Anna Brunelle, CFO of Ouster, which specializes in high resolution digital lidar sensors, sees her company’s potential application everywhere she looks, from traffic lights to forklifts to even aiding in preventing forest fires by monitoring power lines.
“It opens up a really wide market, much like when cameras went digital,” she says of the digital sensing technology, which uses a laser to discern distances and create imaging, including 3-D data.
Ouster itself opened up when the once private company went public in March. Brunelle talked with StrategicCFO360 about Ouster’s lidar application in robotics and automation, the potential to increase industrial safety and the what the SPAC process did—and didn’t—do for the company.
Looking back on taking Ouster public, what were the biggest challenges and how did you address them?
There were really three key challenges we needed to address: the timing around the SPAC process, getting our story out in front of investors and analysts, and navigating through noise in a crowded landscape of newly public lidar companies. Ouster managed to do all three things well, and it is starting to pay off in the capital markets.
On the SPAC timing, I have always believed that time kills all deals. Internally, the financials being used to market the transaction to investors have a limited shelf life and getting the S4 on file with the SEC could be significantly delayed if a company has to pause outreach while waiting on new audited financials. Pausing would be a huge impediment to generating interest and buy in. Externally, the big concern is market risk which all IPOs, SPAC or otherwise, are very susceptible to. Fortunately for Ouster, SPACs are great vehicles for companies like ours that have strong fundamentals such as product-market-fit, paying customers, revenue, industry-leading positive gross margins and an executable go-to-market strategy. We were able to move very fast and close our pipe quickly, all in about three months.
How did you get your story out?
Ouster didn’t have a large external presence leading into the SPAC process. We were very heads down, focused on building the business. We also didn’t have the traditional early investors, such as a large VC, to make those inroads. Once we decided on the SPAC, we had to hustle to get our name and story out there in a short period of time because we went into a quiet period shortly after we listed. We had the added challenge of having a differentiated technology approach—digital lidar—and much broader TAM than the other lidar companies who are mostly synonymous with autonomous vehicles (AVs). Since the listing, we’ve hit the conference circuit hard and have prioritized analyst and investor meetings, addressing questions around the non-auto opportunities for digital lidar which spans hundreds of use cases across thousands of potential customers.
How did you handle a crowded landscape?
A handful of lidar companies went public within a few months of each other—each with their own technology and go-to-market approach. Investors were hearing conflicting and sometimes misrepresentative information on the technology sets, performance, future order book and partners. Ouster has been very thoughtful since the beginning of the SPAC process to take a conservative approach in our modeling and forecasts, and to be transparent around how we define strategic customer agreements and things like contracted revenue opportunity. Our goal is to build long-term trust with our investors and deliver on our product roadmap and financial guidance. Over time, investors have heard our story and been able to do their own due diligence, which has enabled them to see past much of the noise in the market.
What has the transition from private to public been like for the company culturally?
Our employees are really excited about being a publicly traded company. Ouster is an exciting company to be a part of because it offers an ability to see into the future. Our customers are building next generation automation technology to build a safer and more efficient world, and our employees get to see that future emerging across hundreds of real-world applications and use cases before anyone else.
We’ve been focused on attracting the absolute best talent, and I believe it is evident when you look at everything we’ve achieved compared to most of our peers. We’re half their size or less, have more revenue, more customers, more products shipped and have done it all faster.
We’re using the capital from our business combination, in part, to hire across the company. As we scale, we are focused on the same mission and continuing to recruit high-quality talent. It is the employees that drive Ouster’s culture.
What trends are you watching in smart robotics in the year ahead?
There have been so many advancements made in the last few years—one of them being digital lidar which offers 10x better resolution than legacy solutions in a smaller form factor, with less power consumption at a lower price point. This unlocks an array of use cases that were never possible before either because the cost was too high or the solutions weren’t suited to applications outside of auto such as the industrial, robotics and smart infrastructure end markets.
We are now reaching a tipping point in digital lidar adoption which is fostering automation across the supply chain. Our sensors are on autonomous mining vehicles and ships, robotic gantry cranes, robotic forklifts, autonomous trucks and last-mile delivery robots, to name a few. What’s incredible is that there isn’t just one use case taking off. Every aspect of the industrialized economy is marching toward greater and greater levels of autonomy for improved safety and efficiency.
Where do you see the most potential for growth—in industrial automation, robotics or in the auto industry?
We believe our target verticals represent $8.6 billion in combined TAM by 2025 and $48 billion by 2030. We see the industrial and smart infrastructure markets driving the TAM in the near-term, with automotive and robotics applications gaining momentum by 2025.
