German insurance giant Munich Re Group is making its first venture investment in Canada, leading a $16.5-million financing by Montreal Internet-of-Things startup Mnubo Inc.
The six-year-old Canadian firm has established itself in a crowded market for collecting and analyzing data from connected industrial machines, thanks in large part to the track record of its management team, said Matthew McElhattan, investment director with Munich Re's HSB Ventures, which has made 12 investments globally since 2015. "What sets this company apart are the entrepreneurs in it themselves," Mr. McElhattan said. "We like the fact they know how to run a startup business and the focus has been there." He said Mnubo represents a "strategic opportunity" for Munich Re as insurers are keen to get a deeper look into the functioning of equipment they insure that is vulnerable to breakdowns.
CEO Frederic Bastien previously worked with three members of Mnubo's management team, all tech-industry veterans, building data-management company Blueslice Networks, which they sold to a U.S. telecom company for $35-million (U.S.) that was itself eventually taken over by Oracle. After leaving Oracle in 2012, Mr. Bastien and his three Mnubo co-founders scored a multiyear, multimillion-dollar research contract from the American software giant, which enabled them to self-fund the development of their software platform until they raised their first venture financing in 2015, a $6-million infusion from White Star Capital and McRock Capital.
Mnubo has 30 customers across a range of sectors, including heating, ventilation and air-conditioning equipment maker Johnson Controls, Hitachi Air Conditioning, Japanese smart-home appliance maker Its Communications Inc. and agriculture supplier Grain Systems Inc., on four continents. What they have in common, Mr. Bastien said, is that they all manufacture products, meaning they "end up with the same issues" such as maintenance, product guarantees, performance and yield optimization. Mnubo's platform gathers data sent from sensors on the products and learns from patterns over time to predict, for example, when machines will require maintenance, how to make soil-irrigation systems more effective or when home alarm customers should be contacted to ensure they don't drop the service.
Rather than relying on customers having machine-learning or data-science experience, however, Mnubo gears its open, cloud-based platform software – sold on a monthly subscription basis – to be easy to implement and used to gather data from its customers' machine sensors, providing what it calls "out-of-the-box insights."
White Star managing partner Jean-François Marcoux said that with tech giants increasingly crowding into the IOT space and industry experts forecasting the number of connected devices will double to 50 billion by 2020, for many industry players "the question will be whether to build in house or buy," which will likely make Mnubo an acquisition target. He predicted the company could grow to be valued at $500-million.
Mnubo declined to reveal terms, but industry sources estimate the deal valued it at close to $50-million prior to the financing, with revenue approaching $10-million a year. Mr. Bastien did say Mnubo, with 47 employees, increased revenue by 130 per cent last year and intends to double staffing by the end of 2019, with a focus on expanding global sales and hiring engineers.