All posts in “Private Equity”

Neos launches IoT powered home insurance UK-wide


What do you get if you combine the Internet of Things with the business of home insurance? UK startup Neos is hoping the answer is prevention rather than (just) payouts.

Its home insurance product is intended to lean on sensor tech and wireless connectivity to reduce home-related risks — like fire and water damage, break ins and burglary — by having customers install a range of largely third-party Internet-connected sensors inside their home, included in the price of the insurance product. So it’s a smart home via the insured backdoor, as it were.

Customers also get an app to manage the various sensors so they can monitor and even control some of the connected components, which can include motion sensors, cameras and smoke detectors.

The Neos app is also designed to alert users to potentially problematic events — like the front door being left open or water starting to leak under their kitchen sink — the associated risk of which a little timely intervention might well mitigate.

It sees additional revenue opportunity there too — and is aiming to connect customers with repair services via its platform. So the service could help a customer who’s away on holiday arrange for a plumber to come in and fix their leaky sink, for example (there’s no smart locks currently involved in the equation though — Neos customer can name trusted keyholders to be contacted in their absence).

“The vision really is about moving insurance from a traditional claims, payout type solution… to one that’s much more preventative, and technology’s really the enabler for that,” says co-founder Matt Poll. “We also think that customers get quite a raw deal from their insurance company… for being a really good customer and not claiming… And no value.

“So what we’re trying to do is to provide value to customers throughout the term of their policy — allowing them to monitor their own homes, using our cameras and the devices that we give them. If there is an issue, they’ll get alerted. Most importantly they or us through our monitoring center and assistance service can put the things right… In that sense both the customer and us benefit if we’re successful.”

On the insurance cover front Poll claims there’s no new responsibilities being placed on customers’ shoulders — despite all the sensor kit that’s installed as part of the package. “There’s no responsibility placed on the customer. We’re really clear about that,” he tells TechCrunch. “Customers do ask this question — oh what if I don’t arm the alarm, does that mean I’m not covered? And our answer is simply of course you’re covered.”

The startup was founded 18 months ago by Poll, an ex-insurance guy, combining with a more technical co-founder. The team market tested their proposition last year in and around London, partnering with Hiscox on the insurance product offering for that trial. They’re now launching their own branded, own insurance offering nationwide.

Neos is actually offering a range of home insurance products, including a combined contents plus buildings insurance offering (or either/or), across three pricing tiers — aiming to support different levels of coverage and different types of customers, such as flat vs house dwellers, for example, or homeowners vs tenants.

While it’s generally aiming to be tech agnostic when it comes to which smart home sensors can be used — supporting a range of third party devices — Neos has developed its own smart water valve, for example, as Poll says it couldn’t find an appropriate existing bit of IoT kit in the market for that.

“It uses machine learning to monitor an individual’s water signature within their property over a period of a couple of weeks and then we can identify from that if there’s any leaks — small or large — and most importantly if a leak does arrive the customer or our monitoring sensor can turn the water off remotely,” he notes.

It’s also built its own hub to control the firmware on the third party devices its platform is integrating with. “We want to put ourselves out there to give customers the best solution for the job and move as the market moves,” says Poll on Neos’ overall philosophy towards hardware.

Despite all this additional kit to be installed in customers’ homes, Poll bills the insurance products as competitively priced (and positioned) vs more traditional insurance offerings. Neos’ prices vary from “approximately £15 to £50 per month”, which it says includes “all the necessary hardware, 24/7 monitoring and assistance plus the comprehensive insurance cover”.

“We’ve got some good early traction and I think the price point that we’ve come in at is attractive, and the value proposition is there,” says Poll, noting that the product will be on price comparison sites “by the end of this month — at the very latest”, as well as being offered through property website Zoopla, which is a distribution partner (and investor) in Neos.

He also says the insurance quote process has been radically simplified by Neos drawing on a range of publicly available data so that potential customers don’t have to answer to a large number of questions just to get a quote.

“We can actually give customers a full quote from just their postcode and their address,” he says. “We use 261 different data sources… One of our partners and early investors is Zoopla. They have a lot of data that they provide us. We also use data from Landmark and Land Registry — local authority data.

