Xemelgo, a Seattle-based startup that brings IoT and cloud technology to manufacturing, is cranking up.
Last week, the business won the $185,000 top prize at the Seattle Angel Conference, a two-month program in which 51 companies honed and pitched their businesses.
The startup co-founded by former Hitachi executives Rich Rogers and Akhila Tadinada has raised an additional $500,000 from angel investors, including the former CEO of Hitachi Americas and the former chief operations officer of Paramount Pictures.
Since launching in Tadinada’s basement in April 2018, the business has grown to 10 employees and is currently headquartered in one of the University of Washington’s CoMotion incubation labs.
Despite what they’ve already accomplished, the duo admits that they hit some bumps to start. Given their backgrounds, they knew their focus would be industrial processes, so they approached manufacturers with a pitch for tech solutions.
“Our suggestions did not resonate with them,” said Rogers, the CEO. So the team quickly changed gears, opting to co-create technology alongside their customers.
The approach worked and Xemelgo’s technology is being used by multiple Pacific Northwest manufacturers — many in the aerospace sector — including Orion Industries, Tool Gauge, Asko, Crane Aerospace, Skills Inc. and ColorTech.
When describing their product, Rogers and Tadinada, who is chief technologist, invoke a mashup of popular technologies.
Xemelgo uses smart sensors somewhat akin to Google Nest, which is a suite of cameras, doorbells, thermostats and smoke alarms that detect conditions and relay data. In Xemelgo’s case, the sensors track information such as the inventory of manufacturing supplies and shipments, reordering items as needed. (Amazon announced a similar technology Thursday for its new smart shelf, meant to replenish office supplies)
The company sets up a monitored factory floor comparable to Amazon Go, the grocery stores that automatically track which items shoppers are selecting, tallying their purchase without the aid of a checker.
And Xemelgo uses a Google Maps-like app for managers to view the manufacturing processes, with the assistance of AI to identify slowdowns and traffic jams in production.
Xemelgo, which means “twin” in the defunct Celtic language Galatian, is built on the idea of creating a digital model or twin of the factory to monitor, predict, and optimize operations.
Seattle has been a great test bed for the startup, the co-founders said. Boeing is among the most valuable industrial companies in the U.S. and the region has lots of smaller companies that feed the aerospace supply chain.
As part of the Industry 4.0 movement to modernize factory production, “countries are looking at manufacturing again,” Rogers said. There’s a renewed interest in manufacturing’s role in national economies.
Over the next year, the startup is looking to expand to another city. A likely candidate is the Chicago area and its proximity to construction manufacturers Caterpillar and John Deere. The company can identify customers by plugging into federally supported manufacturing consulting groups that are found in each state.
While manufacturers build different products, the factories are more standardized than you might expect, Tadinada said. She recently implemented Xemelgo’s services in just a few hours at a Puget Sound-area aerospace supplier. That said, she approaches a project ready to learn and respond to a customer’s needs.
“We don’t go in saying we know everything,” Tadinada said. “We learn about their practice on the go.”
We caught up with Rogers and Tadinada for this Startup Spotlight. Keep reading for their answers to our questionnaire.
What does your company do? Xemelgo uses sensors and AI to alert manufacturing leaders to emerging issues. In a way, we are like Amazon Go for the factory. The manufacturing workers focus on quality, efficiency and safety, and Xemelgo keeps all of the manufacturing business systems updated with real-time information.
Inspiration hit us when: After we launched Xemelgo we did a good number of local factory tours. During these tours we gained tremendous respect for manufacturers, and we felt a very strong cultural alignment with them. They were very proud of their products, their operations and their teams. It was clear that they competed very hard every single day, and did everything in their power to meet or exceed their customer commitments.
But, when we toured their facilities we also saw a lot of pre-historic technology: IBM PCs, AS400s, DOS prompts, barcode scanners that were no longer supported, charts and graphs that were printed and posted every day. We also saw people searching the facilities for missing work orders, misplaced tools, lost shipments, etc. It felt like the manufacturing industry had been completely ignored by the high-tech space. Because we felt such a strong cultural alignment, we were determined to build solutions and apps that would help them to become dramatically more efficient.
VC, Angel or Bootstrap: Bootstrap. When Xemelgo launched, there was a lot of venture capital pouring into IoT startups. We saw many startups with large VC-backed engineering budgets building complex IoT solutions in isolation. They were essentially working to force their many years of IT and software experience into industrial operations. They were leading with platforms, technology and complex dashboards, but they were not really solving a business problem.
