Bayshore Networks, an emerging leader in Industrial IOT cyber security was completed in March 2017 and was syndicated with Trident Capital. The company secures and protects critical Industrial IOT assets. Secret Double Octopus (SDO) is an Israeli cyber security company whose breakthrough technology enables a password-free environment with trust channels established via a mobile phone app. That investment was completed in April 2017 and was syndicated with JVP, Iris Capital, and Liberty Media Ventures. Sherpa Digital Media, an emerging leader in Augmented Reality for the enterprise, was completed in June 2017 and was syndicated with Rally Ventures. The company securely manages, measures and automates video content and reaches customers, prospects and employees across all devices and locations. 6d bytes, an emerging leader in robotics, machine vision and AI, was completed in June 2017 and was syndicated with Partech and leading angel investors such as Plug and Play. The company is transforming the way the food and beverage industry approaches the preparation and serving of healthy foods. Drishti, a computer vision spin-off of SRI (Stanford Research Institute, Menlo Park) joined the BGV portfolio in June 2017 and was syndicated with Andreessen Horowitz (a16z). It provides a highly innovative solution to improve the efficiency of human operators in manufacturing assembly lines. “We are grateful to enjoy the support of exceptional repeat and new investors in fund III to implement our investment strategy,” said Eric Benhamou, founder and general partner of Benhamou Global Ventures. “The sales of Grid Dynamics (acquired by TeamSun) and of Zentri (acquired by Silicon Labs) in Q1 2017 are a further evidence of the success of the BGV model.” The partners of BGV III are Eric Benhamou, Anik Bose, Eric Buatois, Yashwanth Hemaraj, Marina Levinson, Amir Nayyerhabibi, Janice Roberts based in BGV’s Palo Alto office, and Barak Ben Avinoam (based in BGV’s Tel Aviv office in Israel). About Benhamou Global Ventures BGV is an early-stage venture capital firm with deep Silicon Valley roots, with an exclusive focus on enterprise technology opportunities in global markets. BGV currently has 25 active companies in its portfolio. The BGV team of 8 investment professionals has successfully built and implemented a cross-border venture-investing model with companies from Israel, Europe and Asia. Eric Benhamou, former chairman and CEO of 3Com, Palm and co-founder of Bridge Communications, founded the firm in 2004. Comprised of an experienced partnership team of global operating executives and investors, BGV is often the first and most active institutional investor in a company and has a powerful network of technical advisors, executives and functional experts who actively engage with its portfolio companies. The company has offices in Palo Alto, California and Tel Aviv, Israel. For more information, visit www.benhamouglobalventures.com.New Investments, Fresh Capital, Recent Exits, Mark Momentum for Benhamou Global Ventures PALO ALTO, CA –(Marketwired – June 28, 2017) – Benhamou Global Ventures (BGV), an early-stage venture capital firm with deep Silicon Valley roots and an exclusive focus on enterprise information technology opportunities in global markets, announced the final close of their third fund with $80 million of investable capital. Investors in the third fund include both existing LPs as well as new international and institutional LPs including several US, European, Israeli and Chinese investors. Extending the strategy of fund BGV II, BGV III will focus on enterprise IT sectors including cyber security, cloud-based infrastructure services and applications, web scale infrastructure, advanced analytics and artificial intelligence as well as industrial Internet of Things (IOT). The firm will continue its cross-border investment strategy, identifying and investing in promising companies originated in Israel, Europe and Asia and helping them build a presence in Silicon Valley. BGV has made 5 investments from the BGV III fund recently:
Benhamou Global Ventures (“BGV”) is an early-stage venture capital firm with deep Silicon Valley roots and an exclusive focus on enterprise information technology opportunities in global markets. BGV currently has 20 active investments across its fund II and fund III portfolios. With offices in Palo Alto, California and Tel Aviv, Israel, the BGV team has been able to successfully build and implement a successful, cross-border venture investing model. The fund was founded by Eric Benhamou, former chairman and CEO of 3Com, Palm and co-founder of Bridge Communications. BGV often comes in as the first institutional investor in a company, and their network of technical and functional experts actively engage with their portfolio companies. BGV’s Investment Thesis: They are investing in tech companies at the intersection of enterprise digital transformation, early stage and cross border innovation. Digital transformation is changing the way enterprises buy, rent, build, optimize and secure IT infrastructure and applications. This is creating a new generation of technology companies in cloud ($125B market), mobility/IIOT (expected to reach $10T within 15 years) and cyber security ($75B market). An increasing proportion of such technology innovation is occurring outside the U.S. (i.e., Israel, Europe, India, China etc) fueled by the emergence of regional technology hubs. Many of these startups seek to build cross-border companies by establishing U.S. presence and headquarters that leverage their offshore R&D. Reflecting this trend, VC investments outside the