The following interview is a conversation we had with Berk Birand, CEO & Co-Founder of Fero Labs, on our podcast Category Visionaries. You can view the full episode here: $28 Million Raised to Build the Profitable Sustainability Category
Berk Birand
Thank you for having me, Brad.
Brett
No problem. Let’s go ahead and just kick off with a quick summary of who you are and a bit more about your background.
Berk Birand
Absolutely. I’m the founder and CEO of Fero Labs. Originally, I’m an engineer by training. I have a background in electrical engineering and computer science. My latest academic stint was doing a PhD at Columbia in the field of electrical engineering, specifically focusing on the telecommunication space. So I did research in networking, focusing on reducing the energy consumption of fiber optics networks. I worked in the wireless networks as well, so developed algorithms that make base stations more efficient in 5g networks and beyond. And about 2015, Star decided to switched from academia to the tech world and along with my co founder, started Fero labs to bring in some of our backgrounds into the industrial sector.
Brett
What was it like making that transition from academia to the corporate world, the startup world, the tech world? I’m guessing that’s a big difference.
Berk Birand
There are definitely new challenges in adapting from going from academia into the startup world. There’s also some interesting ways in which academia supports that transition. But in terms of the challenges, I think the biggest challenge probably was that I had never worked in a company in my life. By the time I founded Fara, I’d spend six, seven years doing a PhD. I’d done internships along the way, but I just had no idea how a company actually operated and I had to learn a lot of things along the way. Thanks to the support of our investors and advisors, that was definitely a challenge. We are doing enterprise b, two b sales. I had never done sales before. I never done marketing before.
Berk Birand
But this is also proof that you can learn those things even if you’re not trained in those things, especially given that we’re technical founders. But there’s also interesting ways in which academia kind of helps that transition, namely, a lot of what you do as a grad student, writing papers, applying for grants, is about selling a very technical concept. I’m not selling it for money. You’re selling it to be accepted at a conference or a trade show or a publication. But ultimately, the exercise is pretty much the same. How do I position all this hard work, all of what I’ve done, so this will be accepted and published? So that part was actually very useful, not just for the sales part, but also for raising money and for hiring others. You know, the sales and storytelling concept was really helpful.
Brett
And did you always know, as you’re going through the PhD in the early part of your education, did you know that at some point you wanted to be a founder, you wanted to launch a tech company? Or like, where did that entrepreneurial spirit or bug come from?
Berk Birand
I did. One of my main intention, in fact, with going to the PhD was to be a professor, but also to do research and essentially be an entrepreneurial professor of sorts. So go. Go through the academic track, do research, and then on the sides which turn these ideas and the research into companies along the way. Throughout my PhD, I decided that maybe the pure academic route was not exactly for me, but still, even during the PhD, I definitely tried to launch several companies. Initially, they were mostly, I had, of course, the right of passage idea of having a restaurant app. You got to have a restaurant app. So that was my very first idea in my early days of my PhD, and then try to do it more fundamentally and engineering related topics around sustainability.
Berk Birand
But then ultimately, when I did my PhD defense, I knew that this was the next step for me, was launch a startup and something that was very far more technical and not restaurant related.
Brett
It’s a perfect segue to talk about everything that you’re building. So take us back to 2015, early days of the company. What were those conversations like with your co founder? And what was it about this problem and this idea that made you say, yep, that’s it, let’s go dedicate the next 510 1520 years of our lives to working on this company?
Berk Birand
Absolutely. So back in the day. So my technical founder, my co founder, Alp, is also highly technical. He’s the one who brings in the pure ML AI background into the company, apparently also our chief scientist. And for both of us, our main motivation was to take what were really good at and apply it to real problems that will have an impact. And we looked into different areas of where we could apply our backgrounds. In fact, one of the first areas that I was dabbling with was the smart home space, which is kind of consumer side of IoT. It was an interesting space, but it didn’t seem like it was kind of a huge problem to be solved. It was more like a vitamin than a painkiller. And having impact was one of the big goals for us in our careers.
