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Satellites/UAVs, computational imaging, artificial intelligence: Lux continues our partnership with Orbital Insight

Last year Lux Capital helped seed Orbital Insight, a geospatial big data company that leverages rapidly growing availability of satellite, UAV and other geospatial data sources to understand and characterize socioeconomic trends at global, regional, and hyperlocal scales. We’re excited to continue our partnership with them as they announce today a $8.7M Series A financing with other investors including Sequoia Capital, Google Ventures, Bloomberg Beta and The company will use this financing to grow its engineering team and service clients in finance, retail, real estate, insurance, government, and non-profit sectors.

Orbital Insight’s founder and CEO is Jimi Crawford. Previously he was SVP of Science and Engineering at the Climate Corporation, CTO and Software Architect at Moon Express (a company with the modest goal of putting the first commercial robot on the Moon and winning the Lunar X-Prize), and engineering Director of Google Book Search, where he was in charge of Google’s project to scan, index, and make searchable the world’s books. He knows and understands big data.

The company uses expertise in image processing, neural networks, machine learning, and statistical analysis to glean valuable insights from satellite/drone images and other large geospatial data sets for a diverse body of customers. These customers include financial institutions such as hedge funds, real estate developers, insurance companies, but also government agencies, and international development and environmental non-profit organizations. Orbital Insight is not a traditional image analytics company. It utilizes cutting edge techniques to bring actionable insights to transform very large industries and likes to call what it does ‘macroscopic analysis’. As global tech trends in satellites, drones and other forms of geospatial sensors continue to generate very large data sets (esp. imagery), Orbital Insight’s ‘macroscope’ can help all kinds of companies better understand their industry, context, and future.

Lux Capital has significant experience investing in companies that bring the physical and the digital together. Orbital Insight sits at an interesting intersection of three sectors that we have invested in:

Orbital Insight has multiple data products already being used by customers. For example (a) forecast of end-of-season crop harvest based upon mid-season spectral analysis, (b) quarterly retail performance based upon counting of cars in parking lots, (c) measure of rate of construction in China’s real estate sector, and (d) fluctuations in global crude oil inventories. In each case Orbital Insight provides an accurate assessment/prediction months ahead of other organizations. ROI for the customers is clearly driven by the accuracy and timeliness of the insights. (see a WSJ article on Orbital Insight from last year).

Broadly speaking, at Lux Capital we continue to believe that dramatic reduction in cost of distributed sensors/hardware, combined with ubiquitous connectivity and reduced cost of computing horsepower, has allowed new types of data to be produced and harnessed for bringing insights to industries that have otherwise typically operated by looking in the rear-view mirror. The opportunity to transform such industries is a very large one, and we are proud to back Orbital Insight as a pioneer in the space.


Women that are helping bring about the drone revolution

In How Google Works, Eric Schmidt talks about how the company approached recruiting its top talent that were internally referred to as “smart creatives”. Schmidt shared “These are the folks who combine technical knowledge, business expertise, and creativity”. Steve Jobs often talked about the importance of top talent and how a small company depends on great people much more than a big company does.

Kristen Helsel
Kristen Helsel

Today, I am very excited to share that one our portfolio companies, CyPhy Works (UAS/drone systems), has successfully recruited Kristen A. Helsel to lead their commercial efforts. One of top female hardware executives, Kristen is an established successful leader (and former entrepreneur) who brings a demonstrated track record of new business innovation, industry sales and marketing, and executive management to CyPhy Works. She has had a front row seat for the evolution of the drone space in the USA as the former vice president of sales and business development for Aerovironment’s Commercial UAS business, and in her previous life she also ran Aerovironment’s electric vehicle charging business where she saw that new industry grow from near zero to billions of dollars in the US. Prior to that, she held sales and executive positions with Eclipse Management, Swift Engineering and General Motors. Needless to say, she is at home in the world of mechanical, electrical, hard-core engineering based products.

Kristen is joining Helen Greiner, founder and CEO of CyPhy Works, who is arguably one of the best engineer-entrepreneurs of our country. Helen previously built iRobot to disrupt the commercial and consumer robotics industry, and now Kristen and Helen aspire to do the same in the world of drones. It will be exciting to see what bringing vertical motion to robotics does to the world, from productivity and data based decision making to future commerce and saving lives. It has already been a great experience for me to be associated with CyPhy Works as an investor and a Board member. The team is uber-geek, they hack hardware and software for fun, and nerf-gun fights is how they release stress at work! And women rule the place: 3 out of 5 executive team members, and 2 out of 4 Board members are women.