“Because all this data’s publicly available. We don’t ultimately need to ask how many bedrooms or bathrooms you’ve got — in most cases we already know that data. Actually in most cases we know the square footage of your property which is a much more accurate predictor of risk anyway.”

Another strand of the go-to-market approach is it’s also working with existing insurance brands to white label its offering — setting it up to scale more quickly into markets (and regulations) outside the UK.

“We’re just about to launch an Aviva-backed solution,” says Poll. “A lot of the big insurers are looking in this space but haven’t done anything… So we’ve had a lot of interest outside of just our direct Neos brand from larger insurers based here in the UK, Europe and also in the US.”

He says Neos is also hopeful of signing a “large scale partner in the US” — one of the top five home insurance companies — which would be a second strand to its white labeling/enterprise solution bow if they nail that deal down.

“Markets like the US… are very different from a regulation point of view and cost of entry for a small business like us to enter, so that model makes sense. But we’re very much — certainly now and we’ll always be — focused on the Neos direct to consumer brand,” he adds.

Poll says he’s hoping for a minimum of “tens of thousands” of customers within a year’s time for Neos’ b2c play — and “ideally” significant growth above that. “If you add in the b2b play as well in terms of customers actually utilizing our platform I think the potential is significantly higher than that,” he adds.

The startup has previously raised £5m in Series A funding led by Aviva Ventures and with BBC sporting personality Gary Lineker also investing. As well as Zoopla, another strategic partnership is with Munich Re, which has also invested.

Interesting takeaways from its beta period include that customers were keen to have help installing all the sensor kit (Neos is offering an installation service for a fixed price if users don’t want to fit the kit relying on its instructions themselves), and that security concerns appeared to be more of a smart home driver for the product than risks such as water leaks, so Neos tweaked some of the sensor bundles it’s now offering.

Poll also says customer feedback from the trial pushed it to offer a fix on premiums for their first three years (assuming a customer makes no claims) to reassure potential customers that it isn’t seeking to use smart home hardware to lock then in to its products and then quickly inflate premiums.

“It’s interesting how customer perceptions are,” he says, arguing there’s “a mistrust of the insurance industry as a whole” — which is something else Neos is hoping can be fixed with a little IoT-enabled preventative visibility.

Quantifying the driverless startup boom


For driverless car startups, raising capital seems to happen on autopilot. Investors and acquirers have put billions into the space over the past couple of years in the race for early mover advantage. They’ve shown no desire to hit the brakes lately either, as indicated by a spate of recent deals, including last week’s $450 million sale of autonomous driving software developer NuTonomy to Delphi Automotive.

In an effort to put the deal-making in perspective, Crunchbase News has aggregated some of the metrics for startup investment in the space. Our chief finding — that autonomous driving is a red-hot sector — is already obvious.

But in addition, we found:

  • Startup investment so far this year is more than double 2016 totals.
  • While Silicon Valley is a known hotspot for autonomous driving, Israel is a pretty solid No. 2 for startup deals, with three of the 10 largest rounds this year. Intel’s $15.3 billion purchase of Mobileye, an Israel-based startup, is also the largest M&A deal for an autonomous driving-related company for this or any year.
  • Self-driving tech rounds are pretty crowded. For U.S. investments in the space this year, we found just one financing — Ford’s investment in Argo AI — with a sole investor. (And that wasn’t a traditional VC deal, as it has Argo developing technology specifically for Ford.) On average, U.S. autonomous vehicle-related deals this year had an average of seven listed investors per round.

Valuations for self-driving tech companies are going up along with round sizes, Chris Stallman, partner at transportation-focused venture firm Fontinalis Partners, tells Crunchbase News. Part of the impetus comes from automakers and suppliers, many of whom are aggressively expanding their autonomous vehicle capabilities and are making early acquisition offers to promising companies.

“They are attempting to shore up their supply chains and are fearful of becoming too tied to a technology company that may ultimately be acquired by a competitor,” Stallman says. Meanwhile, traditional VCs and corporate venture investors are also actively extending term sheets to talented startup teams.

In the following sections, we look at some key metrics for the driverless car startup space: year-over-year comparisons, largest recent rounds and biggest M&A deals.

