Pattern recognition using Neural Networks has come a long way – When I first got exposed to it almost 25 years ago, a 500 node Neural Network would take days to train and would perform pathetically compared to a standard Bayesian classifier. The explosion of computing power, especially the parallel processing power in the GPU’s, has made training of large, deep neural networks possible. Given the computing power and the advent of various flavors of Neural Networks, many of the pattern recognition problems are well solved today. Image Recognition and Speech recognition have reached near 100% accuracy because of these deep models.
As a fund, we were looking at pattern recognition problems using AI, especially as applied to industry verticals. Our thesis was that to create significant value, technology needs to go beyond images and understand higher level context – actions, sequence of actions … If a system can recognize a complex context, spanning arbitrary time frame, that would be powerful and can be applied across variety of settings and industries. However, as you go towards understanding of complex contextual situations, the problem gets exponentially harder and requires lot more than just computing power. We were looking for companies that would tackle this problem. We didn’t find very many companies.
About a year ago, Nagraj Kashyap and Samir Kumar from M12.vc introduced us to Roland, Moritz and the TwentyBN team. Right off the bat, in the very first meeting, we were impressed with their technology and vision. The team came with a great pedigree as Roland himself was one of Geoff Hinton’s students. TwentyBN had spent a lot of time at the problem of understanding actions and context and built a solution from the ground up. If recognizing context and actions itself is a hard-enough problem, they were taking it one step further and solving it in real time and at the Edge. To say that we were hooked, would be an understatement.
As we started working with TwentyBN, we got to know the team better. Every company is a journey. I have rarely seen a startup go in a straight line in terms of direction, focus, milestones or scale. There is constant evolution and course-corrections and setbacks and adjustments – learning from the market, customers, investors and team members. It is a fine balance though – management team should be willing to take feedback and course-correct, but not so fickle that they are flip flopping on focus every day. They need to have strong conviction on the value they bring to the market but not too stubborn to listen to what the market is saying. In my experience, the companies that reach greatness are the ones that manage this fine balance. Working with the TwentyBN team through the last 12+ months, we were impressed with the team’s willingness to take critical feedback while being steadfast on their conviction and execution. We watched the team launch the Digital Avatar product, Millie, based on their underlying technology with a focus on Retail. The company in turn, has been recognized by CB Insights as a Top 100 AI company and Top 5 Retail AI company.
One aspect we look carefully when investing is the composition of the board – it is often underestimated. Having investors around the table that help with the company’s journey and can make decisions quickly and decisively is essential. Between Peter, Samir, Christian, Alex and Lior, we are very excited to have a great set of investors and people on the board.
It is fair to say we are very bullish on TwentyBN and the value that they bring to different industry segments. We believe that they are creating a new category with their technology. I am sure there will be lots of excitement, learning, setbacks and wins along the way and we are excited to be part of the journey ahead with TwentyBN!
As 2019 winds down, we at MFV Partners are thankful to all our partners — Entrepreneurs, Limited Partners, Co-Investors and Ecosystem participants. This has been a great year for us. Our 4 portfolio companies from 2018 have grown leaps and bounds and will continue to great heights in 2020 and beyond. We invested in 3 more companies in 2019 bringing our portfolio count to 7. More details on our new investments very soon!
As a fund, we focus on companies primarily differentiated through fundamental technology (aka deep-tech) in Series A stage. We focus on such companies disrupting traditional industries like Automotive, Manufacturing, Enterprise Services … Here are some of our high level observations from 2019:
It seemed clear in 2019 that Autonomous driving in every street in America will be a certain reality at some point, but it is not coming in large waves soon. There are regulatory issues that need sorting out, the technology needs more work, and the economics of autonomy needs proving out. Startups targeting pure-play on-street / freeway autonomy faced headwinds in 2019. It is healthy for the industry to go through this.
That said, two things became clear:
MFV View: We are long on Automotive tech despite the slowdown in Autonomous Vehicles — the disruption of the transportation industry is in its infancy. We have long way to go.
Entrepreneurs’, customers’ and investors’ excitement in Robotics has been ramping up and went up significantly in 2019. Robotics startups are finding traction across a variety of industry verticals — Manufacturing, Transportation, Construction, Agriculture, Hospitality and many more. Robotics has had a paradigm shift in the last few years. Robotics used to be all about hardware and motors and grippers and legs. While continued work happens there, off the shelf hardware is good enough for most applications. With the progress in Computer Vision and AI, the problem has moved from Hardware components to Software and Intelligent Systems. Robotics Companies are really Software companies now. We have seen full stack Robotics companies build products from scratch, pilot with customers, deploy and make revenues — all using just Seed Capital (and interestingly with less capital than many Enterprise Software startups 🙂 )
MFV View: We are long on Robotics — we see significant gaps in the current value chain and there are many value creation opportunities.
Applied AI startups may go through AI winter, but AI Compute is here to stay. There are questions around deployment traction of AI startups in Enterprises. Big Companies that have significant data gravity are probably doing better with AI deployment than new AI startups. But it has become very clear now that for AI / Neural Networks, a new type of compute architecture is required — there are no two ways about it. Current architectures of CPU, DSP and GPU are limited for neural network implementations. Lot of the current activity is in servers where model training is driving compute requirements. We saw big investments, valuations and exits in the area. Newer architectures are required for inference on the edge as well. There are more than 100 companies targeting some form of AI compute architecture now.
MFV View: Performance matters, edge or server. Edge AI architecture requires ultra low power but not at the cost of performance. Our investment in Analog Inference is squarely focused on this area.
We saw the collapse of capital driven growth (revenues and valuation) through WeWork and several tech IPO’s this year. Many cheered at the WeWork collapse and public market performance of high-capital tech IPO companies, indicating that things are changing. But we haven’t seen that effect trickle back into private company valuations though — early or later rounds. Quantitative Easing has been a factor — Softbank or not — over the last 10 years. There is plenty of cheap capital available that is willing to take on risks in search of returns. Just in US, there are 1000+ micro VC funds now and the capital deployment has surpassed the peak of 2000. This question will continue on in 2020.
Going into 2020, we are bullish on the ecosystem and we continue to be amazed by the resilient entrepreneurs driving disruptive innovation through several industries. We are thankful for the great year we had in 2019 and we look forward to working with all the ecosystem partners in 2020 and beyond.
MFV Partners wishes everyone a happy, healthy, peaceful and prosperous New Year 2020!