As an example within the industrial market, there are millions of forklifts deployed around the world today and less than 1% have any level of automation. There is a huge market opportunity to retrofit and build new machines with greater levels of intelligence using digital lidar, and nearly every major company around the world is already moving to do this whether for safety or efficiency reasons. Industrial applications offer significantly higher margins, so capturing a portion of this market could equate to a series production run in automotive. Again, this is playing out not just in forklifts but across hundreds, and eventually thousands, of industrial applications.
Within the smart infrastructure market, our digital lidar is already deployed on intersections, local streets and highways around the world. There are over 300,000 traffic signals in the U.S. alone. Cities across the U.S. are already beginning to adopt lidar-based systems to monitor traffic flow, direct the cross walk and so forth, while preserving privacy with better lifetime durability and at lower cost than a camera. We see every camera or CCTV system in use today as an opportunity to augment or replace that system with digital lidar.
Lidar is now familiar technology, but it sounds like there’s a long way to go adopting it across industries. Can you shed more light on that?
When you switch your technology from analog to digital and it allows you to be more performative in terms of size, weight, power, efficiency, durability, et cetera, it opens up just a really wide market for lidar, much like when cameras went digital. Not only did they get smaller and more performative and cheaper, but you started in the mid to late 2000s seeing the total addressable market for cameras, which is another sensing technology like lidar, really open up. And not just double and triple, but increase many, many-fold. You can put it everywhere where there’s moving equipment on the face of the earth, whether it’s something that needs a very small form size, like a drone or low power drill, or a robotics delivery, last mile delivery vehicle. And it just gives you this opportunity to really assist automation throughout the world.
The forklift example stood out or looking at streetlights—how do you see this assisting in improved safety?
For example, Konecranes is using our lidar sensors for port and warehouse safety. So using our lidar sensors on cranes, as they’re loading, you know, large shipping containers onto boats. It cuts down on the risk of accidents, damage to property, damage to humans, et cetera. And it just makes all of the operations much safer. If you think about it, the industrial lidar segment today, which is proliferated by older technologies, is kind of 2-D lidar. The old technology, for example, your forklift, would have these 2-D sensors on them. And if the sensor says something, then the equipment would just stop. And it would do nothing until a human came along. But with Ouster lidar, we have an opportunity to move toward full automation in all these applications. And so what’s a billion-dollar market today, for the 2-D sensors, we expect that Ouster lidar will eventually win in that market, and grow that market as we get other companies to also adopt technology and move toward automation. If you’re saying, well, why would a company want to do that? The cost of providing a lidar sensor is much cheaper than having a single accident. And so there’s a lot of reasons from a safety perspective to do it, but it’s also just a lot more efficient. With older 2-D lidar, they have very low resolution. As a result of that, the equipment would move very slowly. With higher resolution, the equipment can move much more rapidly and much more safely. You’re able to be much more efficient within your company by implementing this.
Is education proving to be one of the challenges right now for you?
Yes, I do think that’s a challenge. But interestingly in 2020, prior to going public and investing further in our sales and marketing teams, we were a very small team and really through primarily inbound interest we had generated over 500 customers. Part of the use of proceeds from our recent public offering was to build out our sales and marketing teams worldwide because we are already selling in 50 countries. So we have sales teams throughout North America, as well as the UK, Germany, France, China, Hong Kong, the Middle East. We’re positioned now as a result of this IPO to expand even further. But we’ve already been receiving a significant amount of inbound interest just because I think the companies that are aware already to that point where they’ve been using our lidar sensors for three years potentially in test situations. Now we’re moving toward actual adoption and production.
Looking ahead, what are you monitoring, or what metrics do you watch every day in terms of looking for potential challenges ahead or being ready for those challenges?
We’re very focused on building relationships with customers, building our backlog and our pipeline. Those are obviously very important to us. We also are already outsourcing our manufacturing to our partner in Thailand. And so we are in full production there across our line of sensors. As we move toward greater and greater volume, we know that we will see our COGS improved because right now they’re still absorbing a lot of overhead in our individual, cost per unit or average cost per unit. And so we’re working with customers to build a volume quickly in order to know that we’ll be able to provide sensors at lower and lower costs over the next two years. We’re very excited about that as it just opens up more and more opportunities for our sensors to be put into production.
Where is the greater advantage: in safety or increased speed?
It’s both. It’s really difficult to ignore safety because when something goes wrong, it’s really wrong. If there’s a problem with a wildfire or a pipeline, anyone can see how a small problem that could have been easily corrected blows up into a big issue. But even ignoring that, day to day if your labor costs are 40% of your warehouse costs and you can nibble away at those, even a few percentage points make a huge difference and pay for the cost of a sensor many times over. So I think those are the math problems that customers are trying to solve.