Investment revs up

It seemed like 2016 was a remarkably bullish period for autonomous driving investments. But at first glance, 2017 makes last year look kind of slow.

So far this year, investors have poured about $1.4 billion into companies in the space, more than double 2016 levels ($630 million), according to Crunchbase data. Deal count is relatively flat, with about 43 rounds in the first 10 months of this year compared to 48 in all of 2016. We compiled a list of noteworthy deals for this year here and for 2016 here.

As always, metrics are imperfect. For one, some companies, such as Lyft and Uber, aren’t known as self-driving car startups, but do have partnerships, internal R&D and strategic plans tied to the technology. For this exercise, we focused mostly on companies that principally characterize themselves as autonomous vehicle technology companies, leaving out ride-sharing and new auto brands. Also worth noting is that the biggest deal for this year, Ford’s $1 billion investment into Argo AI, has characteristics of both a venture deal and an acquisition.

There also is some blurring of categories, including companies that operate in sectors like automotive safety or mobility as well as autonomous vehicles. (When looking at more mature companies in the space, another consideration is that many, such as computer vision juggernaut Mobileye, started out before driverless vehicles existed as a discrete category.)

The biggest deals of 2017

Not only are autonomous vehicle startups raising big rounds, they’re doing so at fairly early stages of development.

In the chart below, we look at the 10 largest rounds for self-driving tech companies this year. Half of the top 10 are less than three years old.

Have checkbook, want startup

Acquirers also have continued to snap up autonomous vehicle companies this year. By far the largest deal related to the space — Intel’s purchase of Mobileye — involved a mature, publicly traded company. But buyers were also picking up early-stage startups, including October’s sale of NuTonomy to Delphi Automotive.

In the chart below, we look at the largest M&A transactions in recent years involving self-driving technology startups:

Parking all that capital

For autonomous vehicles, arguably the most crucial capability is being able to brake when necessary. For autonomous vehicle investors, however, the greatest concern seems to be whether they’re accelerating fast enough.

“Although valuations have crept up, I don’t think we have reached an oversaturation in autonomous vehicle companies,” Stallman says. One reason automakers are motivated to move fast is that much of the early innovation in autonomous vehicles came in the years following the 2008 financial crisis, when U.S. car companies were struggling for survival and R&D suffered. Now they’re having to catch up.

Yet while they’re paying handsomely for self-driving talent, investors and acquirers are cognizant of the risks Stallman says. Deploying autonomous technologies on the road safely requires overcoming a tremendous number of challenges and will require better perception of the vehicle’s surroundings, better maps, better processing capabilities and better decision making.

Like other segments of venture capital, there will be winners and losers. In this space, however, the race to the finish line is happening at an unusually rapid pace.

Featured Image: Li-Anne Dias

Startup studios go Hollywood as CAA launches Creative Labs


The ties that bind the tech industry and Hollywood continue to get tighter as the Creative Artists Agency launches a startup studio to develop new businesses with — and for — its roster of clients.

Continuing a tradition that began with the incubation and launch of Funny or Die (alongside Sequoia Capital and Will Ferrell’s Gary Sanchez Productions), one of Hollywood’s top agencies is partnering with a group of Canadian investors to finance a new venture studio, Creative Labs, with $12.5 million.

“We have been incubating companies at CAA over the years,” says CAA’s head of business development, Michael Yanover.

Yanover was the principal architect of the agency’s work with Funny or Die and Whosay, an influencer marketing company, as well as the firm’s work with CAA Ventures — its venture capital arm. That business has backed some solid companies, including: August, Bark + Co., Drone Racing League, Giphy, Medium and Patreon.

For Yanover, the creation of Creative Labs was a response to the shifting expectations of later-stage venture investors — including his own CAA Ventures, he said.

“Every time we came up with one of these ideas we had to put the money together and raise the money… it was somewhat tedious to build this stuff from scratch,” he said. “The marketplace was changing [and] today you can’t really do that. You have to build something because investors want to see a product and something launched.”

Photographer: J. R. EYERMAN/TimePix

So in 2015, when the capital crunch in startupland was beginning to take hold, Yanover and his team decided to build a startup foundry model that could incubate and spin out companies with fully baked products.

