Tag: Intersections of Innovation

Investing in Intelligent Applications – 2020 and beyond

We have been writing about the Intelligent App Application Stack for over five years – which means we’ve been investing it in for even longer. And that has not changed in 2020. We continue to believe that applications will be intelligent. What has changed over that time is both the rate of adoption and the availability of underlying infrastructure and technology to support these applications. In this post we detail four areas that we are continuing to see innovation around intelligent applications.

We define application intelligence as the process of using machine learning to create apps that use historical and real-time data to build a continuous learning system and make predictions and deliver rich, adaptive, personalized experiences for users. Intelligent applications typically have a modern user experience; a cloud-native, microservices architecture, and integrations to other systems and cloud services. We believe that every successful new application built today and, in the future, will be an intelligent application.

What benefits do intelligent applications deliver? We believe that next generation intelligent apps will allow us to:

  • Create custom workflows to automate any process
  • Process data in real-time across multiple systems of records to deliver insights and predictive capabilities
  • Build digital-first go to market and customer service models
  • Provide better services with lower delivery and customer service costs
  • Become the new systems of intelligence on top of legacy transactional systems

What are the types of intelligent applications that we are seeking to invest in at Madrona? Here are four broad categories where we see immense opportunities:

1. Automation

Many of the most impactful “intelligent apps” today focus on identifying repetitive, time-consuming processes and creating new ways to handle these workflows in a way that allows customers to focus more of their time on high-value synthesis and cognitive work. This is a cornerstone of the digital transformation that every enterprise around the world is currently going through.

The largest companies in this space today are the robotic process automation (RPA) vendors, such as Madrona portfolio company, UiPath. These companies have built horizontal platforms that allows companies to automate individual steps of a workflow, such as opening up a PDF document, extracting key data, entering that data into another system, and combining these steps into an automated workflow.

Despite the success of RPA, it is only scratching the surface of what is possible with AI and automation. With innovations in computer vision, natural language understanding, and other machine learning techniques, we are also seeing more and more companies build “RPA”-like automation into new products to create end-to-end workflows for specific use cases in industries such as legal services, financial services, healthcare, and real estate.

Some of the most interesting companies in this space go beyond automating one workflow to automating multiple workflows and creating a new integrated workflow. For example, a company like Zeitworks uses machine learning to map out a customer’s workflows in order to help understand which processes can be automated and to track how they perform over time. Madrona funded Zeitworks’ seed round in June of 2020 recognizing both the need for discovery of workflows prior to applying automation and the fact that automation for small to medium sized firms is particularly needed as the workforce and resources they need are not co-located any longer.

2. Next Generation Business Applications

Many of today’s key business systems for finance, HR, sales, and customer support were built decades ago, with software architectures that have not changed for the last twenty years. While these companies have built large businesses around certain types of customer behavior, they are often unable to innovate at the same pace that modern companies need.

We believe the most successful next-gen business applications will compete with their legacy alternatives by attacking a small portion of what their legacy competitors offer today or completely reimagining a business process that can only be enabled with modern software architectures.

For example, in the travel and expense space, Concur was founded in 1993 and built a massive business digitizing a manual process where paper receipts and expenses were passed from employees, to managers, to FP&A teams. Modern startups are transforming this process by reorienting around purchase data instead of receipts and forms. Rather than waiting for a month after a purchase is made, modern tools like Center deeply integrate credit cards with enterprise grade software to process expenses as they occur to give managers real-time insights into employee purchasing behavior and budgets.

HighSpot, a Madrona portfolio company, is another example of an intelligent application that uses integrations and data from multiple systems to help sales teams find the right content and relevant guidance for each conversation. By using data from CRM systems, email, and other workflow tools, their system is able to score content and understand what engages customers and drives revenue.

These types of workflows and systems are possible today because of modern microservices architectures that can process data in real-time, stream data to and from other systems, and convert data and insights into immediate actions. While many of these modern platforms start with a small feature like better insights, better UI, or better data, we believe they have the potential to eventually replace legacy systems.

3. “Avant Garde” Applications

Photo of an Amazon Go cashierless store.

“Avant garde” applications create completely new experiences and products by using machine learning – services that just weren’t possible before the combination of low-cost cloud computing, massive amounts of data, and new machine learning algorithms.