U.S. have grown from $1.3Bn to $57Bn from 2005 to 2015 BGV applies a value-disciplined and active approach to make seed and series A investments in enterprise startups at the intersection of the above trends. They focus on companies that contribute to very critical business outcomes – business resiliency, productivity, agility and customer centricity. The team is seeking out startups that are capital efficient, deliver quick value to customers and are focused on unleashing enterprise productivity. Post-investment BGV plays an active role in utilizing their 100+ years of collective operating experience in building enterprise IT companies and assists its portfolio companies as they “cross the chasm” and identify strategic partnership opportunities with larger industry players. A third of BGV’s portfolio is comprised of cross-border startups and they play an active role in helping them set up a US presence and connect to the Silicon Valley ecosystem. How Does BGV’s Portfolio Fit In? BGV invests in 3 types of deals that leverage the above trends including highly disruptive new category creators, superior fast followers and special situations (i.e., spin outs, pivots and or recaps). Totango is an enterprise customer success management technology company with HQ in Silicon Valley and R&D in Israel. The company addresses a white space within enterprises. It focuses on the fast growing market opportunity of SaaS companies whose continued success depends heavily upon their ability to manage customer retention, churn, upsell and lifetime value. The Customer Success function has become a large part of enterprise sales today. It aims to streamline the onboarding process, maximize user engagement, minimize churn and increase the upsell success rate of a subscription business. BGV led and syndicated the most recent equity round, and also assisted in key hires and strengthening the board with industry experts. Bayshore Networks is an IIOT cyber security startup addressing a key pain point in an old sector undergoing digital transformation. The company enables the operational technology (OT) part of the industrial enterprises to connect to the internet securely while protecting their manufacturing assets from cyber-based threats. Bayshore enables asset intensive industries that are seeking operational efficiencies by bridging their IT and OT environments securely, collecting the big data and applying the analytics required to unlock the value of these assets. BGV participated in the Series A syndicate and has introduced the company to a number of scale-up strategic partners. Blue Cedar Networks is a spinout from Mocana. The company secures data at rest and data in motion being accessed by mobile devices. In today’s era of perimeter-less organizations, the app has become the endpoint for establishing the security controls that protect critical organizational apps and data. The company’s disruptive non-client centric architecture enables enterprises to protect their assets and empower their users across the Extended Enterprise—employees, partners, consumers, re-sellers, distributors and all other non-employees who need access to enterprise data. BGV led the spinout and Series A financing and subsequently played an active role in shaping the company’s strategy, introducing the company to several strategic partners and hiring key executives. Thank you to Eric Benhamou, Anik Bose and the BGV team for assisting us with this post. Source: http://www.alphavp.com/news/2017/04/benhamou-global-ventures-enabling-digital-transformation-enterprise/
- Large number of devices and sensors
- Need for low power and low bandwidth connectivity and
- Fragmented nature of the vendor market
- A key theme of IIOT is transforming existing businesses through operational efficiencies, not just creating new ones. This requires start-ups in this arena to establish collaborative models with incumbents instead of do-it-alone models in order to create and capture value. This will likely result in a bias towards M&A exits rather than billion $ IPO’s.
- Most traditional VC’s lack domain knowledge around not-so-glamorous IIOT use cases and are therefore unable to provide this value add to start ups. This is another reason for startups to work with VC’s with deep operational experience in this industry as well as collaborate with larger players earlier in the process for product definition and validation.
- New business models are emerging as VC funded ideas do not need to be just broad and finely tuned (as in other sectors). In fact many IIOT startups are narrowly focused on specific problems and vertical markets. Such a “vertical solution” approach is often outside the comfort zones of most traditional VC’s. Furthermore issues around data privacy and data ownership are creating their own challenges around data monetization for startups.
- GE is making investments around building smarter industrial machines and delivering business process improvements to its traditional customer segments such as aviation, rail, healthcare, power and oil and gas through advanced analytics. Key investments include being a founding member of IIC, Predix Industrial data lake development and eco-system investments to seed and identify best of breed IIOT analytics applications.
- Cisco is focusing its efforts on the theme of intelligent and secure-IIOT infrastructure and is partnering aggressively with industry incumbents like ABB, Honeywell and GE to deliver complete solutions. Key investments include ruggedized industrial networking infrastructure, acquisition of Jasper Networks and investments in PaaS cloud connectivity startups.