In a sign of both the globalization of the entertainment business and the tech industry, the new studio will be based in Vancouver and includes backing from large Canadian and U.K.-based media industry players like Entertainment One, Boat Rocker Media (through its venture arm) and The Telegraph Media Group.

“Vancouver we picked for a couple of very clear reasons,” says Creative Labs’ co-founder Leonard Brody, a Canadian serial entrepreneur and investor. “It had a very strong developer base that was more loyal and [is] less troublesome keeping talent than you would see in other hubs… [and] you have this real deep strength around project management.”

For early-stage companies that, in some cases, are little more than an idea and a celebrity advocate, the need for a project manager to guide a business is critical, according to Brody.

Creative Labs’ chief executive, Mike Edwards, agreed. A former social media marketing executive, Edwards was brought on board to head operations from Mobio Technologies where he had served as chief executive officer.

To ensure the alignment of interests, employees of the studio have an equity stake in the venture studio and will be able to receive equity in all of the businesses that are spun out from it. They also have the option of graduating from the studio to participate in the development of the individual startups as those businesses mature, Edwards said.

“Part of the genesis story of the lab was also a realization that the media and entertainment and sports world has really changed,” said Brody. “The industry itself has changed. The old model was you used to sell product for other people… you were selling stuff for others… as the platforms evolved where talent could speak direct to consumers you realized you could sell your own things and build your own brands and really have the direct relationship.”

That’s what Creative Labs is trying to capture.

Yanover said that the venture studio has identified three kinds of opportunities that correspond to the three ways he was building businesses internally at CAA in the past.

One is developing an idea around an artist or athlete that the agency represents — like Funny or Die. Already, Creative Labs has one such company waiting in the wings.

Founded by the actress Emma Roberts and the former Huffington Post video producer and creative talent manager Karah Preiss, Belletrist is sort of a next-generation book club for a new literary set.

The company soft-launched in April with an interview between Roberts, a lifelong lover of literature, and the literary icon Joan Didion.

If Belletrist is an example of a platform created around a CAA client, then Creative Labs’ other brainchild, Ground Control, is a company that was created with CAA’s roster of talent in mind.

The startup looks to tap actors, athletes and other celebrities and bring their talents to the voice operating systems developed by tech companies like Apple, Amazon and Alphabet. Founded by former AOL executive Michael Macadaan, Yanover said that Ground Control is akin to the firm’s development of Whosay in that it’s a platform that can use CAA’s client roster to succeed.

Finally, there are companies that dovetail with the work that CAA does internally, or tap the company’s own talented pool of developers, designers and programmers. There’s a yet-to-be launched game development company that falls into that category, according to Yanover, Edwards and Brody.

Yanover, Edwards, Brody, seasoned media and gaming executive Pauline Moller and CAA’s Head of Mobile Michael Blank will all serve as members of the Creative Labs board of directors.

“The premise of anything that we incubate is that we want to bring a piece of CAA’s DNA into the mix,” says Yanover. “We want to embrace the company as one of our children and we want to give it all of the resources that CAA has.”

[Update: This story has been updated to correct the identification of investor Boat Rocker Media, not Boat Rocker Entertainment as was originally indicated.]

Featured Image: David Wall Photo/Getty Images

ROSS Intelligence lands $8.7M Series A to speed up legal research with AI


Armed with an understanding of machine learning, ROSS Intelligence is going after LexisNexis and Thomson Reuters for ownership of legal research. The startup, founded in 2015 by Andrew Arruda, Jimoh Ovbiagele and Pargles Dall’Oglio at the University of Toronto, is announcing an $8.7 million Series A today led by iNovia Capital with participation from Comcast Ventures Catalyst Fund, Y Combinator Continuity Fund, Real Ventures, Dentons’ NextLaw Labs and angels.

At its core, ROSS is a platform that helps legal teams sort through case law to find details relevant to new cases. This process takes days and even weeks with standard keyword search, so ROSS is augmenting keyword search with machine learning to simultaneously speed up the research process and improve relevancy of items found.

“Bluehill benchmarks Lexis’s tech and they are finding 30 percent more relevant info with ROSS in less time,” Andrew Arruda, co-founder and CEO of ROSS, explained to me in an interview.

