurately and seamlessly, with minimal training.

This means accuracy, zero-learning time, transitioning between indoor & outdoor, and translation of users’ hand gestures of where to fly the drone in a physical environment.

The technology supports extremely low latency (depending on the distance) and high-quality video transmission, which allows for deep immersion and spatial (visual) awareness.

This platform, the XTEND team had realized, lends itself very nicely to the world of defense. Allowing military forces to launch a drone to survey indoor parameters, as one example, or to intercept low altitude flying aerial threats, without putting its personnel in harm’s way.

We thought the way XTEND had tackled this was compelling: if the market is there, pursue it, but do so in a contained manner.

Prior to our investment, XTEND created a fully owned subsidiary focusing exclusively on defense. This translated to a siloed commercial unit, sitting on top of a broader technology chassis. This chassis, we believe can be extended into multiple plays. Reaching all the way from fields adjacent to defense (e.g., HLS — Homeland Security) to very remote ones (e.g., gaming).

2. Topnotch execution

This parameter is not an easy one to objectively pinpoint to, but from the moment we started interacting with the team we observed the kind of qualities we really like: a persistent, go get’em kind of attitude, which is single-mindedly focused on deliverables.

There’s nothing standard in the way XTEND operates, but somehow, in between the humming of drones and the chirping of VR (virtual reality) equipment, one can detect discipline in execution which could be traced back to the last startup the dynamic-duo of siblings behind XTEND founded, and which they had sold to intel.

==

And so, in Q2 — a mere few weeks after our initial investment, when the world was turning upside down and the company decided to raise additional capital, TPY had doubled down on its investment in XTEND.

How come?

For one, we had a broader view into the execution the team is capable of, which gave us a good perspective that our pre-investment thesis was on spot on this front.

But more holistically, we see COVID-19 unleashing two trends which are very positive for XTEND:

1. Remoteness: in a nutshell, people are doing less on prem, and more off prem. This will not be going away even as the virus does, and it will be extending itself from defense to areas such as predictive maintenance in manufacturing or even, imagine that, tourism (if you can’t go to Rome, why not ‘be’ there by sitting in your living-room-sofa, using your VR glasses and flying an XTEND drone which is by the Colosseum).
2. Security: it’s an unpleasant reality of the crisis we’re going through, but we’ll need more first responders with far less federal or state budgets available to deploy them. XTEND’s technology can help bridge this supply-demand gap. Imagine an ability to provide instantaneous first response & security services to the wide population, irrespective of physical distance to the one in need (for example a police officer can project herself into a drone to a burglary site).

Is this a whole new way for us to experience the world? a bold version of what human-machine-interface looks like? We do hope so.

And as we’re kicking off this partnership with XTEND, we wish them, and us, good luck — after all, they’re the reason we’re present in telepresence!