Monday, 1 December 2014

Another @BBYltd Disruptive Lunch . . . Smart engineering. #Maestrano, #Palantir, and #PowerbyProxi

Maestrano, Palantir, and Proxi are all examples of smart engineering companies. Only Proxi makes hardware; Maestrano and Palantir are software companies. Each company is disruptive of an existing platform, and each had a good story to tell last Thursday at BBY's offices in Sydney.

A partner at one of the largest investment firms in the world once said to me:

"Mike, your business structure is too smart. You've outsourced everything. I know these guys and this firm. We even recommend this firm to some of our investment managers. No one has ever come into this office and presented me a structure like this one. It's all too clever. If you want us to invest, you've got to bring some of this in-house."

We never moved the staff in-house because the cost in Switzerland would have killed us on day one. I'm not sure what that investor would have thought if Maestrano had existed in Geneva in 2010.  Maestrano is for want of a better phrase a networking platform for outsourcing software. Stephane Ibos is the CEO, and a Frenchman, who swapped the northern winters for southern sun and settled in Australia after working for defense giant Thales. He was "grandes ├ęcoles" to the core. That's a good thing in case you're wondering. Ibos' Maestrano presentation had all the hallmarks of a sound engineering background.

The Maestrano offering targets SME's. You subscribe to gain access to your personal platform that integrates various software providers on one coherent dashboard. One platform is controlling everything from CRM to Ops. From this dashboard Maestrano claim that you'll be able to forget about the old days of outputting excel data files from (say) your client management system and then trying to upload it into your accounts system. No more upload errors from mismatched field names, in fact, no more "CSV" files clogging up your hard drive.

As is my usual practice, and as I class myself as an SME, I took the time to sign-up for a free trial of Maestrano. The first thing I did was take a look at what apps I could "purchase". Thirty-six apps currently are available to users. As an example, I went straight to the accounting section, as currently I, like many SME owners run my business on a spreadsheet.

There are six apps in accounting to choose from, so I selected "QuickBooks" and checked out the basics.

You get a nice introductory page with some screenshots and a summary. Once you select the app it will appear on your dashboard.

In order to get things started you use the data upload wizard. Although the wizard is somewhat manual compared to what you'll be doing once you're up and running, it's straight forward in terms of process. Just hand over the "keys", or in my case the excel and you'll be populating apps before you know it. The only problem I see is the personal embarrassment of showing people how unorganized you currently are.

So what's it cost and how do they make money? You buy a license for a specified number of users. In my case, that would be 1-5 simultaneous users. You then select your apps and pay USD 29 per month, per app. Plans cover 6 - 10 ($89.70) and 11 - 20 (179.40) users. After that, you just call them up and ask for a deal. It's simple, and efficient. No more managing individual pieces of software, it's all on your dash and you get one convenient invoice.

I liked Maestrano and see it as an easy "go-to" for start-ups keen to keep costs down and stay on top of their business. Their revenue is roughly 50 / 50 Australia / USA. There's a new JV project in the Dubai that will cut into that geographical revenue split by adding $17m into the business. Right now there's 2,200 businesses signed up, and CEO Ibos said they were looking to float the company in the second half of next year.

Palantir is hard to talk about, not because of their presentation, but rather because this is about metadata engineering on the edge of everything the public knows.  One of Palantir's first investors was In-Q-Tel, a venture capital firm that invests in high-tech companies for the Central Intelligence Agency. That probably explains why I felt the presentation was somewhat obtuse.

The core clientele for Palantir is unsurprisingly governments. They also count major industrials as contributors to their revenue line. They don't have a sales force, just 1500 staff, mostly engineers. It felt like you don't choose to do business with Palantir; rather they choose you. To quote the presenter: "We don't want to deal in the mundane." It's a unique approach to business and had most in the room smiling enviously.

