Cisco Entrepreneurs in Residence program showcases IoT startups

Cisco established its Entrepreneurs in Residence (Cisco EIR) program in 2013, which has since helped 27 small companies grow, by assisting with the right connections to customers, and by connecting them with outside venture funding, Cisco business unit executives and product development resources. The newest cohort of startups has developed innovative solutions for big data, networking, visualization and the Internet of Things.

The 451 Take

Cisco EIR serves a dual purpose: open innovation for Cisco business units; and exposing selected startups to Cisco's large sales and marketing machine, network of customers and venture capital partners. Cisco has a long history of leveraging multiple open-innovation models with academic research, close relationships with VCs and partner-engineering – Cisco EIR appears to be the best model it has yet tried. The most recent cohort of small companies have synergies with Cisco's target markets for IoT, and the artificial intelligence (AI) and orchestration startups could also tuck in nicely as acquisitions to fill in portfolio gaps.

Cisco Entrepreneurs in Residence

Cisco established its Cisco EIR corporate venture program to identify and incubate technologies and startups that align with the interests of its business units. The startups are typically complementary to Cisco offerings; however, the company states that in rare instances, it will also accept companies with particularly disruptive technologies outside the remit of any specific business unit.

It now operates in five cities in the US and EMEAR (Europe, Middle East, Africa and Russia), and has seen acquisitions of four of the 27 startups (ParStream and Pawaa, acquired by Cisco, PetaSecure, acquired by Niara, and Crowdx, acquired by Cellwize) that have graduated from the six-month program.

While innovation at Cisco is typically attributed to its aggressive acquisition strategy, the company has a long tradition of open innovation. It has sponsored applied and long-term research at universities including Stanford (where Cisco founders Sandy Lerner and Leonard Bosack were professors), Berkeley and MIT, as well as co-development with startups. The company opened its first IoT innovation incubator in Munich. The graduating cohort of the current Cisco EIR program, briefly summarized below, includes companies focused on healthcare operations, networking, AI and data visualization.

Tagnos – the Internet of (medical) Things

Tagnos, founded in 2010, provides multiple technologies for workflow optimization for hospitals. Hospitals have multiple information systems, including clinical systems (for electronic health records, dominated by vendors such as Epic Systems), financial systems and hospital operations management systems. This latter category is where Tagnos lives.

Tagnos ingests data from the standard admissions, transfer and discharge feed from operations systems, and begins patient tracking through the hospital journey. This allows it to notify family of location changes (from intensive care to an overnight room, for example), schedule specialist appointments, and track expensive hospital medical care equipment. It does this via a combination of RFID tags, ceiling monitors and Wi-Fi access points, and has worked closely with Cisco to integrate with its Wi-Fi offerings: Tropo (Cisco) SMS and Cisco Spark collaboration software.

Tagnos states that it has seven paying customers at present, and eight prospective ones working through the long (four-to-six month) sales cycle. Although the company has a compelling value proposition, Cisco has historically chosen to engage with heavily regulated industries such as healthcare indirectly through partners; therefore, we do not expect to see Tagnos as an acquisition candidate for the company.

Simularity – the Internet of (learning) Things

Simularity is a small AI startup focusing on applying general-purpose machine learning to the problem of incident prediction and anomaly detection to avoid equipment failure. The company's software is modular, and can be executed in datacenters and at the IoT gateway, or on equipment as small as a $5 Raspberry Pi Zero. Simularity used the example of oil-well failure and self-learning by observing time series data from well motors to predict pre-failure indicators.

The company's software has been sold on an (on-premises) annual-subscription basis to 17 customers to date. Simularity competes with other analytics companies such as TempoIQ. As expected, the company integrates with the Cisco IoT gateway platforms, and was also recently certified on Dell IoT edge gateways. It's worth noting that Dell hasn't formally responded with its own edge analytics offering to compete with Cisco's ParStream play, which makes it a potential acquirer. The company's small size (10 employees) and bite-sized cap table (approximately $350,000 in early seed funding) make it an attractive target.

LISNR – the Internet of (audio) Things LISNR has developed data-over-audio technology that, in contrast to Bluetooth or Wi-Fi radios, leverages any speaker as a data beacon and any other device (aka 'cross device') with a microphone as a receiver. The company embeds inaudible tones in audio signals, which are then heard by third-party smartphone applications that have implemented the company's SDK to detect these 'smart tones.'

The company highlighted rock concerts and NASCAR races as two venues where the technology has direct applicability for triggering highlights or close-ups to attendees' smartphones via the embedded audio signals. Despite the high level of ambient noise and distortion at these events, the company is confident it can still detect the tones, and even says that having the microphone 'always listening' consumes less battery life than similar Bluetooth Low Energy radios used in Bluetooth beacons.

Cross-device usage of embedded audio beacons to mobile devices was the subject of a November 2015 workshop convened by the US Federal Trade Commission over concerns surrounding a similar audio broadcast technology developed by vendor SilverPush. As recently as March 2016, the FTC issued warning letters to 12 vendors that had incorporated SilverPush's SDK into their Android applications over concerns about these applications tracking end-user television-viewing habits via a microphone in their mobile phone. This casts something of a shadow over what is a promising broadcast signaling technology.

LISNR's revenue model is based on a per-SDK installed licensing model. The company has applied for 17 patents, and has raised two rounds of funding, the most recent being its $10m series B round led by Intel Capital. We feel that LISNR is an unlikely acquisition for Cisco, at least until the uncertainty (regulatory or PR) surrounding embedded audio signals has been resolved.

C3DNA – the Internet of (self-repairing) Things

C3DNA (the C3 stands for Cognition, Computing and Communication) is a company focused on building intelligence into the cloud. The company's technology, which it has termed 'Cognitive Application Area Networks,' self-repairs, automatically scales, and automatically and dynamically migrates workloads throughout one or more clouds. It originally demonstrated its approach at Cisco Live 2015, running on the Cisco Intercloud, dynamically shifting workloads between different Intercloud providers.

The company has eight patents issued, with a further nine patents in progress. The company's go-to-market strategy heavily leverages cloud partners such as Cisco, Innova, Tech Mahindra and Mphasis. C3DNA has raised one $2m round of early funding. We see capability such as this to be an important component for cloud federation, and believe that it would be a logical tuck-in technology acquisition for Cisco's Intercloud business.

ZoomData – the Internet of (visualized) Things

ZoomData, the largest company of the current Cisco EIR cohort, is more of a 'scale up' than startup. Founded in 2012 in Reston, Virginia, the 115-person company focuses on visual analytics for real-time and historical big data, and already counts over 50 customers, including Cisco and Juniper, as well as non-technology companies like Bankrate and CARFAX.

The company provides technology for real-time visual analytics of large amounts of data, and has two patents applied for in the area. Cisco uses ZoomData in its customer support operations, where customer support engineers use the tool to track customer problems and correlate these problems across the broader Cisco product portfolio for serviceability design engineering.

ZoomData has raised a total of $47m across a seed round and three venture rounds. The company raised $4.1m in its series A led by Columbus Nova Technology Partners, a $17m series B round led by Accel Ventures, and a $25m series C in February 2016 led by Goldman Sachs with participation by Comcast Ventures. ZoomData is another potential acquisition for Cisco as it seeks to further build out its analytics capabilities, specifically in extracting insights from the large amount of IoT time series data.

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