Breed Reply CEO and angel investor Emanuele Angelidis tells Internet of Business why IoT start-ups matter, what he looks for in investment opportunities and how the European start-up scene is changing.
Emanuele Angelidis has distinguished pedigree in the start-up world. Beginning his career at Italtel Telecomunicazioni in 1994, he played his part in the early development of Omnitel, latterly Vodafone Italy, and in 1999, he co-founded Italian telco Fastweb. Following various international projects and investments, he became the CEO of London-based, IoT-focused start-up incubator Breed Reply in 2014.
Three years on at the IoT investment arm of the Reply Group, he’s helping early-stage IoT companies to take their businesses forward.
Describing the company’s business model, Angelidis tells Internet of Business: “We invest in order to take a minority shareholding into the invested companies.”
“But alongside investment, we operationally support the companies for one year, in order to make sure that they get the right support in many areas such as strategy, business planning, seasonal marketing and technology, because I’ve been a ‘start-upper’ myself many times, and when you are a young company, you are in need of cash, but you are also in need of know-how, expertise and resources.”
This focus on operational support therefore enables Breed Reply to minimize investment risks and accelerate the growth of these fledgeling companies. It will also help them to hire an external CEO or business development manager, he adds.
“This, for us as an investor, is extremely important because it enables us to de-risk the investment. Because it’s completely different if you invest your money and then you wait and see, [compared to] if you invest your money and, in this delicate phase of the company journey, you can support the company with your expertise in order to deliver what is expected [from] a company like that.”
Why is IoT Breed Reply solely focused on IoT, though? “We are 100 percent focused on IoT, and the reason for that is because we really believe this is the next big revolution,” says Angelidis.
Having lived through the mobile revolution this has obviously influenced his thinking. In fact, he says he now believes that the IoT will be even more disruptive than mobile.
“IoT is very impactful, [it] is very pervasive, and basically every application is in some way impacting all the stakeholders with a share in that application, and this is why we’re so focused on IoT because it’s going to be a much bigger revolution than mobile has been so far.”
Breed Reply is sector-agnostic when it comes to IoT, and it has its fingers in many verticals. Last year, the investment company announced its portfolio had reached 15 companies across sectors including healthcare, industrial IoT and even space.
Picking the right investment
Angelidis says that when his team is looking for investment opportunities, they’re basically interested in start-ups with strong management teams, high levels of innovation and operations focused on a fast-growing market.
“But most importantly, we also look at the business model,” he said. “We want these businesses to have a sustainable business model in the long run.” That means not investing in short-term projects that don’t bring in recurring revenues.
Twice yearly, Breed Reply hosts what it calls its ‘IoT Best in Breed’ event. It’s an opportunity for IoT start-ups to pitch their ideas and put themselves forward for investment. It’s open to the global start-up community, but Angelidis says Breed Reply’s presence is naturally bigger in Europe.
Most recently, following the completion of Best in Breed 5 this month, Breed Reply invested in start-ups Canard Drones in Spain and Wearables Technologies in the UK.
Wearable Technologies’ unique selling point focuses on the industrial IoT market, and specifically, connected workers. Angelidis tells Internet of Business that, as the industrial IoT market grows, regulation is becoming more stringent where worker safety is concerned.
Wearable Technologies has developed an end-to-end platform, protected by 40 patents and trademarks. The idea is to have sensors used by the worker, connected through a communications system.
“These sensors are typically embedded into personal protection equipment, so the worker is basically wearing a jacket connected to a mesh networks, to colleagues, to machinery and to the control rooms,” Angelidis explains.
“It aims to improve accident reporting and prevent accidents occurring, because the worker and their devices are connected to the network – so that if anything dangerous happens, a worker is alerted.”
He uses the example of a worker being prevented from going into a dangerous zone or being told to turn off a tool if it is dangerous to keep it running. It’s entirely about the safety of workers in hazardous environments.
