Our Investment in Apkudo: How We Assess and Support Disruptive Innovation

“Every once in a while, a new technology, an old problem, and a big idea turn into innovation.”                    – Dean Kamen

 

Recently, MissionOG co-led a $14 million Series B investment in Apkudo, the leader in supply chain automation for connected devices.  The company has built an elegant solution to help customers like T-Mobile, Verizon, FedEx, and Amazon assess, track, and manage inventory across a global group of partners.  Founded in 2011 by Josh Matthews and Ben Leslie, Apkudo is an overnight success ten years in the making.  Their built-for-purpose platform has evolved over the years to provide automated testing of devices then incorporated inventory management and now provides automated decisioning for devices.  With our investment, the company intends go deeper in its core market and extend its solution into other relevant verticals.  Key to that growth will be scaling its disruptive technology to become widely adopted and the industry standard for large connected device companies.

Disruption is hard.  It is also a term that gets thrown around a lot in the investment industry and seems to have many different connotations.  For MissionOG, the types of “disruptive” businesses that get our attention have the following factors:

• The business addresses a hard problem or problem set for customers in a large segment
• The emerging company’s product either significantly increases revenue or reduces operational cost in a manner that accelerates with additional volume or greater usage
• Once implemented, the solution provides previously unknown insights and productivity advantages that customers adopt as essential components of their workflow
• The company helps its customers transform and improve their business models to pursue new clients

At first glance, Apkudo demonstrated all four factors and gained our attention.

Our next step with a potentially disruptive company is to run through a diligence process to better understand their model.  Below are the major items we used for validation, but the checklist can also be used as a proxy for performing diligence on any technology-driven disruptive business model:

1. Is the company pointed to a large market?

With an immediate customer base of mobile connected device companies, through a bottoms up analysis based on customers and volumes, we estimated that Apkudo’s current addressable market is $3.2B.  While significant, that addressable market will expand as the company addresses other connected device markets.

2. Does the company solve a big problem for its perspective customers?

To serve their customers at scale, connected device companies leverage numerous partners.  While managing a large partner base provides scale, it does create complexity as it is essential to understand inventory and guide those partners to make the right decisions with every step throughout the cycle.  By utilizing Hive, Apkudo’s data platform, customers make more informed decisions concerning state of inventory, quality, pricing for resale, etc. Hive provides real-time visibility for device counts, not only within a company’s four walls, but through its partner and distribution networks.  Apkudo’s solution combines inventory data with current market pricing, providing companies with data to make better informed decisions.  Additionally, Hive Appliances gather valuable data by automating physical processes.

3. Is the company pointed to where the industry or market is heading?

To ensure we are correctly thinking about how markets will evolve, MissionOG manages an active list of investment themes.  Apkudo mapped to two of our existing themes:

• Speed and efficiency matters – management and product owners need to analyze and action on data in real-time
• With the digitization of business models, adoption of industry-specific SaaS solutions have moved from “nice to have” to “must have” for survival

4. Has the company been able to attract impressive early customers that depend upon its solution?

Early in its evolution, Apkudo decided to go narrow and deep with a segment of customers.  This decision has not only resulted in a built-for-purpose platform, but also a group of lighthouse customers that depend upon the Apkudo solution for device identification, testing, and inventory management, including LG, Amazon, T-Mobile, and FedEx.

5. Does the company have compelling use cases?

With Apkudo’s software and data platform, a large telecommunications customer has been able to reduce inventory write-downs by tens of millions of dollars.  By providing a platform to capture all possible data about devices and provide prescriptive recommendations for “what to do next with a device,” Apkudo has automated processes that were either manual or not possible for their customer.

6. Does the company’s solution include superior technology that suggests a more defensible moat as it scales?

Apkudo’s decision to go deep with early customers resulted in a platform that unique in the market and without peer.  With Apkudo, customers can automate the testing of physical devices, receive real-time inventory visibility across their partner ecosystem, and leverage appliances to power the capture of data and supplement physical processes.

7. Does the team demonstrate that they are active problem solvers?

Check.  The Apkudo team received very high marks for problem solving. Customers provided consistent feedback that Apkudo knows the industry well and its Hive platform addressed difficult problems.  Several of their customers are reshaping traditional business process or customer offerings because of the new capability that Apkudo offered.

8. Does the company’s business model succeed in a post-Covid world?

For Apkudo, the answer is a “strong” yes.  Due to the pandemic, enterprises are looking to more tightly manage risk and cost within their supply chain.  For empowered enterprises to better manage their suppliers and logistics, real-time data is necessary.  We expect this need for actionable data to be a considerable tailwind in this market going forward.

 

The connected device market is a significant one and the opportunity to help enterprises manage it is vast.  In addition to mobile devices, Apkudo is already being pulled by customers to provide their disruptive platform to serve new markets such as IoT devices and networking devices. We look forward to sharing stories on how the company progress in its next leg of growth.