The Palantir business is about risk management and mitigation. They build systems that help entities defend against cyber threats, fraud, and internal threats. This means if you're able to engage Palantir they can help you understand everything from customer churn, client lifetime value, retention analysis and even provide predictive metrics across a whole range of fields.

Their main competitor is Autonomy. Palantir would characterize themselves as more a bespoke consultant, rather than off the shelf software house. Palantir staff get embedded in the client's problems.  But what does Palantir offer? My understanding is that they trade in unstructured data and give it form via various types of algorithmic analysis. I didn't get that from the presentation. I had to do some data mining. Palantir product is employed by counter-terrorism analysts at the U.S. Department of Defense and fraud investigators at the Recovery Accountability and Transparency Board. Cyber analysts at the U.S. Information Warfare Monitor (responsible for the GhostNet and the Shadow Network investigation) also employ them. In fact, watch "Zero Dark Thirty" and you'll get the picture. If you're a bank looking for certain characteristics amongst your staff that might see them skirting compliance or racking up a series of "false" trades, then Palantir can help.

One interesting aspect was the emphasis on dealing with potential rights violations from their activities. The presenter was at pains to make it clear that Palantir seeks to engineer protections within its software. These protections mean if you're not authorized to see a particular stream of data and (I assume) the statistical analysis associated with it, then you can't see it. I don't know about the other members of the audience but after Wikileaks and Snowdon I am somewhat skeptical of this claims.

As an investor, it's very unlikely you'll ever be invited to become a shareholder, unless the company lists on a stock exchange somewhere. The best thing you can say as an investor about Palantir is that it shines a ray of light on what is possible in metadata. If Palantir is uninterested in the mundane, then there are probably companies out there happy to deal in the dull in exchange for good returns. Investors should be looking companies who not only collate big data, but are expert in its analysis.

I didn't envy Proxi CEO Greg Cross when he stepped up to the lectern. If Meastrano was logical and Palantir was fascinating, then Proxi was easy to understand.

Proxi engineers wireless power solutions. You've probably seen examples of charging pads that you just place your smart phone on to charge. These are "resonant induction chargers". The chips that control the process are the result of 20 years of hard work by Professor John Boys and his engineering department at Auckland University. They have produced 252 patents and applications for patents. The University remains a core shareholder, and the company comprises 70+ employees. They've already raised $25m and licensed their technology to some big players such as Texas Instruments and Samsung.

The market for this type of charger is likely to grow to $15bn by 2020. CEO Cross says this is conservative. I thought the most interesting statement Cross made was the industry is all about standards. I'm not sure many people in the room understood exactly how important this was. This was acknowledgment that better products don't always win.  Sony's Betamax failed to build a business case for a technology that was better in nearly every way than its main competitor VHS. If Proxi wants to get value for its patents, it needs them integrated into accepted engineering standards. That is why Proxi still has some execution risks, and why they need to spend so much of their time courting chip companies as partners.

I suspect Proxi would like to be a standalone entity, preferably with a public listing. Cashflow should start to be less of an issue with some new chips coming on line in the next 18 months. It's an interesting business, much in the way that several smart hardware companies have been at these lunches in the last nine months or so.

Finally, investors who follow the blog might want to look back at my notes on Sydney smart power meter company Wattcost as they won the first-ever SingTel Group-Samsung Regional Mobile App Challenge last week.

Back on June 10, 2014 . . . remember this one?

The contest attracted more than 500 submissions from across the region. I picked it as a "no-brainer" earlier in the year and suspect that after a recent street meeting with co-founder David Soutar that things are progressing nicely. Have this one on your favorite news ticker and be ready with a cheque if given the opportunity to invest.

President and Head of Samsung Media Solution Center, Dr Won-Pyo Hong;  Minister of Communications and Information, Dr Yaacob Ibrahim; SingTel Group CEO, Ms Chua Sock Koong and Optus CEO, Mr Allen Lew present prizes to the winning team, Wattcost. 
As always contact me for further information or introductions to the companies mentioned here via my website


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