ML breakthroughs in fields like robotics and computer vision have created self-driving automobiles, which enable completely new vehicle form factors, business models, and services. Alexa, Siri, and Google Home’s voice assistants enable new interaction models that would not have been possible without advancements in natural language processing.

Many of the companies in this category are pioneers in bringing important new technologies such as computer vision, deep learning, robotics, and NLP to market, so it is a very dynamic space to watch because it sits at the intersection of massive markets, cutting-edge technologies, and novel business models.

For example, Amazon Go has created a completely new shopping experience by using computer vision technology to reimagine the shopping workflow. This allows for the construction of stores with new layouts that don’t require cash registers at the exit and may one day allow for retail stores to adopt new business models as well.

4. Intersection of Innovation spanning Life Science and Data Science

This is a vertical specific intelligent application category. However, given the potential opportunity size and impact, we have called it out seperately.

Whether it is in the field of diagnostics, therapeutics, or healthcare operational efficiencies, the availability of massive data sets combined with applied ML/AI is revolutionizing what is possible in the fields of life science and healthcare. For example, a company such as Adaptive Biotechnologies leverages decades of research on the immune system, next generation sequencing, and machine learning in order to detect changes in the immune system to diagnose disease.

While these companies can become massive winners, they may also be harder to measure and monetize in the short term. However, as early stage investors, we are excited to continue exploring investments in this category.

Over the next decade, we believe that every successful new application will be an intelligent application, and this will lead to many opportunities to build enduring software companies. If you are working on building an intelligent app in one of these categories, we would love to meet you and learn more! Our contact info is linked in our byline!

Madrona’s Investment Themes for 2020 and Beyond

Over these last months of quarantine, we at Madrona have remained very busy, first and foremost working with our portfolio companies to help them navigate the economic turmoil of a global pandemic. Second, but also importantly, we have continued to invest, adding eight new companies to our portfolio since quarantine began in March (Fauna, VNDLY, Go1, Zeitworks and four others still unannounced). This continued active pace of investment exemplifies both our commitment to the long-term opportunities we have identified, as well our belief that downturns can be the best time to invest.

As we have been quarantined in home offices in front of Zoom and Teams, we have also taken the opportunity to step back and revisit our investment themes and think about which trends we continue to be most excited, which are emerging, and which perhaps are being accelerated (or dampened) by the aftermath and “new normal” of COVID-19.

It has been 18 months since we last posted about the investment themes that are driving our activities at Madrona. When we took a fresh look at our current thinking on technology trends that we believe will drive the industry in the next five, ten, or 20 years, the picture that emerged shows significant consistency with our view of the world 18 months ago, but also interesting new opportunities and trends. The figure above illustrates the overall areas we find most compelling for new company and investment opportunities.

In this post we offer a preview of the themes and will follow this up with deeper dives on the areas outlined in the image above. We work as a team to fully investigate and build our investment themes and you will see many from the Madrona team as authors – please reach out to us with ideas and your thoughts!

At the center of our investment themes, we continue to see a massive opportunity for companies to create businesses around intelligent applications, fueled by machine learning and modern user interfaces. We believe that every successful application being built today should be an intelligent application, with a data strategy and continuous learning system at its core. Intelligent applications have been the single largest area of investment for us over the previous several years, and we expect this to continue for the foreseeable future. We will continue to invest in the next generation of line-of-business applications being reinvented by machine learning and cloud native delivery. Read more about the areas we are seeing opportunity in intelligent applications in our deep dive.

As the world continues to struggle through the COVID pandemic, we also see a massive acceleration in the emergence of technologies enabling the future of work. This trend had been evolving for the last several years and the current environment has created an order of magnitude acceleration, as businesses of all sizes rush to find new intelligent applications that help them collaborate more effectively when all employees are remote, build and retain more diverse and distributed workforces, and prioritize digital-first workflows and processes that have remained largely “in-person” and workplace focused. Read more about the work, the workplace, and workforce in our deep dive.

A major new focus area for Madrona is the intersection of innovation between machine learning, intelligent applications, and life science. We touched on this opportunity in our investment themes 18 months ago, and subsequently invested in several exciting companies including Twinstrand, Nautilus Biotechnology, and Terray Therapeutics. As our partner Matt wrote when we announced our recent large investment in Nautilus: “Today, these domains are coming together to transform the ways we understand and improve life and health. The biological and chemical sciences are intersecting with computer and data sciences in precision medicine, digital pathology, proteomics and more. At Madrona, we believe these intersections of innovation will be at the forefront of major breakthroughs in research, analysis, diagnostics, clinical processes, preventions and cures.”