“Our interest is related to two things,” he says. “The first one is that the IoT market is fast-growing, so it’s one of our priorities [to have] applications in fast-growing markets, and this is a market where regulation will become tougher, hence requiring a specific solution in order to be in line with the regulation. Wearable Technologies is perfectly matching this kind of requirement.”
“The second thing we like is also the business model, because this is a business model with three potential revenue streams. One is the possibility of licensing the technology and supplying electronics; the second is the potential for revenue as a service; and third, there’s also a potential set of revenues coming as a device licence from the device manufacturers. So, [it’s a] very diverse set of opportunities on the revenue stream front, which is obviously very important to de-risk the investment.”
Based in Spain, Canard Drones is an entirely different prospect. This company has built a visual inspection solution for airport systems based on drones. By law, airport equipment needs to be periodically inspected and calibrated from the air to make sure the systems work correctly, and, most importantly, airports need to deliver certification to comply with national regulations.
Angelidis said that the way this is done today is often extremely manual. He said: “When the airports need to check and calibrate, for example, their lighting systems on the landing strip, they have to fly with aeroplanes above the airport and check that the lighting is working properly according to the regulation.
“This is manual and quite complex because of human error or adverse weather conditions, and so what happens is that the pilot has to do several laps of the strip to make sure he acquires the data.”
Clearly, this is complex and extremely expensive, especially as these inspections need to be conducted during limited windows of airport downtime.
Canard has shown that automated drones can perform this kind of airport system inspection instead of humans, at a much lower cost and with greater efficiency, says Angelidis.
The company is currently running a couple of paid pilots as this is their first application, but Angelidis confirms that the company sees potential uses beyond airports.
Future Breed Reply investments
As Angelidis points out, “When we do the Best in Breed, we are always open to any kind of opportunity”, but notes there are three areas in particular that he is keeping a keen eye on.
These include the healthcare industry. “This is definitely an area where there is a lot of interest and a lot of opportunity, because it’s a top priority of any government’s agenda to find a way to provide a better level of service to their population in a much more efficient way,” he says.
“So we have several solutions in our healthcare portfolio that are addressing those kind of requirements but obviously we need more.”
The second industry that Angelidis deems “extremely attractive” is industrial IoT, “because sometimes manufacturing companies [have] benefited less from innovation. So now with IoT, there is a great opportunity to close the gap with other industries and really adopt the highest level of innovation possible.”
Finally, Breed Reply is keen to invest in “the world related to smart cities and smart buildings,” as well as two horizontal enablers that Angelidis believes are crucial: data management platforms and cybersecurity.
European IoT start-up market
Despite the talk of future investment, IoB was keen to know how the current European market is shaping up for start-ups. Has the European start-up market been affected by the talk of Brexit? Will start-ups really look to relocate to Paris and Berlin?
“The quick answer is no, we don’t see any impact due to the Brexit,” Angelidis insists. “There’s no start-ups that are looking to relocate to Berlin or any other European country, because I really believe the UK is still the best place to be in Europe for a start-up to develop for several reasons,” Angelidis said.
First, it’s the “ideal place” to find investors. “The amount and quality of investors in London and the UK is definitely greater than you find in Europe.”
Second, the overall addressable market – comprised of both public and private sector organisations – is greater than that found elsewhere. “So even the level of interest IoT has for the government is much higher in the UK than what you experience in other countries,” he says.
Third, Angelidis sees the UK as a gateway to the US market, “much more so than other countries.”
“Over the last few years, I’ve seen Germany growing quite fast in the IoT space. I’ve seen some countries start to have dynamic movement, such as France and Spain – but even if these countries are improving, I still believe that overall, if we look at all the elements that drive the attractiveness for a young company, the UK is still ahead of anybody else,” he adds.
Interestingly, Angelidis indicates that there is a new pattern emerging when it comes to US investment. In the past, US-based venture capital firms were very much focused on Silicon Valley – but over the past few years, they’re looking far more seriously at Europe.
With such investment power potentially heading this way, the long-awaited European tech unicorn may only be a few years off. Breed Reply is on a mission to get to it – and invest in it – before others do.