It is difficult to miss the proliferation of companies building new autonomous surface and underwater vessels (ASVs and AUVs), and associated robotics. This cohort of startups raised approximately $3Bn over the last decade (excluding companies formed and financed in China). In reality, much of that financing activity came in the last 4 years, and much of that total ($2.6Bn!) was aimed at one company, Saronic. Among the companies in this category are Propeller investments Vatn, Orpheus (pictured above), and Fleet Robotics.
The recency, and the growing activity in the category are part of a story about a new wave of founders creating companies to disrupt how ASV / AUVs are designed and built, and the role they will play in ocean defense and intelligence (or what I’ll also refer to as domain awareness). And with good reason. We’ve seen the disruption of energy and communications cables in the Red Sea, the Baltics, the Arctic (well, this one appears to have been caused by sea ice gouging), and off the West and East coasts of Africa. Ukraine's defense from Russia’s illegal invasion includes actions against Russian naval assets in the Black Sea. Iran has countered US aggression by turning the Strait of Hormuz into a commercial choke zone, with Iran’s proxies taking similar measures in Bab Al-Mandab. Add to this the fact that China is extending its strategic military interests across the South China Sea. This list of conflicts is sobering, and we’d rather see a world without them and the disruption and suffering they cause to people, cities, and the environment.
We believe a result of this push of entrepreneurs and companies might be a new wave of technology and innovation that makes our future safer, more sustainable, and more resilient. That’s because before technologies find mass market application, they need to be widely available and affordable. But mass market adoption is rarely abrupt. Rather, it traditionally follows an adoption S-Curve.
In brief, the traditional tech S-curve describes the shape of the adoption curve of a product over time. Initially, a product might languish for many years selling only to a group of committed early adopters. But if successful it moves up a faster growth curve as it gains popularity and ubiquity. Once that phase ends, it again settles into slower growth as market saturation takes over and more conservative buyers ultimately take up the product.
In the government-aided market adoption story, government agencies play the role of early-adopter, willing to pay more, work with products that need improvement, and be the customer that startups need during their early stages. In other words, government spending here shifts and accelerates technology adoption curves.
Of course, not all technology is benign. At Propeller, we’ve had to consider the questions that surround the use of new technology in the ocean for both defense and civilian / scientific purposes. What ultimately excites us (and what our investors expect from our judgment) are founders who see the through-line from what they are building today, to how their innovation lines up with new economic opportunity in ocean-edge industries.
For underwater technology, we’re looking for breakthroughs in sensors and software defined architecture used in guidance and navigation, better forms of electric propulsion, new materials and coatings that stand up better to the harsh conditions of the ocean, uses for the new data collected from ASV / AUVs that help us better understand ocean bathymetry, biology, and the ocean’s role in the changing nature of global climate.
As the costs of these enabling technologies drop, we will see wider application across civilian needs that span areas such as security for ports and infrastructure, search and rescue, fisheries surveying and enforcement, and conservation, science and research. This is about market expansion as much as it is about technology disruption. And this means new investment opportunities and maybe even Propeller’s next narwhal result.