Analyzing a Smart City Startup Series B Funding Round Success

Raising funds is hard for any startup. Not even half of them make it to a Series A, not to mention, a Series B. And it's not easier in the smart city industry. Smart city startups struggle more because sales cycles are very lengthy, as the end customer is a municipality whose purchase process is long, tedious and, on many occasions, has a constrained budget. This means that becoming profitable and proving the business case takes longer, so finding clients and investors becomes harder. We spoke with HaydenAI, a US-based company that mounts cameras on fleet vehicles and uses an AI-powered geospatial mapping platform to identify and inform of violations that obstruct transit vehicles. They recently closed a Series B with a whopping $53 million. Any type of parking violation, whether it's parking in a bus lane, parking at a bus stop, double parking, any type of violation that obstructs or impedes the movement of a transit vehicle, our system detects and allows cities and transit agencies to more efficiently and more effectively issue violations. Places like New York, they've seen as much as a 30% increase in on-time arrivals of buses since the cameras were installed. They've seen similarly a 42% reduction in collisions on buses where our systems are installed. HaydenAI has run pilots in major cities like Philadelphia. The municipality's return on investment comes in the form of a more reliable public transport system, which is set to lead to more riders and fewer cars, so less pollution and congestion, and tickets for rule breakers. We wanted to find out about their successful experience raising funds. For their Series B, the company leveraged the experience they gained from their series A funding round. From what I learned through the process, I think it was a great opportunity during the Series A to get familiar with the types of information, the way you want to tell your story and really what resonates best with the investment community. The Series B is a little bit more about being, I think, more focused on what you're actually doing and also being able to better tell the story of your revenue, of how you're going to grow your company and how you're going to use this new capital that's being invested into your organization. The Series A was used to really put in place the basic infrastructure that you need to build a company. The Series B now is about taking that product market fit and bringing that product and other products to see their full potential. And that funding is really important as you look to scale, as you look to grow. To enter into a Series B funding round, it's important to show an established solution with market fit and growth. Charley told me that to show that, they relied on numbers. Traffic management and enforcement is a very big market in the US as there is a need to curb congestion and improve public transport. The company started deployments over one year ago and now has some 1000 cameras in US cities. There's no question that the Series B is going to give us the fuel we need to continue our growth trajectory and we're going to use this to, not only continue to invest in our core enforcement product and even other enforcement use cases, but also move into things like data analysis, like asset management and change detection and even data as a service, capturing ways to use the data that we're collecting. The digital twin layer or foundation now will be something that we’ll be investing in pretty heavily over the next few years. In a time in which AI is all people talk about, because of the possibilities, working with artificial intelligence and having it in its name has helped the company in the funding round, not just because AI-enabled cameras are allowing for more use cases, so companies can diversify, but also because it's a growing trend that generates high valuations and attracts investors. This past year, the smart city and utility sectors saw AI-powered vendors successfully raising funds. Vizzia raised over €3 million, Cortexia some 2.3 million, Upciti raised 7 million, Vivacity Labs 8 million in early 2023 and Amperon hit $20 million. AI has certainly had a great deal of buzz about it over the last 12 months. And I would have to say that there are doors that were opened largely because we had AI as part of our platform. The biggest headwind that we would face is any potential backlash against AI. Right now, there are a number of regulations and I think a number of cities that are looking at ways to protect against people using AI for the wrong reasons. I think our focus will be telling the story of how we use AI for good. Like any other Series B, HaydenAI is looking to use the funds to improve what they already installed and expand globally, something that would be impossible without fresh funding. I think you have to believe in your product and you have to know where you're going and you have to be flexible and agile because what's important to one investor may not be important to the next one. By the end of the process, you'll probably know more about your company than you ever had. The biggest challenge, I would say, of a Series B funding round is the time commitment. It's not something that you can do with one toe in the water. There is a great deal of work or a great deal of preparation and really tremendous amount of resources that have to go into that process. HaydenAI's successful funding round proves the importance of timing when looking for investment. The perfect time comes with understanding the market, the customer pain and needs and the growth opportunities and trends. In the US, we've seen utilities successfully scale smart projects, but smart city vendors struggle when it comes to moving forward from a pilot phase. However, there are clear opportunities in mobility as major cities struggle with congestion and encouraging public transport use. And when the solution is enabled by AI... there are good chances of success.