- Intel is touting IIOT as a key driver of its virtuous cycle of growth (data center and memory being the other drivers). Key investments include IOT SoC chips and investments in IIOT applications and infrastructure to create demand for its chips.
- Startups delivering core solutions instead of technology building blocks alone. BGV portfolio company Intellivision (intellivision.com) a leader in video analytics and smart connected IOT cameras is a good example. The company delivers full video analytics solutions for surveillance and smart connected homes. In an era of robotics, drones and automated vehicles, where a multitude of sensors help in control and maneuverability, computer vision has become a critical technology need. While open source solutions like OpenCV provide a good starting point, accuracy and real time are features one cannot compromise on. IntelliVision has some of the highest accuracy rates and is integrated directly into chipset. In order to win with this strategy, you have to have best-in-class solutions with proven performance metrics.
- Focus on Analytics and Cybersecurity – the sectors where startups will be best poised to create and capture value. Analytics innovation will be driven two factors: a) Tsunami of MegaData – According to IDC 40% of all data generated by 2020 will be machine generated, yet most companies remain ill prepared to leverage this for competitive advantage; b) Latent Economic Value – McKinsey and ABI estimate that $11.4 trillion will be created from IIOT driven productivity improvements. A big driver of this will be analytics ($25B from Maintenance analytics alone). Innovations in Machine Learning (Neural Networks/Deep Learning) – are beginning to deliver the data science needed to deliver insights from the above. This spans issues such as ability to scale, improved signal to noise ratios, lack of labeled data for training, and the use of deep learning models that adapt as the contextual environment changes. Companies like Predikto (predikto.com) – Predictive Maintenance for Transportation Verticals along with Sentient (www.sentient.com) – AI platform employs deep learning to a number of verticals and Maana (www.Maana.com) – Data mining and machine leaning solutions for IOT) are promising early stage companies in this area. Cybersecurity will be the another area of significant value creation opportunity for startups because of two reasons: a) The surface area of attack for IIOT is immense due to factors such as – Cloning of things, malicious substitution of things, eavesdropping attacks, Man-in-the middle attacks during key exchanges, firmware replacement attacks, routing attacks, Privacy threats and extraction of security parameters; b) Security is fast becoming the #1 bottleneck for broader IIOT deployments (451 research findings that the #1 concern inhibiting IIOT deployments amongst enterprises is security). Companies like Bayshore Networks (www.bayshorenetworks.com), Device Authority (www.deviceauthority.com) and Bastille Networks (www.bastillenetworks.com) are good examples of startups in this space.
- Developing Solutions for Vertical markets – We believe that there will be an emergence of IIOT full stack vertical solutions startups that can deliver solutions required by enterprises instead of having to pursue a DIY strategy with consultants and SI’s. Deep product experience, filling in a gap that is not available within the SI world, is a necessity to win in this market. A common challenge such investments face is questions around the size of the total and serviceable addressable markets (TAM and SAM.) Contrary to a broad approach, startups have to choose a “niche market” that they can dominate. A successful strategy for such full stack vertical solutions startups is to have a viable “bowling alley” strategy (http://chasminstitute.com/) where they seek a beachhead that will allow them to leverage their success in the initial niche market to attack an adjacent related niche market.
- Partnering with Larger Eco-system Vendors – Finally startups will need to leverage the domain knowledge possessed by strategic partners around IIOT use cases to shape their product and technology development earlier at earlier stages of their life cycle.
- Cross-border start ups – According to the McKinsey Global Institute report on the Internet of things, “over the next ten years the potential number of IoT uses is likely to be higher in developing economies. The applications that drive the most value in developing economies differ from those in advanced economies and, in some cases, because there are no legacy technologies to displace, developing economies can “leapfrog” in IoT implementations”. The high volume of estimated installations in developing economies reflects the shift of global economic growth to those areas, which has important implications for companies that compete in IoT equipment and service markets. China will be one of the largest users of IoT systems in factories as well as in other settings. Countries with oil and gas operations—among the most important early adopters of IoT—will also be major geographic markets.” Cross-border startups that can address these international market opportunities will be well positioned for success.
- Around balancing vertical investment bets instead of purely broad horizontal ones
- With the DNA of corporate partnering required to collaborate with incumbents in the early days to deliver complete enterprise solutions rather than pursuing purely go it alone value building strategies
- Towards return models with a bias more towards M&A exits than Unicorn IPO exits