Next, the march to the cloud and broader adoption of the cloud computing model by enterprises continue to create myriad opportunities for next-generation software infrastructure companies — despite the increasing dominance of the hyperscale public cloud providers. These steady improvements to software infrastructure enable and increase the pace of innovation for all the applications higher in the stack that leverage these cloud services. Enterprise need for better usability, manageability, security, cost-savings, and performance across diverse devices, cloud platforms and environments will drive new business opportunities that provide hybrid and multi-cloud management, infrastructure automation, and new architectures that leverage serverless and event-driven architectures. Read more in our deep dive on The Remaking of Enterprise Infrastructure.

Another investment theme created by the need to move faster, increase productivity and reduce cost is in the area of low-code or no-code platforms and applications. The next generation of workers is more tech savvy, and there are more “makers” in business teams and organizations who want to build things directly and not wait for IT, engineering or the data science team. These range from developers who need to incorporate ML directly into the applications they are building to information workers who become citizen developers in order to quickly solve business problems. Read more about how we think about no-code/low-code in our deep dive.

While we have invested a somewhat higher percentage of our last several Funds in B2B companies, we continue to strongly believe in and invest in new consumer services, often where the digital and physical worlds are fused in a way that create a virtuous cycle to provide a more compelling and fully integrated experience. This digital transformation of consumer experiences, where mobile-first applications streamline, simplify, and save consumers time and money, is a core pillar in our investment themes going forward. Read our deep dive on the areas we see changing dramatically in the next five years here.

We are eager to engage with all of you in the community around these updated investment themes. Each time we have published our thoughts in the past, we have been energized and humbled with the feedback we have received – from founders whose vision hew closely to one of our themes to constructive debate on how we are too early or too late with our ideas. In the coming weeks, we will post six deeper dives into our themes around software infrastructure, intelligent applications, the future of work, the intersections of innovation, low-code/no-code platforms, and the digital transformation of consumer experiences. We can’t wait to further discuss, debate and learn from all of you. In the process, we look forward to investing and working alongside some of you to build the next generation of companies that address these exciting areas of innovation.

Send us an email or connect with us on Linked In (all contact info is in our bios which are linked above).

 

 

 

Embracing the Intersections of Innovation: Our Investment in Nautilus Biotechnology

(Sujal Patel and Parag Mallick, co-founders of Nautilus)

The code of life, biology and chemistry, have been constantly evolving for millions of years. The code of computing has functioned for less than 100 years. Today, those domains are coming together to transform the ways we understand and improve life and health. The biological and chemical sciences are intersecting with the computer and data sciences in precision medicine, digital pathology, proteomics and more. At Madrona, we believe these intersections of innovation will be at the forefront of major breakthroughs in research, analysis, diagnostics, clinical processes, preventions and cures. While our 25-year history has primarily been focused on transformations in information technology sectors including cloud computing, applied ML/AL, Software as a Service and Internet/e-commerce, we have more recently embraced opportunities where biotech meets infotech.

A company that embodies this emerging theme is Nautilus Biotechnology. Madrona has helped shape the company for almost four years, working together with founders Sujal Patel and Parag Mallick from day one. We provided office space and support for the company in the early days. We co-invested in the Series A with Andreessen Horowitz’s Bio-fund a few years back. And, today, Nautilus announced their $76 million Series B round with new investors including Vulcan Capital, Perceptive Advisors, Bezos Expeditions and Defy.vc.

What has drawn us to this investment theme in general and to Nautilus in particular? It is a combination of the expansive opportunities for scientific discovery, the scale, speed and agility enabled by modern compute and automation, and the continuous improvement in patient and disease understanding enabled by machine and deep learning. But, more importantly, it is a combination of founders in Sujal Patel who we have worked with for almost 20 years – first as the founder and CEO of Isilon Systems (and Madrona Strategic Director), and Parag Mallick who is a Stanford Professor with a focus on proteomics and systems biology with a background in biochemistry and computer science.