ROSS is using a combination of off the shelf and proprietary deep learning algorithms for its AI stack. The startup is using IBM Watson for at least some of its natural language processing capabilities, but the team shied away from elaborating.

Building a complete machine learning stack is expensive, so it makes sense for startups to lean on off the shelf tech early on so long as decisions are being made that ensure the scalability of the business. Much of the value wrapped up in ROSS is related to its corpus of training data. The startup is working with 20 law firms to simulate workflow examples and test results with human feedback.

“We really spent time looking at the value ROSS was delivering back to law firms,” noted Kai Bond, an investor in ROSS through Comcast Ventures. “What took a week now takes two to four hours.”

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The company’s initial plan to get to market was to sell software designed for specific domains of law to large firms like Latham & Watkins and Sidley Austin. Today ROSS offers products in both bankruptcy and intellectual property law. It is looking to expand into other types of law, like labor and employment, simultaneously moving down to serve smaller firms.

LexisNexis and Thomson Reuters are frequently on the butt end of claims made by machine learning-powered data analytics startups emerging in a potpourri of industries. A strategy favored by many of these businesses is pushing products to interns and college students for free so that they, in turn, push their advanced tools into the arms of future employers.

“The work ROSS is doing with law schools and law students is interesting,” Karam Nijjar, a partner at iNovia Capital and investor in ROSS, asserted. “As these students enter the workforce, you’re taking someone using an iPhone and handing them a BlackBerry their first day on the job.”

Prior to today’s Series A, ROSS had secured a $4.3 million seed round also led by iNovia Capital. As ROSS moves to scale it will be navigating a heavy field of mergers and acquisitions and attempts by legacy players to ensure legal tech services remain consolidated.

Petuum secures $93M Series B to push AI into the mainstream


With a shortage of machine learning developers bearing down on the industry, startups and big tech companies alike are moving to democratize the tools necessary to commercialize artificial intelligence. The latest startup, Petuum, is announcing a $93 million Series B this morning from Softbank and Advantech Capital.

Founded last year by Dr. Eric Xing, a Carnegie Mellon machine learning professor, Dr. Qirong Ho and Dr. Ning Li, Petuum is building software to facilitate two components of machine learning development. First, the team is automating aspects of data preparation and machine learning model selection. This is useful for novices that might otherwise struggle to even make use of common machine learning frameworks like TensorFlow and Caffe.

Once models have been selected, Petuum can also assist developers in optimizing for specific hardware constraints. This means virtualizing hardware to remove barriers — taking out the extra step of managing a distributed GPU cluster.

“The way we treat AI is not as an artisanal craft,” Dr. Xing explained to me in an interview. “We are trying to create very standardized building blocks that can be assembled and reassembled like legos.”

Petuum founder Dr. Eric Xing inside the startup’s offices in Pittsburgh

The point here isn’t to solve every problem in machine learning, but rather to automate enough of the process that industry can move from 0 to 1. That said, Petuum is attempting to build for both the expert and the novice — a tough balance to strike.

“Everyone knows how to use Excel,” asserted Dr. Xing. “A layman can use Excel to create a table. A highly skilled statistician modeling certain phenomenons can still use Excel.”

The other challenge facing Petuum is one of market strategy. As the tech industry grapples with its dumb money in AI problem, many investors have turned to heuristics to manage uncertainty — most popular of which is that horizontal platform AI plays don’t work.

The concern is that it’s difficult to outgun Google and Amazon in the machine learning-as-a-service space as a startup that needs to balance feature development and spending. Dr. Xing deferred to the skill of his team and while he didn’t directly mention it — the goldmine from Softbank won’t hurt. This is something that others like H2O.ai and Algorithmia can’t claim to date.

To the company’s credit, it is starting by going after healthcare and fintech customers. Though in the long run, Petuum doesn’t intend to cover every vertical. Petuum is working with beta testers in different industries so that in the future, outsiders can develop and deploy solutions on top of the platform.

Today’s investment comes from Softbank proper rather than the $93 billion Softbank Vision Fund. It’s unclear whether Softbank intends to shift the investment into the fund in the future. Petuum currently claims 70 employees and says that it will be expanding simultaneously in product, sales and marketing.

Featured Image: Petuum