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Reinventing the Factory Stack

Perspectives from an Early Stage VC

April 25, 2018

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Agenda

Opportunities in Industry 4.01Challenges for Startups2

3 Challenges for Corporates

Q&A4

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Introduction

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Chart shows number of investments per fund by category.

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&A

€75M Fund IV€200M AUM

12 people there of6 investment team

SaaS & MarketplacesEurope & North America

OPPORTUNITIES

Industrial Engineer1.5y with P9

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Opportunities

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Chart shows number of investments per fund by category.Source: https://techcrunch.com/2013/04/18/formation-8/

The Smart Enterprise Wave

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Chart shows number of investments per fund by category.

Shift to service orientated business models

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Chart shows number of investments per fund by category.Source: http://www.kaeser.com/int-en/products/sigma-air-utility-operator-model/

Example Kaeser: instead of investing in a complete compressed air station, all you pay for is the compressed air you actually use

Air-as-a-Service

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Chart shows number of investments per fund by category.

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Chart shows number of investments per fund by category.

US Startups raise more capital in similar application areas compared to German startups

Germany

Predictive Maintenance2014, raised $19M

CAD & Simulation2012, raised <$20M

3D Printing2013, raised $13M

3D Printing2015, raised $212M

CAD & Simulation2012, raised $169M

Predictive Maintenance2014, raised $263M

USA

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Chart shows number of investments per fund by category.

Reinventing the Factory Stack

Industry 4.0 is not really about replacing machines and equipment but about leveraging software, exploiting the captured data and making machines and human workers smarter and more efficient.

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

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Challenges for Startups

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Chart shows number of investments per fund by category.

Ending up in the „innovation-friend zone“

Source: https://a16z.com/2018/01/24/mixed-signals-going-to-market-pre-chasm/

Founders

one-sided knowledge transfer

little budget

little progress after pilot

you end up thereyou want to sell here

end-user

buying center

budget

product champion

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

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Chart shows number of investments per fund by category.

Nobody gets fired for buying SAP (yet)Pitch the problem, not the solution and champion your buyer

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

• Sell a use case and not technical buzzwords („AI“). People buy a solution to a problem, they don’t buy IoT.

• Adapt your language to the industry: „control room“ vs. „dashboard“.

• Try to sell high - the worst thing that can happen is that they forward you to somebody down the hierarchy.

• Platform-second: try to start with a narrow use case.

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Chart shows number of investments per fund by category.

You can follow a lean approach even though you are selling to enterprise companies

Source: https://docs.google.com/presentation/d/1NC9tPdrmd7wJb2Cd3XERDZAKoGEaVeKF9uON_O3ZGPE/edit#slide=id.p

• Talk to users several times per week.

• Talk to buyers several times per week.

• Short iteration cycles.

• Embed customer’s feedback.

• Design matters.

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

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Challenges for Corporates

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Chart shows number of investments per fund by category.

The „good“ news

23% of the GDP value add comes from manufacturing in Germany

48% of the mid-sized world market leaders  the so called Hidden Champions are coming from Germany

The „bad“ news

„If you went to bed last night as an industrial company, you’re going to wake up today as a software and analytics company.“ (GE Chairman & CEO Jeff Immelt)

We have to transform industrial companies into software companies

Source: https://sodio.tech/lean-startup/

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

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Chart shows number of investments per fund by category.

Manufacturing is data rich but information poor

Source: http://agcpartners.com/content/uploads/2017/07/AGC-Manufacturing-Analytics-Jul-2017.pdf.

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

It is probably going to be easier for software companies to enter new industries (e.g. Google → Automotive) than for traditional industrial companies to hire top notch developers.

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Chart shows number of investments per fund by category.

Theoretical Example: what do to with a €10M budget?

+

McKinsey project for 6 months

Build an internal innovation unit

1-2 Acqui-Hires

100 pilots á 50k

Risk?

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Chart shows number of investments per fund by category.

What founders (and I) would like to see more from corporates

Commitment > capital

Tailored standards for working with startups

Faster processes

Clear communication and responsibilities

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

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Get in touch

robin@pointninecap.com @robindchnt www.pointninecap.com

Q & A

https://medium.com/point-nine-news

Sign-up for my Newsletter: http://bit.ly/2FSUHfr

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Backup

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Chart shows number of investments per fund by category.

Viessmann: A healthy risk appetite

It is probably going to be much easier for software companies to enter new industries (e.g. Google → Automotive) than for traditional industrial companies to hire top notch developers.

Venture Capital Incubation Community

Source: https://www.v-co.io/

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

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Chart shows number of investments per fund by category.

Understanding the different personas andhow you can sell to them

Head of Production

Goals* OEE, Efficiency, Quality Reliability, Stability, Security OEE, Efficiency, Quality

Requirements* Convince works council Standards, No new systems, Security

Only one use case, No platform

How to support?* References, Roadmap, Vision

Documentation, Standards, Checklists, Little integration References, Ease of Solution,

Little implementation costs

Head of ITHead of Factory

(+) (+)

CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIESINTRODUCTION

*Examples

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Some interesting examples

INTRODUCTION CHALLENGES FOR STARTUPS CHALLENGES FOR CORPORATES Q&AOPPORTUNITIES

Collaborative lightweight robotic system designed specifically to assist humans

High quality custom prototypes and end‑production parts online.

Unlocks your industrial data with digital twins that enable true digital transformation.