Helen Greiner
Helen Greiner

It is an exciting time for the US drone industry. CyPhy Works is seeing tremendous growth both nationally and internationally. They have partners and customers in varied industries ranging from oil & gas, insurance and mining to package delivery. Kristen is joining to head the commercial activities to build on those relationships and scale operations, including manufacturing, customer support and services. She has already been schooling me on the regulatory landscape around drones and how it impacts commercial potential in different markets. Since I am a long-term believer in the drone space, what also excites me is her commitment to playing a leadership role not just for the company, but for the space in general. I have no doubt she will be a voice to reckon with for all drone companies and technology providers.

CyPhy Works is a Silicon Valley funded company that draws upon the strong talent pool in both Silicon Valley but also Boston’s robotics cluster. Kristen will have one foot in Silicon Valley and another in Boston. As a Board member, one of the things I am most proud of is the help I am able to provide to entrepreneurs in building great teams. Executives at portfolio companies become a part of the Lux Capital family, just like the founders and CEOs. Hence, I am excited to welcome Kristen and looking forward to working with her.

You can follow Kristen on twitter at @KristenAHelsel, Helen at @helengreiner, and CyPhy Works at @cyphyworksinc.

An investor’s perspective on the proposed drone regulations

It was an exciting Sunday morning on a holiday weekend in the world of small commercial drones (small Unmanned Aerial Systems as FAA calls them). We had heard last week that FAA was close to announcing their regulatory framework, and it has arrived. Finally, after nearly a decade of persuasion from everyone, from the drone community to the US Congress to the President of the USA, FAA has published its Notice on Proposed Rule Making for commercial use of sUAS.

I am a believer in the potential of commercial drones in the USA. We have been leaders in the drone technology space, and a lack of clarity from the FAA was hindering our progress. One could argue it was hurting our standing globally in the space, and many US companies had actively started processes to primarily focus on non-US business opportunities. My blog post at the end of 2014 outlined some areas where I envisioned innovations to bear fruit in 2015, but their exploitation hinged on the regulatory environment.

Below are some thoughts on the FAA NPRM (summary here of the regulatory document which will go through a 60-day comment period and will likely become law in 12-18 months).

  • At Lux Capital, we believe the FAA drone regulatory document is a big step forward, a watershed moment, in the future of aerial robotics.
  • Investors will no longer need to discuss product and technology innovation roadmaps of drone companies in the context of baseless rumors & leaked documents regarding s confusing and regulatory environment.
  • The drone industry is taking a collective sigh of relief that FAA is approaching regulations with a somewhat practical and common sense approach. Earlier leaked memos etc had cultivated a fear of draconian, irrational laws. Those fears were ungrounded. We hope the FAA will instill a greater degree of transparency in its process as it continues to use the regulatory process to fully integrate drones into our commercial airspace.
  • Technology in the drone space is evolving rapidly, from navigation systems to control, optical stabilization, lidar based sense and avoid to fleet management, compliance and insurance. We should continue to see great things emerge form this industry that is currently attracting some of the smartest minds in engineering.
  • I often saw investors discussing what FAA regulatory bottlenecks might look like, and if it was “the right time for this technology”? Regulatory uncertainty kept many investors on the sidelines. Clarity from FAA should help all such investors, including those interested in investing in not-technology but service businesses built downstream.
  • There remains a lot of work in bringing FAA regulations in line with emerging tech. For e.g. CyPhy Works drones can be tethered to ground for continuous use. They are not flying freely, and hence should they not be allowed to operate at nights as well? Besides, aren’t drones equally visible at night with LEDs and other lighting? Or, for e.g. current regulations limit use to visible line of sight. This sounds good but is practically, is it really easier to control dots flying at 100 mph when viewed with just naked eye vs enhanced viewing features including the use of augmented and virtual reality technologies? And what about autonomous flights? If we can have autonomous cars driving on the highways in California, drone flights are in fact easier, esp with the latest on-board sense and avoid technologies.