We didn’t take any outside funding for our first year, and this bootstrap approach forced us to engage very deeply with small- to mid-sized manufacturers to learn their pain-points and understand where we could add the most value. We worked very hard to deliver turnkey solutions that could quickly be deployed into production, creating a SaaS subscription revenue for Xemelgo.
Our ‘secret sauce’ is: Our ease of use and ease of deployment. Small- to mid-sized manufacturers maintain very chaotic production schedules. They do not have time for lengthy sales meetings or drawn-out pilot projects. Our Xemelgo solution is easy to understand, and it can be fully deployed in a few hours. Many customers see Xemelgo as a Google Maps like app for the factory, showing them production bottlenecks as they develop in real-time. There is a tremendous amount of intelligence built into our solution, but it’s delivered to our manufacturing customers as an easy-to-use mobile app.
The smartest move we’ve made so far: Joining the UW’s CoMotion community. CoMotion provides an outstanding collaborative work environment, as well as a world class collection of mentors and advisors. They also provide a series of startup workshops that help you to understand the many facets of launching a business, including fundraising, IP protection and exits. And most importantly, the intern talent at the UW is remarkable in terms of technical ability, work ethic and cultural alignment with our Xemelgo values.
The biggest mistake we’ve made so far: When we initially launched Xemelgo we thought that we had all of the answers and that we would be able to wow local manufacturers with our technical expertise. We tried to explain to them how digital twins, IoT, AI and predictive maintenance would minimize their downtime and maximize their efficiency.
The truth is that the manufacturers had no idea what we were talking about, and zero interest in our ideas. After several weeks it dawned on us that we should start to talk less and listen a whole lot more. Once we pivoted our approach the manufacturers happily led us to their biggest challenges and greatest opportunities, and customer engagement became a whole lot more rewarding.
Which leading entrepreneur or executive would you most want working in your corner? Over the last 25 years Jeff Bezos has completely disrupted the retail industry. Amazon started with a very simple web site, selling books, and then proceeded to apply technology to every facet of retail operations including advanced robotics in their distribution centers.
In many operational areas, Amazon is already on their second or third iteration of technology adoption. For instance, initially customers could buy products on the web, then on their mobile device and now via Alexa.
We see the identical transformation beginning in the manufacturing space. We are entering the next iteration of the Industrial Revolution, where software will ultimately bring machines and factories to life. We are working with many manufacturers to start their Industry 4.0 journey with a project that is the equivalent of Amazon’s initial “very simple website.” We would love to apply Bezos’ best practices and lessons learned as we take manufacturers on a similar 25-year journey.
Our favorite team-building activity is: Xemelgo is a “melting pot.” Many of our engineers have grown up in different countries. Our favorite activity is to pick lunch places from different corners of the world. We then have someone familiar with that culture walk us through the cuisine and the cultural nuances of the country. Learning about someone’s culture is great for team building as we get to appreciate the complete person and everything that they bring to the table. It helps to increase inclusiveness on our team, which in turn leads to a more diverse set of ideas.
The biggest thing we look for when hiring is: We look for technical depth and cultural fit. We look for people who are deeply passionate about what they do, and will work hard to advance their technical skills. We look for people who can grow in the organization, while enhancing the morale of our organization.
Our interview process is a bit unique. We avoid asking engineers to solve the standard programming problems. Instead we ask them about their proudest moments, and the complex technical challenges that they have worked on and overcome. We then attempt to collaborate with them to compare and contrast different solution options. Software is a team sport. We’re not looking for the absolute best engineer. We’re looking for people who can come together to solve near-impossible problems for our customers.
What’s the one piece of advice you’d give to other entrepreneurs just starting out: You need a maniacal focus on building the team, building the product and building the business. There will be hundreds, if not thousands, of distractions for your time. You will be flooded with messages from people trying to sell you services, investors trying to understand your business, events offering you a platform and many many more. You need to aggressively protect your time and your team’s time.
To us it felt as though there were two paths to take: a “vanity” path, that consumed a tremendous amount of time engaging with other startups and provided a sugar high, and a “pragmatic” path that had you in the trenches with customers every day learning their operations. My advice is to avoid the distractions. Focus on your team, your product and your business.