Red Leader, a startup specializing in software and not hardware, is taking a shot at the stock market as a wave of SPACs laser sensors has crashed.
Red Leader aims to be the iPhone camera that uses laser technology to replace DSLRs by using software workarounds and enabling it to compete with higher-end (and often more expensive) hardware. On Thursday, the company from Mountain View, California announced that it had received $10 million in Series-A funding from NextView Ventures and Micron Ventures. This corporate venture capital arm of the semiconductor firm is Micron Ventures. Since 2018, the startup has been quietly operating. It previously raised approximately $3 million in seed capital, from funds such as NextView, Refactor Capital, and Haystack. After the new round, it is now worth $55million.
This company develops software for lidar. Lidar stands for “light detection & ranging” and is best known for allowing self-driving cars to see the globe. Several lidar hardware manufacturers, including Velodyne and Luminar, Aeva, Aeva, and Ouster, went public through special purpose acquisition company deals to raise funds. These companies have seen their stock rates fall due to poor sales performance. Red Leader CEO Jake Hillard, a cofounder of Red Leader, says that these companies are all variations of the same question: “How can I make the physics package better?”
Red Leader’s software focuses on fine-tuning lidar images, especially for lower-range, cheaper sensors. The company isn’t building technology for autonomous vehicles, which are still many years away from mass adoption. Instead, it focuses on general robotic applications such as helping robot forklifts and warehouse automation robots sense their surroundings (e.g., to avoid dropping heavy objects on humans). Hillard says the secret sauce to the software lies in Hillard’s algorithms for signal processing. This component of the lidar system affects image quality. He says, “We do one thing better than anyone in the world. That is, you get an actual 3D map.”
Red Leader was launched by Hillard (26) and Rebecca Wong (25) while they were still engineering students at Stanford. Hillard, 26, was part of a university research team that launched a laser satellite. Wong was an expert in high-altitude rockets and had previously worked briefly for SpaceX. After Hillard presented his idea on Red Leader at a Stanford event to Elizabeth Yin, Hillard dropped out of college. He later became a Thiel Fellow. Hillard said it took them two years to get their idea beyond a whiteboard. It was four people doing a lot of math in a garage in San Francisco.
Hillard says that the team made a mathematical breakthrough that allowed them to create a demo of the software before 2021. Red Leader has posted a demo to YouTube that shows how Red Leader’s software can see the environment in real-time at ten times greater resolution. He says that the demo was shown to people from November to January. $10 million showed up in our bank accounts. “It was incredible,” he said. Eric Bahn, one Yin’s partners in Hustle Fund, says that the company raised funds correctly. Many Series A funds are now “sitting on the hands” because of the market decline and would not hesitate to back a deep-tech company like Red Leader. He says that if they tried to raise funds now, I don’t think the company would be around. “But they are now completely free to produce the 100 first units for their manufacturer.”
Red Leader signed five proof-of-concept contracts with customers Hillard claims he can’t name. These contracts are expected to bring in approximately $250,000 in revenue for the company this year. Hillard predicts that five customers will be signed onto $5 million- to $15 million contracts by next quarter. The company then hopes to have full-scale production contracts worth $50 million within three years. If five contracts are signed, this will translate into $250 million in revenue by 2025. These are lofty goals (Velodyne made $62million in 2021). However, Gayathri Radhakrishnan, a Micron Ventures investor, believes it is possible. She also said that timelines could be modified depending on market conditions and company progress. NextView’s Lee Hower says that businesses such as these scale in a step function. We can debate whether that will happen in three, four, or five years but this is the most likely shape of the revenue curve.
Hillard said, “Working with industrial companies is a great thing. They move slowly, but they will be happy to move if you have a solution that works.”