All in all, this FAA document is a major step forward for the US drone industry, and entrepreneurs are excited to continue to build for US commercial use-cases. The US drone industry expects to create jobs and spur economic growth, increase productivity in our agricultural fields and construction industries, improve worker safety in mining locations and oil-fields, and help protect our environment as well as save lives during natural and other disasters. The aerial robotics revolution has just begun and amazing times lie ahead. For engineers, innovators, entrepreneurs and investors!

We at Lux Capital are watching this closely, and investing in this space.

VC due diligence. Important, and helpful for everyone involved.

VC diligence is not a scientific process. I like to think every investor does some level of diligence even though there are some signs in today’s ‘hot’ market that some are willing to write big checks based on just a hunch. That should not be the case as due diligence is a good thing. It helps everyone involved.

Due diligence is a good thing. It is not just good investment practice that we certainly take very seriously at Lux Capital, but it also has additional benefits that accrue after the investment is made. It helps investors understand the space, its particular dynamics, strategies deployed by the company and its competitors, and the likely scenarios of how the story unfolds better. Knowledge about the company one invests in can help investors be better Board members, advisors, and strategic thinkers. Thus diligence across various aspects of the business, such as team, technology, competition, market size, capital needs, exit outcomes are very helpful.

I have also noticed that investors don’t often share with entrepreneurs what questions they might be stuck on. I am not sure what the reasons might be but maybe it has a little do with the fact that VCs can be conflicted if these are the right questions in the first place? Their gut and mind are at odds with each others? or they are trying to find lessons from history (pattern recognition), when short term and long term history has conflicting stories to tell?

Anyways, below I am including some thoughts I tweeted out this morning (hashtag #vclogic) on some questions investors sometimes ask that fall into that category. There is nothing inherently wrong with these questions, but good investors are careful about contextualizing the answers they may get back in cursory diligence.

  • What if Google/Amazon/FB were to do this internally? Would they buy or build?
  • If this is such a good deal, why hasn’t it been picked up as yet by others?
  • This team has no senior management, just a bunch of hipsters. Who on the team has deep experience in the space? Conversely, this team is all grey hairs. Where’s the passion and fire to walk through walls?
  • Isn’t the TAM too small for us? Conversely, don’t unicorns form when they create new markets?
  • This is a crazy price for this round. Conversely, why was last round done only at a modest step up?
  • Why does this company not have the same buzz as the other company I recently saw on TC and WSJ?
  • This is a nice widget/toy. But how do you build a business around it? Conversely, isn’t this a science project?
  • When do you reach cash flow break even? Conversely, why aren’t you growing much faster and owning the space?

My partners and I at Lux try to be transparent about the process we engage entrepreneurs in. We aspire to be prepared about spaces we invest in, but we are often surprised by what great entrepreneurs cook up to bring to us. My partner Josh calls it the “hmm, that’s interesting’ moment. When exposed to a new space or a new take on an existing business area, we quickly try to get educated by calling upon people in our network who know and understand the dynamics and economics better.

If we choose to dig further, we talk to technologists deep in the space, we call some reference and some potential customers, and we call personal references. We talk to people you might know, and some you may not, some partners of yours and some competitors. We meet key team members (sometimes individually) and talk to existing investors. And more…There is no laundry list of diligence items (except for legal diligence which seems to have such laundry lists), but our process hopefully shows a genuine curiosity on our part to figure out how the value chain works and where will dollars accrue, how would this particular company play and win in the space, what protective moats can it build, what are its strengths and weaknesses, and how Lux and our amazing set of LP partners can help if we were to make the investment. We try to be fast and respectful of your time. And by the way, if we end up choosing to not invest (which happens more often than not), we are happy to share our learnings with you so you can be helped regardless.

And yes, entrepreneurs hold us to that standard, and we love it.


Devices, gadgets, robots, virtual worlds and selfie-sticks: some thoughts on CES

I recently attended my first ever CES show in Las Vegas. I was only there for a few days, and frankly, found it entertaining and useful. I know there are many SV folk who look down on CES. Oh well…I do plan to go back there next year if I can.

