The Smart Deal (Podcast) – Investment, Tech, and Smart Cities

you're listening to the smart deal i'm emma lozana dugan bringing you our new current podcast in which along with our expert in finance and investment strategy and also cfo of tech startup cinema's joe zary fair we will tell you about the latest in investments technology and the smart city industry so joe how are you how's life treating you hey amma thanks for having me happy to be doing this podcast with you yeah i feel like this new program this new podcast was a great next step i mean at current we've been seeing investment numbers slowly going back to pre -pandemic numbers with many funding rounds and partnerships yeah you mentioned 22 in this week's currently which is very interesting they raised 22 million and here is a in a bit to expect in europe and the us they are targeting an ambitious 10 million euros in subscriptions in 2024 which is very exciting yeah and what i found funny is that 22 raised 22 million euros yeah i think i think i think they i think that's their lucky number they made it i'm sure they made it on purpose i'm pretty sure yeah it would be too much of a coincidence exactly We've also seen Quantela raising $50 million from Digital Alpha to partner with Starlight. Quantela indeed, raising $50 million to expand in the private sector. Brilliant, brilliant. Look, there is obviously growing interest lately for everything that's data technology. With the obvious all eyes on AI data engines in the past few months, computer vision and advanced data analytics have been focal for quite some time. too so you take 22 that specializes in computer vision and ai cantela specializes in advanced urban data analytics so and both companies show that they have very strong data science expertise and that's what's attracting investors their core offer is software which allows them to have great great gross margins so despite not being very profitable at early stages because heavy investments in growth, I think they can easily become very profitable businesses at the end of their growth phases. Look, another key takeaway here is monetization with customers other than the cities. Yeah, we've been seeing that at current more and more. More of this vendors moving towards private clients. Exactly, exactly, exactly. And while both companies started off by providing solutions to cities they were able to diversify and expand their customers' portfolio to the private sector. 22 is catering for retail and fast food, while Cantela is partnering with advertisers in retail outdoor spaces. So this enables them to grow and scale by tapping into additional revenue streams with shorter sales cycles and lower customer acquisition costs. We all know how long and pay for it. close public sector deals yeah so you know it gets them to be more dynamic but why do you think they were successful look my as we said one software companies with strong data science expertise is pretty sexy for investors diverse surviving revenues by tapping into the private sector is also something that is a great differentiator for them. And last but not least, and in my opinion, a major factor behind both successful fundraisings is the fact that both 22 and Cantela are adopting recurring revenue models through subscriptions or license fees. We are seeing companies adopting more and more business models based on ARR, which is annual recurrent revenues, enabling them to, I think, convince investors in their ability to grow and scale by showing them predictable revenue streams you know at the end of the day nothing is more confident for comforting for an investor than predictable revenue streams we are even seeing investors ready to pay up to 20 times the realized ARR for companies so this is this is great for the for the yeah I mean 20 times is a lot I think it's it's interesting because we're seeing these companies going into partnerships or raising funds you mean they're growing But then we see other companies like air quality solution vendor Hawa Dawa, we covered this. They sold their entire portfolio to Bernard Gruppe. Why do you think that is? Look, Hawa Dawa, despite offering an as -a -service model and implementing data exchanges by API, they remained, I think, a simple solution vendor addressing one use case for one client. Hyper-local environmental monitoring has become... increasing concern for cities, there's no doubt. But while significant numbers of European and US players entered the market in the recent years, I think hyperlocal air quality sensors remain deployed at a very shy scale and in very specific locations like schools, I can think of low emission roads, I can also think of retirement houses. You know infrastructure for health monitoring is very technical. And it's a big concern. We've seen the bridge collapse in Italy, the Notre Dame fire. We even covered the topic on Current in a video where Catalonia's train service told us how they're monitoring a mountain area following a collapse that led to an accident. Yes, yes. And for some reason, it remains a niche technology with strong competition from more aggressive IoT players like World Sensing, who leads the market. But do not dismiss this vertical. And always remember Breeze -O -Meter who were able to work around these hurdles and go to the private sector, selling them air quality data to consumers like L 'Oréal, which by the way reconciles exactly with what we said previously, in a sense that these traditionally city vendors are tapping into the private sector, which... led to the whooping acquisition by Google at an estimated 200 million for Brise -O -Meter. So do not dismiss this vertical. 200 million is not bad, not bad. I mean, the Brise-O-Meter case, it was an eye-opener, really, because it just made everyone realize how much potential the private sector has. Exactly, exactly. Because when we think of air quality monitoring, we always think of cities. But then this proved that there is so much going on for the private sector. Exactly, exactly. And I think you covered some pharmacies that were... Yes, yes. The pharmaceutical industry. Exactly. Monitoring the pollen. There you go. So that they know when to push the advertising for the allergy season. Exactly, exactly. And how to stock up too. Yes, yes. Yes. Now, everyone at the Smart City Expo, all the air quality solution vendors, we're very excited about the news. Maybe let's see what news we have in the next Smart City Expo. We'll be watching. Well, that's all the time we have for Investment Talk for today. But don't forget to follow us for more episodes like this one. Joe and I will be back. We'll be right back.