There are always valuable lessons and war stories to be heard from startup founders, if you ever get the chance to get them talking. That value amplifies for serial founders. And the takeaways are even greater and more validated from those who have achieved successful exits.
Such stories are rare in the relatively nascent spatial computing world. You can point to Oculus of course, and many Facebook acquisitions that followed. And then there’s Apple’s many smaller acquisitions and acqui-hires as it continues to assemble its top-secret AR mystery box.
But the exit that has perhaps gotten the most attention from industry insiders in recent memory was Niantic’s purchase of AR cloud innovator 6D.ai. Founder and CEO Matt Miesnieks recently joined Jason McDowall on the AR Show to reveal hard-fought lessons and candid philosophies.
You could say that Matt Miesnieks was an early mover in AR, given his work at Layar in the late 2000’s. That led to Dekko and Samsung — the former he founded and admits was early to AR. Through all that, he developed an intuition for the technology….and what it was missing.
This perspective allowed him to see the uniqueness in a technology he encountered from Oxford Active Vision Labs’ Victor Prisacarui (who went on to become 6d.ai’s co-founder). For the first time, there was a technology that could dynamically map a space while it was performing AR.
This eliminated a key step which was to take time to form a spatial map (unrealistic for average mobile users) or have to rely on a non-existent database of pre-mapped spaces. In the aggregate, Prisacarui’s tech could work towards such a database, otherwise known as the AR cloud.
So 6d.ai was born. Meanwhile, the concept of the AR cloud caught fire as Miesnieks and fellow Super Ventures partner Ori Inbar penned influential narratives in late 2017. The AR cloud became the rallying cry for “AR everywhere,” attracting ample attention and investment.
Reality Sets In
But beyond those feel-good visions came the trials of running a business and a go-to-market path. This is where Miesnieks and team ran into several forks in the road. Should it validate a single use case by building a marketable and monetizable app, or provide underlying tech to others?
Between those endpoints was a sliding scale of options, many of which 6d.ai tried. One path was to work with companies that intimately know their vertical, use cases and customers. 6D.ai could help them build the AR functionality they need to enhance a user experience or gather data.
That company was Airbnb. It needed to map hosts’ homes to have more comprehensive data on their spaces and amenities. They could do that reliably for tens of thousands of homes, but not millions. So 6d.ai let them scale with host tools to scan their own spaces with just a smartphone.
This ran into some issues when it ended up producing too much information. Listings needed to sell the dream of a rental home versus the granular realities. Worse, this path represented a narrow application of the technology that didn’t reflect any market scale beyond Airbnb.
The lesson: be careful of false positives in your go-to-market. Airbnb was a whale and seemed like a big win at first….but it ended up being a Red Herring in the company’s road map. Miesnieks says that you can spot these false positives if similar deals don’t follow after the first high-profile one.
Another key lesson (independent of Airbnb): don’t build something that only excites developers. Product managers hold the keys to the budget, so any given technology needs to speak their language. That’s as much about sales narratives and positioning as the product itself.
6d.ai soon reached another big fork in the road: its corporate development and future path. It could take further funding to stay alive; go to market with a monetizable app; do boring back-end work for a large enterprise company or government agency; or it could sell to a larger player.
After lots of internal debate and soul searching, Miesnieks and team chose the latter….which only opened up a new set of choices and forks in the road. Fortunately, the company’s high-profile status in AR — and high-profile investors in General Catalyst — attracted a handful of suitors.
It ended up choosing an offer from Niantic due to cultural and values alignment, along with a favorable term sheet that was competitive with other offers. The fact that Niantic is an AR pure-play (rather than an afterthought), and is still small enough for upside potential, swayed favor.
But the process itself was long and onerous, including several options and offers and with a lot on the line. Miesniek’s advice: leverage investors’ characteristic sense of FOMO to drive up the price. If you’re fortunate enough to do so, get several offers to validate market demand….and be vocal.
This lesson goes deeper than playing the market during an acquisition. As a CEO, one should always be shopping — at least in one’s head. This can engender a strong read on the market so that a trained perspective is in place when it’s needed. It’s about agility and preparedness.
Miesnieks also learned that valuations can lie in the eye of the beholder. A startup can be worth a lot more to an acquirer that needs to accelerate its path to a massive market. Again, this can be about narratives and finding internal stakeholders who influence the checkbook (not engineers).
Time and Timing
Now that the Niantic acquisition is complete, Miesnieks is in an advisory role and is eager to work with the company’s Real World Platform. This is not only Niantic’s most impactful long-run play, but is most aligned with 6D.ai’s longstanding quest to build an OS for the physical world.
With time to slow down and think, Miesnieks is also realizing the importance of personal care. Diet, exercise, sleep and all of these factors that CEOs usually treat as luxuries should be bigger priorities. Peak condition allows CEOs to operate from a healthy and confident space.
As a former race car driver, Miesnieks likens this to drivers’ physical stamina. Even though they sit to drive a car, they have to make critical split-second decisions. Physical training can condition their minds to have the stamina to be as sharp at the end of a long race as in the beginning.
Lastly, what’s the outlook on the next few years in AR? Miesnieks believes some folks are misguided about Apple accelerating the market in short order. If we look to historical evidence, the iPhone 1 only sold a few million units. Years later, the iPhone 4 finally reached ubiquity.
The same trendline existed for Apple Watch and will for “Apple Glass.” So the first few years of the device could sell under 5 million units (our projections align with that). The 100 million installed-base “ magic number “ won’t be reached until years and product generations later.
The takeaway: Apple Glass won’t be big enough to support a worthwhile ecosystem of apps and other orbiting parts until 3–5 years after its V1 launch. We often forget that the iPhone 1 didn’t even have an app store….that came out a full year later and then took a few years to ramp up.
“The best thing you could do as a founder when the iPhone was launched was to go to the beach for 3 years,” quipped Miesnieks, “then come back and start your company.”
Originally published at https://arinsider.co on December 11, 2020.