CES is a crazy place simply because there are so many people there. Long lines for taxis or shuttle buses, booked up hotel rooms from months in advance, ginormous exhibition hall floors and lecture halls from the Las Vegas Convention Center to the Sands Convention Center and Venetian. All mixed in with Las Vegas lights, music, casinos and street artists. I stayed two days, walked many miles equivalent each day and was pretty tired by the end of it.

IMHO CES is great for a few reasons:

  • It is a really a tremendous concentration of all things technology in one place. From next gen TV sets, cameras and robots to phones, PC peripherals, cars and gadgets. Some times one has to see the hundreds upon hundreds of companies innovating in technology to realize SV is not alone in moving technology forward, and there is tremendous supply and demand from consumers all around the world. Some of the most interesting companies I met there frankly came from Israel and France.
  • Unlike some other conferences, one can actually see founders and senior executives of companies often on the exhibition floors or in nearby vicinity. Its not just marketing folk surrounded by booth babes (ugh!).
  • CES is not just about large tech companies and their megabooths. Its also about the little guys tucked away in corners who might be doing something unconventional, something that may not make news this year but is bound to see more attention in the future. At the same time, major sponsors like Intel had actually also opened up much of their booth spaces to smaller startups that had incorporated their technology in the products.
  • So many different types of people attend CES. I met several fellow VCs, CEOs, product development folk, marketing consultants, young and old consumers, Las Vegas locals, and press/media. It was interesting to be able to somewhat compare and contrast the opinions formed by different people on the same products.
  • Its not a bad place to meet people if planned in advance. I mostly met people who live further away from SV – people from the East coast, Canada, Europe, and as far away as Russia.

Some other observations even though there are excellent CES summaries now published online.

  • TVs occupied a huge space. Everything was 4K and above. Curved TVs still occupied shelf space but it was clear their use-case is unclear to even their inventors themselves, and most TVs touted some level of connectivity. God only knows how many different Asian TV manufacturers were there, and fwiw, it would be hard for someone to tell a difference if they had slapped a more well-known label across their product. Some companies showed off glass-less 3D TVs as well, but they stayed a novelty. TV industry is certainly grasping for something to hang on to as its share of our attention erodes.

  • Virtual reality was present in full bloom. It wasn’t about the devices themselves as much as it was about experiences created within VR. From shared VR experiences to flying drones inside VR. Some interesting 360-degree camera systems were on display as well for video filming from 3D/VR/immersive content.
  • There were dozens of drones and drone-related companies. While US continues to muck around with the FAA regulations, drone companies are sprouting elsewhere in the world, esp in Asia. In fairness, besides DJI and Parrot, US companies still seemed to have a lead on hardware, software, UI and applicability of the small drones.
  • There was a gigantic section showing of Internet of Things devices and systems. One could not have counted how many such companies were present. Many still remained as point solutions (use an app to turn a device on/off/measure etc). I think as far as VC investments go, we may be reaching past the stage of “lets connect this device to the internet”. Next up is how these devices perform important tasks together by exploiting their collective intelligence and networking. Nest, IFTTT, Smart Things etc are early experiments in that space.
  • I was honestly a bit disappointed to see the fitness trackers/health device spaces. I may have missed some important sections otherwise what I saw was unimpressive. I am not sure what utility there is any more in simple fitness trackers embedded inside fancy looking watches and devices. We need better vitals, better integration between devices and what physicians might know/measure periodically, and then AI engines to help translate all the body of knowledge into actionable insights.
  • There were several robotics companies but only a few stood out. I don’t fully understand the market opportunity around simple remote presence systems but some of those companies had a significant presence (e.g. Suitable Technologies). Their systems certainly entertained the audience for at least a short while.
  • One thing that really stood out at CES was the need for distance wireless charging systems. Unfortunately I did not see a good solution. Witricity had a big booth, and given the company has been in stealth for years, I expect to be more wow’ed by their product manifestations than I actually was. It feels they might have an int’g business in licensing their technology to larger product companies, but much work remains to be done to turn it into something that leaves consumer with a ‘wow’ experience.
  • 3D printing has certainly come of age and now a well understood, growing field. Small printers showed how to print in composite materials, including carbon fibers, and there were plenty of companies utilizing 3D printing to mass customize their products. This trend will not stop and investing behind it is probably a wise thing to do. At Lux we continue to look for opportunities downstream in the 3D printing value chain.
  • Some other interesting technologies were around cameras/imaging (certainly mobile is eating the DSLR world which is shriveling back to really high end systems mostly for professionals), gesture recognition & eye-tracking systems for use in gaming and VR, heads up displays for cars are definitely slowly making their way towards becoming commercially available, novelty items like heated shoes, solar bag-packs etc, and tons of phone cases, screen protectors, and ah-yes, the selfie sticks! If you think of a product, somebody likely has something at CES in that category. And its more likely to be a Chinese company than from anywhere else.

