By Sean Wolfe
Menlo Ventures announced Friday it led a $21 million third round of financing for AeroScout, a company that develops radio frequency ID tags to help track objects in businesses.
This latest round, intended to last the company until profitability, brings the company’s total financing to $51 million.
The market for RFID tags is split into active tags—those that broadcast information wirelessly like AeroScout does—and passive tags, those that only broadcast information when they receive a radio signal. Menlo’s backing brings further validation of the niche that promises to give large organizations tags to keep track of expensive assets—not just to deter theft—but to make sure expensive assets are used efficiently.
San Mateo-based AeroScout touts its software programs that not only track objects, but also issue system alerts for how those objects should be distributed throughout a building, factory, or other facility, when groups of objects are ready for a new process.The concept is to save businesses time that might be spent looking for a piece of diagnostic equipment on a crowded factory floor or communicate to workers when a batch of medical devices are ready to be sanitized for new waves of patients.
The company is targeting the healthcare, manufacturing, and logistics markets, any one of which, noted AeroScout CEO Yuval Bar-Gil, would be enough to sustain the company. By going after all three, the company is looking to become a significant global player.
IDTechEx issued a report in January that said that while active RFID systems now amount to about 20 percent of the overall market, it remains the slice with the most growth potential.It noted that in the short term large “closed loop” markets—including the three AeroScout is pursuing—will “remain very profitable,” and that the race is now on for companies to position themselves as market leaders within different vertical markets. The report also predicts that by 2016, the value of the total market, including systems and services, will rocket to $26.2 billion, about ten times 2006 levels.
Mr. Bar-Gil said the latest round of financing will be used for research and development as well as sales and marketing.The company is working to simplify what it offers for a number of its high-profile partners, which include Intel, Cisco, and IBM.Intel Capital is also a strategic investor in AeroScout, which is also backed by Greylock Ventures, and Israeli VCs Pitango Venture Capital and Star Ventures.
Like many others, AeroScout is betting that wireless local area networks using Internet protocol will continue to be the standard most popular with enterprises. Mr. Bar-Gil said that standard is key to its sales story because customers looking at total cost of ownership often bridle at the notion of paying for yet another networking solution that may or may not tie in with their existing system.
Doug Carlisle, managing director at Menlo Ventures, said he thinks that’s a safe gamble.
“What happens once there’s a standard, is that the market grows much more rapidly than with proprietary solutions,” he said. “I expect this market to coalesce around the Wi-Fi standard because while there are companies with stuff that works, you end up having to double-install, and double-maintain your networks, and most customers don’t want to do that.”