Ground Truth in China: The Push Toward Flexible Manufacturing
Insights from our first Assessing China program in industrial IoT, and how startups can accelerate business development in China.
Comet’s Assessing China program for Industry 4.0 startups had a simple goal — bring the top AI/robotics startups in a specific industry to China to meet with leading companies and de-risk go-to-market partnerships for both sides.
That’s bold in the best of times, and downright maniacal in today’s political climate (thank goodness they didn’t slap a tariff on airplane pillows).
But innovation is a universal language — the push and search for the better, the new, is a business reality around the world — and the timing is now for data-driven automation of massive industrial operations.
It’s already happening.
China is the focal point of global manufacturing, so it made sense to have our first Assessing China trip focused on industrial IoT. We selected five top venture-backed startups working on “Industry 4.0” to explore go-to-market partnerships in China based on product readiness, technology strength, and market fit. Those startups were:
- Arch Systems (Bay Area)
- Augury (Israel/New York)
- Canvas Technologies (Boulder, CO)
- PsiKick (Bay Area)
- Ready Robotics (Columbus, OH).
While in China, the teams met with a diverse group of manufacturing leaders including BYD, Lenovo, BGI, and Hytera. We identified current stakeholder pain points and explored the broad range of China manufacturing setups. Further, the teams had the unique opportunity to engage with strategic leadership from Saint Gobain — one of the largest industrial producers in the world with a large operational footprint in China — as well as leading investors in China looking for unique solutions in the startup ecosystem.
And it worked — partnerships are being formed, and Industry 4.0 technology, driven by startups, is being deployed in China. Ground truths discovered from these visits were both unexpected and enlightening, and focused on two main points:
- Mass manufacturing has a people problem.
- Smart Manufacturing means Flexible Manufacturing — and this is really hard to do.
From the Founders: What worked, What didn’t, and What we learned
This was Comet’s first Assessing China effort. A prototype. And like all prototypes, we had some preconceptions of the intention, goals, and outcomes of such a program.
As with any prototype launch, however, what we discovered through our test effort was just as valuable as all our combined knowledge guiding our predictions.
For the startups, the greatest value of Assessing China was in learning: about the market, about other startups working in their space, and about themselves.
Learnings about the Market
One of the most exciting findings was from Gal Shaul, the founder of Augury, noting the “overwhelming response to automation and the interest of industry to adopt”.
In my previous experiences as a founder, interactions with potential business partners in China felt like a one-way street. I’d pitch, describe my technology and product and how it could help their business, and they’d listen, usually through an interpreter. The end of the first meeting was usually a general politeness and an agreement to continue the dialogue.
Not so with our meetings on this trip. One of the early manufacturer visits with a larger paper manufacturer began in this vein, but by the end of the site visit they were describing key pain points — quality control — and how AI companies could help their QA processes.
Another manufacturer, a mid-size injection molding operation in Shenzhen, politely listened to the companies discuss their technology and then directly said: “We don’t have a data problem. We have a people problem.”
Wow! Their head of manufacturing operations went on to discuss in detail his staffing issues and key pain points of maintaining high-quality work in the face of increasing automation. His workers get bored, and he’s looking for automated solutions to solve their boredom problems.
These kinds of honest, direct insights increased with the size and sophistication of the manufacturer. Personally, the most compelling moment of the trip was at the manufacturing campus of BYD: we got the tour, then an audience with management in a conference room, on the floor above their massive injection molding tooling operations. BYD’s team listened to the companies discuss their products and technologies in turn.
Then, company by company, BYD’s head of manufacturing operations individually and directly reviewed the startups in turn: we don’t need this; your solution is interesting; we’re already doing that; we’d like to pilot this now.
As a team, we’d not experienced this kind of direct, honest feedback from groups in China. The key lesson is that there’s a growing interest in China for innovation and acceptance of working with early stage companies. This is driven no doubt in part by an increasingly active innovation scene in China itself, where VC activity is increasing at a very steep rate to become one of the largest innovation centers.
Hytera, a leading provider of professional radio communications and partner with Siemens for intelligent manufacturing transformation, put it like this:
“We have explored a complete set of intelligent manufacturing development plans. This exchange event allowed us to see a lot of good overseas startup teams, learned about the latest development trend of ‘Smart Manufacturing + AI’ technology in the world, and also enabled overseas startup teams to have a deeper understanding of Chinese manufacturing.”