I am sure CES is not for everyone. Sometimes it reminded of my visits to crowded Japanese electronics malls in Tokyo, but I actually enjoyed those places as well….so maybe I am an odd person who enjoys such setups, but it was certainly a useful spend of my time. I hope there will be Uber there next year!


Tribes, clans, groups, religions, unions, societies…a rant.

Most humans like to belong to groups – we belong to tribes and clans, we are patriotic and national, religious in our beliefs including atheism, and affiliate ourselves with certain churches or sects, we have labor unions and political action committees, identify ourselves as Democrats or Republicans, liberals or conservatives, and call ourselves libertarian or communist, so on and so forth…I don’t know why but there is clearly an innate interest in us to be communal, to ‘belong’ to a larger faction, and form societies with rules and regulations that we may or may not like if we thought about them some more. There is much good, and much bad, that results from this group behavior.

This is not a philosophical post even though it is the end of the year and time to ponder on things like this. This stream of thought came to my mind as I was talking to my kids about our own identities, and realized how complicated it is. I told them we were humans first, boy and girls, Muslims by faith, Pakistani-Palestinian-American ethnically, part of the larger Zuberi and Rimawi families, relatively liberal in our views as a family, affiliated with MIT/Yale/Wooster/McGill alumni groups, members of the Red Sox nation and the Palo Alto library and and and…gosh, so many affiliations, so many cultures to learn about and adhere to, customs to practice, rules/regulations to follow, communities to give charitable giving to, and so much more. Oh, and is there a rank order for these in terms of what takes precedence?

That last sentence is an important one that I have been grappling with recently. 2014 was in many ways a terrible year for Pakistan, country of my birth. It was hit by terrible acts of violence perpetrated by terrorists.  But what’s been most incredible is that these acts were carried out by people from inside the country, acting in the name of the same religion that more than 98% of the country ascribes to. Muslims around the world were haunted by images of terrorism committed in the name of Islam…and wondered are those guys really Muslims? Do we really want to be a part of the same group that these murderers also happen to be a part of? Do we denounce them and kick them out, and can we do that? Did people forget that we are humans first and belong to any religion afterwards? Can we create our own group of reformed Muslims and walk away without being seen as heretics?

I have been thinking for the past few weeks/months that what internet has allowed us to do now needs to become more commonly practiced: namely, creating ad-hoc groups and affiliations as needed and moving/walking away when not needed or not in line with our individual points of view. Just like on Facebook or Youtube or Google Groups where we are able to Subscribe or Unsubscribe from groups and email lists, why can’t we do the same thing in life. Join a religious sect that may preach peaceful existence and leave one that starts to incite intolerance towards people of any religion, sex, class, race or sexual orientation. Form a labor union composed of both workers and customers to demand higher minimum wage from corporate overlords, but then walk away if the same union starts to put hurdles in the path of operational efficiency. Essentially, find a way for people in the real world to come together around causes and issues they care about at a point in time and easily disperse when priorities don’t align.

I would imagine an opportunity to practice above might result in at least incremental good in the world. Without this we are living in a world where people are either born into, or find their way into, affiliations and ‘memberships’ that often have to be maintained even when it is not the right thing to do. Hey, you can be killed if you denounce Islam, or lose your job if you leave a union. I have had members of labor unions tell me that they tolerate the crap labor unions sometimes engage in simply because they have no other way to voice their valid concerns about workplace environments and benefits. I have heard devout Muslims keep quiet when murder is committed in their name because they can’t be seen as airing dirty laundry in public, and I have seen people turn a blind eye on racism, bigotry and sexism because it was one of their ‘own’ that perpetrated the injustice. Similarly I wish there was a way to easily build an affiliation with people who cared about poverty alleviation, or those who had a liberal streak in their practice of Islam, or create a social movement with those willing to commit time, money and political capital to work on exciting ways to improve how we all lived.