Nautilus’s Approach to Innovative Thinking

Biological sciences have been transformed over the past twenty years first by sequencing the full human genome and then by the “commoditization” of genomic sequencing (Illumina, 10X Genomics). Yet, a human’s approximately 3.2 billion nucleotides and 25,000 genes are just the beginning. The DNA functions as a set of instructions, a static view of what might happen, that needs to be transcribed and translated into the tens of thousands of proteins that drive all life — selective expression of proteins drive cell differentiation, metabolic reactions, stimulus response and, importantly, disease. Those proteins act dynamically to determine how our body functions (and malfunctions) which creates substantial measurement challenges.

From the beginning of Nautilus, Parag and Sujal set out to think differently. The core challenge they were trying to tackle: how do we make the proteome as accessible and impactful as possible by overcoming the limitations (coverage, throughput, ease-of-use) of existing protein analyses approaches. By reimagining proteomics as the foundation for improving the health of millions of people, Nautilus strives to enable new horizons in basic science research while transforming drug discovery and personalized/precision medicine.

Nautilus approaches the challenge of mapping the proteome differently at every stage of their automated and re-imagined process. That starts with the biochemical steps for how samples are prepared on the front end and continues through to the cloud computing, data science and machine learning techniques used continuously on massive datasets throughout the process. They leverage a robust understanding of biochemistry and the abundant technological resources that are only now available in scalable ways through cloud computing. There is so much more for the Nautilus team to share, but we defer to them on how and when to tell their story more fully!

Madrona’s Three Key Intersections of Innovation Concepts

Madrona’s investment in Nautilus and their approach to re-imagining the ability to leverage proteomics is just one area where biological sciences are intersecting with computer and data sciences. In the past several years we have increasingly seen the growing interdependence of these disciplines and the ability they have to change lives.

There are many more categories where the intersections of innovation apply. Digital pathology is developing models for image-based tumor detection, cancer research is applying machine learning to identify genetic or immune system biomarkers, and CRISPR screening techniques are helping to rapidly understand the mechanisms of action underpinning disease. Three key concepts span these intersection areas – discovery, automation and continuous learning.

  1. Discovery: The more we know about human (and non-human) biology, the more we realize there is so much more to learn. The pursuit of basic science research and the curiosity to explore new areas of discovery are central to the breakthroughs that lie ahead. Take the relatively new learnings about how bacteria’s immune system fights viruses by turning the virus’s DNA against itself through CRISPR-associated proteins (Cas) and guide RNA. In just the past decade, the natural function of the CRISPR-Cas systems has been harnessed intro powerful molecular biology tools to edit the genome, to the point that we can now edit at the base level. Modern information technologies will facilitate the front-end research and leverage discoveries, but the opportunities start with new biological insights.
  2. Automation: Biology was historically the world of wet labs filled with samples, test tubes and pipettes. Today, wet labs are combined with dry labs where computer modelling, simulations and in silico analysis occur. And, increasingly the processes of these two lab environments are automated and digitized. New approaches to sample prep and handling, to “seeing” and measuring the impact of reagents and then gathering massive amounts of data to rapidly analyze are emerging. The automation of preparing inputs, running experimental processes and analyzing outputs has the potential to mirror the journey of semiconductor technology from bespoke workflows to highly digitized, specialized and scalable processes. This automation, combined with massive computing resources, can lead to both broad scale breakthroughs and cost-effective precision medicines over time.
  3. Continuous Learning: Digitized data, across a mix of data types and formats, can increasingly be combined and normalized to transform information into insights. There are massive amounts of data to be captured through increasingly sophisticated techniques like high throughput sequencing and screening and cryo-electron microscopy. Elements of data management, modelling and machine/deep learning can then be leveraged to deepen the insights. In fact, operationalized data models can continuously improve our understanding of a mutation, antigen, biomarker or general disease state. In time, this should lead to curative approaches to most cancers, gene editing that prevents diseases and even rapid detection and containment of viruses.

The Road Ahead

The Madrona team is energized by our journey to continuously learn and support companies at the intersections of innovation. In addition to Nautilus, we have made substantial investments in Ovation.io, TwinStrand Biosciences, Accolade and Terray Therapeutics. And, we have seed-stage investments in a few early-stage companies within this investment theme. But today we especially want to celebrate the news about Nautilus’ Series B round and the potential for this outstanding team and company to positively impact the world by providing affordable and accessible proteomic information and insights to all those who may benefit from them.