And from Andrew Scheuermann, co-founder and CEO of Arch Systems:
“The Assessing China program exceeded my expectations in the relationships I was able to build with many of the manufacturers as potential future customers, as well as the fellow participants.”
Right on, Dr. Scheuermann. Right on.
An Unintended Founder Network
Three of the companies in this first Assessing China program — Arch, Augury, and PsiKick — leverage sensor data to enable and optimize manufacturing automation. The other two — Ready and Canvas — are technologies for industrial robotics.
To be honest, we didn’t know what to expect when throwing these teams together in a place like China. Founders can be sensitive to potential competitors in their personal space. While we anticipated some tension, an all out street brawl in the heart of Guangdong was not out of the question. We prepared for that. Mentally, at least.
But a funny thing happened on the way to that first manufacturer meeting: traffic. Hours of it in a van. With nothing to do but talk.
Andrew from Arch said, “We built friendships and learned from fellow industrial entrepreneurs that I might not otherwise have met and spent a week with. It accelerated my knowledge about the bigger Industry 4.0 picture as well as gave me perspective and wisdom from others’ journeys.”
Indeed, by the second day, the teams had refined their company introductions to show how their technologies are necessarily, mutually collaborative for the continued advancement of manufacturing digitization and automation.
One of my favorite examples of this came during conversations with MGI, a leading manufacturer of genetic sequencing machines. They want to reduce the number of robotic arms required to automate their manufacturing operations. Together we discovered that Ready Robotics on a Canvas AGV provided a unique and creative solution.
As a founder in the Valley, one of the most valuable things I found going through accelerators was building a founder network and leveraging the mind share to strengthen the whole community and avoid repeating mistakes.
In talking with Benjamin Gibbs from Ready Robotics, it was those hours on the bus — rare downtime in a founder lifecycle, and even more rare to be in the company of other founders working in a similar market, and at a similar stage — that were perhaps the most valuable during the week. It was an opportunity to learn, to research, and to better understand how founders can collaborate as they grow.
Direct Feedback and Fast Reflections
Never believe your own hype. No quote necessary — this is a universal truth for startup founders. Yes, there is a large part of salesmanship, marketing, and PR involved with startups, especially if they’re VC-backed. The pressure is real and the competition is fierce.
With startups focused on B2B with industrial partners, the need to demonstrate real world values and KPIs is intense. There is little to no room for BS when you’re talking about integrating a new technology into an assembly line or industrial setting. If you pilot ahead of product readiness, you may get a short term investment but a long term kick in the ass.
The direct, repeat feedback forced the startups to hone in on their unique value propositions. This was extremely important. Overall, we discovered that while China is indeed open to innovation, and companies are increasingly willing to engage with early stage startups, the burden of proof is still on the startups.
China can be a very compelling market, but startups should only consider going into China when their products and services are clearly defined and ready to roll. This was one of the few preconceptions that held through the experience, and the results are telling.
“This has been the most eye-opening and business progressive trip I’ve ever participated in and I would recommend any startup CEO/CTO/COO/CRO to join if they are thinking of the Chinese market.”
— Nils Alstadt, VP of Customer Experience at Canvas
Views from the (Comet) Tail: Our Thoughts as an AI-focused VC
Our first meetings in Shenzhen were on July 9th — a few days after $64B in tariffs were levied against China goods and a day before the threat of an additional $200B. Interesting times, and definitely top of mind for many on the expedition.
However, as is always the case, it quickly became clear that innovation and entrepreneurship are universal languages of global interest. New technology is always compelling and there is a strong desire to make partnerships work in an increasingly globalized Earth.
In addition, there is a growing openness from Chinese businesses in discussing key industry pain points and areas of technology interest. This is exciting stuff, reflecting an increasing awareness and appetite for new technologies to accelerate into traditional industries — in many cases at a significantly faster pace than US and European counterparts. While there are certainly complexities, China is certainly open for business and is pushing technology adoption. Just try to buy a hamburger with cash at a McDonalds in Beijing (spoiler: you can’t).