I am hopeful even though I know there is no silver bullet, and what I wrote above now reads more like a rant. Yes, the decision to join or leave any and all groups is, after all, in our hands. But it is not so easy at the moment…But I am hopeful that lessons learnt from ad-hoc real-time networks that we have seen come together on the internet will make this much easier in the future. Then we will be able to simultaneously satisfy the innate need to be a parter of the large ‘whole’, and still remain independent. It will be a truer democratization of our society.

‘Twas the year of the Drones. Did you get to fly one?

What an amazing year 2014 was for the drone industry. Amazing highs and frustrating lows. Lots of new companies, new startups, many kickstarter success stories, and an ecosystem of technology companies developing to service the new industry. It is safe to assume most people probably heard about drones this past year (even those who planned to shoot them down from the sky), but question is, did you get to fly one? If not, find a friend that got one as a Christmas present. You will be delighted to see even your own home in a never before-seen perspective.

I got involved in the industry several years ago as an investor when commercial drones were illegal (unfortunately they remain so), FAA had no real plan to allow for commercial drone operation (seems to still be the case) and hobbyist drones were niche toy items (that has dramatically changed in 2014). A friend of mine emailed recently when he himself got a drone as a christmas present…and asked if we had reached #peakdrones. Or was there more excitement to look forward to in 2015. I told him things were just starting to get busy in the drone world and here are only some of the things I expect to see from the industry in 2015:

  1. Hardware, software, data or service – industry remains unsure where profits will be had. On one hand this means we are seeing innovation across the value chain, on the other it also means companies are hedging and trying to change their tune on a monthly basis. Hardware companies opening up platforms for software developers and software companies trying to lock in hardware manufacturers to use their systems. Data guys tried to take the higher ground but not much data available without owning hardware & software solutions. Its a mess out there and will take a while to clear up. I like Helen Greiner’s (CyPhy Works‘ founder & CEO) opinion on this: “Customers don’t buy hardware, software, data or services. They buy solutions to their problems”. A lot of the rest is sloganeering that is more relevant to silicon valley more than anywhere else. [disclosure: CyPhy Works is a Lux portfolio company]
  2. That said, we are starting to see some fantastic companies emerge in and around the drone ecosystem. I expect 2015 to bring more data analytics (+mapping + visualization + crop models), camera (high resolution, 3D, infrared, multispectral) and service (imaging as a service) companies.
  3. Optical stabilization/computational imaging – Most UAVs are being designed for use as imaging platforms. 2015 is bound to bring the latest in computational imaging to the drone world. From onboard computational imaging to stabilize the drone itself, to computational imaging to stabilize and crop the image and real-time video editing. For example BrightSky Labs is already working on this. [disclosure: BrightSky Labs is a Lux portfolio company]
  4. Precision navigation – even though it is used on almost all drones, GPS navigation is still far from ideal for drone use. Drones often find themselves in GPS denied environment, close to buildings, under bridges, in electronically noisy environments and indoors. In the coming year or so we will see some new technologies brought into commercial world that use RTK, SLAM and other techniques to aid, and in some cases replace, traditional GPS navigation. Just as important will be sophisticated (but low cost) sense and avoid systems built around lidar or optical imaging systems which will rely on on-board intelligence for autonomous flying.
  5. True consumer drone – Yes DJI is expected to do $500M or so in revenue and others like Parrot, 3DR and others are offering consumer drones, I still believe these drones need help with form/function ease of use. They still look and feel like hobbyist playthings, rough on the edges hardware-wise and relatively complicated software to work with. Many still rely on external cameras (such as the popular GoPro) but we are already starting to see built in cameras, and rumors are ripe that GoPro is working on its own drone as well. 2015 might finally bring us that elusive pocket drone that would be cute, friendly, really easy to use, and a sexy selfie/follow-me drone that one can take on their next trip even to Disneyland. Market is still looking for the iPod of the drone world, one that I could give to my 6 year old daughter to play with and even take into the pool with her.
  6. Virtual Reality space is taking off at about the pace and fervor as drones. And I am super excited about the two coming together in the near future. While we have already seen demos of drone-view through Oculus etc, I am looking forward to VR specific camera systems getting mounted on-board so a true VR experience can be created. How awesome was this video of a drone flying through fireworks? Now imagine feeling like you are flying through it in 3D yourself.
  7. Application specific drones – some companies would have you believe a drone is a drone is a drone. That is certainly not true and I think as the industry grows up a bit we will see segmentation and application specific drone development. We may already be seeing signs of that. The $500 drone you gifted to your uncle is probably not best suited to be used by a farmer in the field or on an offshore oil & gas platform. Just because you can put solar cells on a drone doesn’t mean it is able to carry the weight needed for high resolution imaging for agricultural uses, and most likely neither the traditional multicopter or the fixed wing is the right solution for drone delivery. Similarly, while its OK to put all computational capabilities and intelligence on a cell phone for a selfie drone, a security/remote monitoring drone many need on-board real-time image processing for it to be fully effective. We are also starting to see interesting work arounds to the battery limitation problem. For example SkyCatch has shown a battery replacement system while CyPhy Works is using a micro-filament tether for power and communications. So on and so forth with many applications, especially in the commercial/industrial sectors.
  8. Management of drone fleets – Right now customers are buying what they would themselves consider prototypes, in onesies and twosies. But expectations are that if the promised value is there, drones will be operated in fleets, no different than cars, trucks and other specialized equipment. Not only will we see software tools for fleet management (especially with all kinds of sense and avoid technologies) but also a secondary service industry to grow up around repair, maintenance of fleets and management of insurance and expert pilots (until drones are allowed to fly fully autonomously).
  9. Cost - we have started to see a bifurcation in the pricing of consumer vs commercial drones. Consumer drones are priced around $1,000 (as low as $500) while commercial drones are priced anywhere from $10,000 to $100,000. There is a lot of work to do on cost reduction of drones, and in business models to make drones available for general use. I would like to see consumer drones priced at <$500 with retail store margin built in. On commercial front we should soon start seeing more drones as a service companies vs the traditional buy, maintain, manage own fleet of drones.
  10. Internationalization of US drone industry – we are already starting to see that happen. While 3D printing was touted for bringing manufacturing back to America, FAA inaction and in fact hints of regressive regulation, is forcing our fledgling drone industry to look for markets, partners and even investors abroad. Australia, Japan, France, Dubai etc will be beneficiaries of technology leadership that US held for a while. I am already starting to see foreign companies pitching investors in the US for startups bringing commercial revenues outside the US. Lawyers facilitating commerce department and ITAR clearances stand to benefit. Unless FAA can soon bring a common set of principles to govern drone use, we will unfortunately continue to see loss of local talent, technology and business leadership in this space.

2014 was definitely the year of the drones. This year the conversation changed from “drones kill” to “drones affect privacy”, and hopefully 2015 will bring conversation to “drones do good”. I am a big believer in drones, especially because drones are basically flying robots and there are so many things robots can do better, faster, cheaper than humans…we have seen what amazing things robots can do in our homes (e.g. Roomba), in commerce (e.g. Kiva) and even in hospitals (e.g. Intuitive Surgical’s Da Vinci). At Lux Capital we expect to continue to look for additional investments in this exciting space in 2015.

An Experiment to revolutionize and democratize science

I conducted undergraduate thesis research at a small liberal arts college in Ohio (College of Wooster). That experience was vastly different from the Ph.D work I later completed at MIT. During undergrad I had limited resources, little to no funding, and much of the equipment was donated/hand-me-downs where the work to fix them was likely itself thesis worthy. But despite shortage of resources, there were not shortage of research ideas – both big and small. I often joke with friends that my MIT research group’s pizza budget was probably larger than the money that was available to me for undergrad research.

Funding for science research has only become worse since I was in school. There is certainly a scramble by faculty to find research dollars for their programs and even though average grant sizes tend to be larger, they’re now best fought for as multi-faculty, multi-department, and even multi-school consortiums. Scientific research seems to have become more consensus driven, which is a pity. The days of a young grad student working independently on an interesting area that nobody else believes in, and coming up with an aha discovery, appear to be numbered. Situation is even worse if you are not affiliated with a major research institution, or are literally working out of your garage.

