1660601226303 Larsonheadshot1april2019crop

When is it OK to buy from a startup?

May 27, 2021
Access to innovation may be worth the risk, but go in with eyes wide open

As the digitalization of industry began to gather steam a few years back, industry was suddenly sexy again—at least for tech startups focused on new software and connectivity technologies. As a journalist covering the industrial sector, I can’t even begin to tell you the number of PR inquiries from unheard of companies that have been coming my way—many latching onto this rising “Industrial IoT" tide from which manufacturing and the process industries were projected to be primary beneficiaries.

Not that there’s anything wrong with that, but statistics compiled by TechCrunch indicate that only 40% of new tech startups survive past initial seed money investments, and fewer than 10% make it to a Series C round of venture capital funding. This all got me thinking: we at Control are often writing about best practices and new technologies that can help you, our readers, run your plants more safely and sustainably. But what about the decision to buy an innovative new technology or service from a relatively unknown company? What questions do you need to ask to minimize the risk of being left holding the bag when that company goes under? Is the risk really worth the potential reward?

I recently had the chance to put these questions to two gentlemen uniquely qualified to address these issues in a recent episode of our Control Amplified podcast. Joining me were J.P. Bauman, principal at Altira, a venture capital fund that focuses on venture/growth-equity stage companies serving the energy and broader industrial space, and Michael Risse, VP and CMO at Seeq, a software company founded to put the power of easy-to-use analytics for time-series data into the hands of the process engineers who could effect positive change on behalf of their organizations.

Yes, Seeq was one of those “unheard of” companies that first came to my attention back in 2015 when I ran into Brian Parsonnet, one of the company’s cofounders and CTO, at the Emerson Global Users Exchange. I first met Brian some 25 years earlier when he was setting technology direction for Loveland Controls, a calibration systems provider later acquired by Honeywell. Fast forward to today, and Seeq has recently cleared its first round of Series C investments, having grown from 10 to 150 employees since its founding in 2013.

Parsonnet’s credibility in our space certainly helped establish Seeq’s credibility in my mind—and it think it must have for Bauman as well, since Altira became one of Seeq’s early stage investors. And that brings me to what Bauman identified as the clearest leading indicator of an organization’s success: the experience and quality of the leadership team.

“Solutions evolve over time and are always going to look a little different than what was originally drawn up,” Bauman says. “But if you start with a great team, I think that tends to be the biggest sort of predictor of success.”

Momentum is another key qualitative measure that can help one gauge the viability of a startup—whether you’re looking to purchase software or make a capital investment, adds Risse. Start by taking a look at a potential supplier’s website. “Has it been updated recently? When was the latest blog posted?” he asks. “Then check their financial momentum at a website like CrunchBase, where you can see what funding they’ve received.”

And while it’s often an individual champion that recognizes what new value a relationship with a relatively untested provider might bring, a strategic partnership with an investment firm like Altira can also help to match needs and opportunities that are not being met by incumbent suppliers with innovative alternatives.

“We vet the technologies and do the intellectual property due diligence on potential suppliers, but then we include our strategic partners—which include major energy and industrial organizations—in the scaling process,” Bauman explains. “We help manage risk for our partners, but also help build entrepreneurial tech companies into mature, professionalized organizations, so they can be a sustainable, valued vendor for industrial customers.”

About the author: Keith Larson
About the Author

Keith Larson | Group Publisher

Keith Larson is group publisher responsible for Endeavor Business Media's Industrial Processing group, including Automation World, Chemical Processing, Control, Control Design, Food Processing, Pharma Manufacturing, Plastics Machinery & Manufacturing, Processing and The Journal.

Sponsored Recommendations

Measurement instrumentation for improving hydrogen storage and transport

Hydrogen provides a decarbonization opportunity. Learn more about maximizing the potential of hydrogen.

Get Hands-On Training in Emerson's Interactive Plant Environment

Enhance the training experience and increase retention by training hands-on in Emerson's Interactive Plant Environment. Build skills here so you have them where and when it matters...

Learn About: Micro Motion™ 4700 Config I/O Coriolis Transmitter

An Advanced Transmitter that Expands Connectivity

Learn about: Micro Motion G-Series Coriolis Flow and Density Meters

The Micro Motion G-Series is designed to help you access the benefits of Coriolis technology even when available space is limited.