In the manufacturing industry specifically, while there is a lot of talk around leveraging AI tools to push manufacturing automation to the limit, there is a strong understanding in China of the limitations of the technology and where, how, and why these technologies ought to fit into today’s operations and the manufacturer of the future.
Hytera in particular is pushing the envelope of manufacturing automation, leveraging robotic arms and line optimization to a degree previously unseen by Comet Labs or the visiting startups. Their partnership with Siemens reflects this, and their combined effort is remarkable.
Increased automation in manufacturing settings decreases the workload on individuals. One of the repercussions of this is the tools available for failure analysis, both in individual parts inspection and in machine O&M, are increasingly boring. Even for highly unskilled labor — US or China, it makes no difference — these QA and FA tools make the job boring to the point of distraction. Coupled with the fluid job market in China manufacturing, where employee turnover approached 70% annually, it’s becoming increasingly difficult to just hire people, let alone keep them engaged in the job long enough to have an economic advantage for the factory owner.
This is the driving motivation behind the analytics and failure prediction companies like Augury, Arch, and PsiKick. Yes, there is value in having an automated system do a better job than people, but it’s a marginal value. The problem is that manufacturers today cannot find and maintain people to even do the job. Deployed sensor networks, integrations with Manufacturing Execution Systems, and layered machine learning services are universally viewed as a necessity in an increasingly automated future.
Flexibility is King
Mass production is build around the concept of an assembly line — a large investment in rigid machines and linear workforces that can then leverage economies of scale to output a given product.
Two trends are shifting the calculus of the assembly line:
- Demand for customization
- The compressing timeline of product innovation cycles.
Rather than automation offering potential operational savings from reduced labor costs, the value of automation and data-driven services is in building an increasingly modular, flexible manufacturing setting that can quickly adjust to new products without sacrificing operational cost.
Here, one of the most compelling potential solutions was a hybrid between Canvas Technologies — the leader in autonomous mobility systems in unstructured indoor environments — and Ready Robotics, the universal OS for robotic arms. By offering a mobile, highly programmable robotic arm, manufacturers can potentially have a single arm operating at multiple points on an assembly line, and one that can be reconfigured for different tasks with minimal downtime. Comet Labs and the manufacturing partners had not seen a solution like this in the startup world or elsewhere, and the potential combination is a unique, collaborative finding of the Assessing China effort.
Technologies that enable manufacturing flexibility is increasingly important when we consider the trend toward a single machine vendor for a complete assembly line. The value here is that all machines would speak a single language (there is no standardization for industrial machinery across vendors), the data is centralized, and operations can be optimized across the line. The downside is the vendor, today and in the future, maintains control of the data and offers that optimization as a service to the manufacturer.
At risk of upsetting some industrial stakeholders, this concept of centralized data limits the adoption and scaling of fully flexible, autonomous manufacturing systems.
Disruption is at the heart of the startup experience. The major disruption for the startups on this Assessing China trip was that they unlock the value of data for manufacturing owners, enabling deeper levels of automation and flexibility without sacrificing time or operational margin.
Onward!
“Ignore the news and focus on doing business with people you trust.”
- Gal Shaul, co-founder and CTO of Augury
I really like Gal’s style. With startups, there’s always dozens, hundreds of reasons not to try something new, and only one or two reasons to go for it.
There’s so much noise. And at a time of political tension between the two biggest economies in the world, with AI as one of the foci of that tension, Comet decided it would be helpful to bring the top AI startups in industrial automation over the Pacific to meet with some of the manufacturers leading China’s efforts toward Industry “4.0”. There were plenty of risks — the wording was buzzy, the timing was questionable, and the concept had definitely been tried before.
But something interesting happened once we actually got to Shenzhen. China opened up, it listened, we listened, and we all saw a step taken to introduce and grow new US technologies to the largest scales in Chinese manufacturing.
I personally would not have believed it possible before we went. I do now, we’re excited to help these startups continued to accelerate into Chinese markets, and we’re already working to start the next group journey of Assessing China. Who knows what opportunities it will create!
To stay up to date on future Assessing China programs from Comet Labs, sign up on our website or send us a note at hi@cometlabs.io.