At Lux Capital, we have been thinking about this general space quite a bit. As investors in science/engineering based startups, we are significant beneficiaries of research that leads to breakthrough inventions at major research centers. But above trends are troubling. Below are some other observations: Read more

Looking for a business co-founder? Some things to look for

A significant percentage of our investment at Lux Capital are thematic. i.e. we find an area of particular interest (e.g. computational sound) and then investigate the space to find people and opportunities that could lead to incredible investment opportunities, including formation of newcos. We sometimes find our way to strong technical founders and then work with them to find strong business co-founders as a part of the startup sausage-making. May not always be the case, but usually it takes two to tango. Or as my friend Dharmesh Shah (founder of HubSpot) has said in the past that companies need at least two people to start. One to build the product and another to sell it.

This morning a technical co-founder and I were chatting about what to look for in business co-founders. This could be a long post, as certainly this might be the most important decision he is about to make…but here’s the gist of what I told him.

Evaluate these people for:

  • interest in, and knowledge of, the space
  • their ability to attract and retain the best talent
  • their networks in potential customers and partners
  • their entrepreneurial DNA, drive
  • thinking big strategically. Wanting to hit it out of the park and win
  • management sophistication, esp in early stages when there is much ambiguity
  • nice people to work with
Would love to hear what others might add to the list. Or how others think about finding business co-founders.

Electronics/hardware retail stores bouncing back with the hardware tsunami?

There was a time when Best Buy, Circuit City, CompUSA, and their smaller cousins like Frey’s (Bay Area) and MicroCenter (Cambridge) etc, were awesome places to visit. These stores carried, above all else, the latest and the greatest in electronics and hardware products. I used to go and spend hours in such stores.

And then these stores got into trouble. Some went bankrupt, others shrunk in size/scope, and others continued to struggle on with enthusiasts and hobbyists frequenting them. There were lots of reasons for their demise but that’s not my concern here…what is to be noted is that while these stores’ futures were sinking, another amazing chain of hardware retail stores was surging at the same time: Apple. Yes, Apple stores had an amazing futuristic design which attracted an eclectic audience, but its hard to miss the fact they also had amazing products. Beautiful, simple, consumer-friendly devices that consumers wanted.

I spent a few hours at a Best Buy store this weekend (San Carlos, CA). I have to say I was quite surprised at how different it actually looked from what I remember of such stores. While the store looked different, and more modern with LED lighting, wider aisles and neatly laid out sections, what was really cool was that the stores prominently displayed and carried tons of products that were actually exciting! It wasn’t just all various sizes of TVs and DVD players, rather similar home entertainment systems, and aisles upon aisles of CDs and DVDs…the large sections were dedicated to aspirational, practical stuff people actually want. The hardware tsunami had clearly invaded the electronics retail store.

The store had large sections dedicated to products from large companies that define hardware (+software) technology today: Apple, Microsoft, Google, Samsung. I comfortably browsed through the various phones, tablets, laptops, computer monitors, accessories etc. In one place I was able to compare the Google Chromecast with Apple TV, and decided I wasn’t ready for either as yet. I saw 4K TVs and the latest cameras utilizing 4K sensors (e.g. GoPro Hero4). I didn’t see a 3D printer but maybe I didn’t look hard enough.

In another section I looked through a variety of robots, drones and fun things to play with. In yet another I saw the latest technologies for connected home displayed. From various types of IP cameras and associated cloud services to digital thermostats, smoke alarms, water flooding sensors, ice sensors, and connected light bulbs. I saw a young couple buying a Philips Hue internet connected LED light bulb to add to decorations for their newborn’s nursery!

I am glad to see this new generation of hardware/software products are finding relatively prominent shelf-space in big box retailers like Best Buy, Target, Home Depot etc. It is good for the stores and good for the consumer hardware industry. Kickstarter and Indiegogo have been great in promoting new hardware products to enthusiasts and to early adopters , but these companies eventually need distribution channels above and beyond the web, and choices have been limited in the past. In the process these retailers can possibly also rebrand themselves, and once again become an attractive place for young consumers to spend time (see also NYTimes: Electronics Retailers Scramble to Adapt to Changing Market). If done right, its a win-win for all parties.

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