Berk Birand
So as were exploring different areas, we realized that the impact that we could have in the industrial sector was huge. The magnitude of the problems were huge. The impact that we have from a sustainability standpoint was huge. I mean, the way that we think about it now, right, as responsible citizens, we make conscious decisions in terms of doing things, doing the right things from an environmental perspective or recycle. We make sure that we turn off the ac when we’re not at home. But actually, when you think of things from the perspective of a factory that making steel or that’s making chemicals, that’s just not that big of an impact in a factory. In 1 second, this is more emissions than all the changes that I could be making over the course of a year.
Berk Birand
So having that element of impact and having an impactful startup was the top goal. And it seemed like the industrial sector was right for this kind of a change, and it’s right for AI. At the time, there were a lot of discussions around what’s known as Industry 4.0, which is the fourth industrial revolution. There were a lot of talks, but there wasn’t that much that was actually done. And we thought we could actually do things. We could actually take this notion, this concept, abstract idea, and actually to produce actual value and create actual value within that domain. And that’s what we’ve been doing for the past years.
Brett
Obviously today I think sustainability is everywhere, everyone’s talking about it. But if we go back to 2015, was it as hot of a topic back then?
Berk Birand
It definitely was not. This was very early days in terms of stability. One of the interesting things that we’ve always focused on was aligning sustainability goals with profitability at the same time. And this became a core part of our mission. And this is why we call ourselves for a profitable sustainability platform. And the idea here is that our goal all along was to reduce waste, reduce industrial waste using AI, using our specific kind of AI, white box AI. So initially our pitch to our customers was, well, using this, you’ll waste less raw materials, you’ll waste less processing time, and as a result you’ll become more profitable. But of course, all along we knew that if we could convince our customers to do this would also have an impact from a sustainability stand.
Berk Birand
And we’re very happy that since then, our collective consciousness has developed in a way that sustainability is now a top goal for many organizations. And now our message around profitable sustainability is all the more important.
Brett
That seems to be, like, the key ingredient to really succeed in any industry when it comes to sustainability is like, it can’t just be a sustainability narrative. Like, that’s not enough to get customers across the line. It seems like customers, of course, care about sustainability, but this, they also need to make money, need to make more money. That’s always top of mind. So it’s a very smart approach. I think, and I think a lot of others have tried to do that as well, where you combine those two together, and then it’s pretty hard to say, no, we can make you more money and you can contribute to making the world a better place. It’s a pretty compelling pitch.
Berk Birand
Absolutely. And especially now that customers are realizing they can do both at the same time, we’re seeing an incredible uptake interest, even just as the pandemic in the past few years where people are realizing, wait a sec, this is both. We’ve made some promises for our 2030 goals, and 2030 is not that far out. And for the industrial sector, that the sector that traditionally moves very slowly is not that far at all. And this is a great way for them to help drive these emission reduction while also improving profitability.
Brett
And what about AI? When did that enter the picture? Were you saying or talking about AI back in, like, the early days, 2015, 2016? Or did that come later on?
Berk Birand
We’ve always been an AI company. We were always since day one, my co founder’s background is in machine learning, a specific type of machine learning, bayesian machine learning. So since day one, we’re an AI company, and our goal was to apply AI for the good of humanity, in this case, for the goals of driving sustainability. So it’s not something that we added later. But of course, over the years, we’ve brought AI and machine learning to different parts of our software. Initially, our core offering was this, AI models to allow engineers that work at factories, process engineers, chemical engineers that do not have a data science background. Our goal was to give them the ability to use AI in a visual, no code type of interface. But over the years, we started applying AI all over the software.
Berk Birand
So the data cleaning phase, model deployment phase, and so our AI offering grew exponentially since the first days. But, yeah, this was a core part of what we do since day one.
Brett
From my conversations with other founders who are building with AI, they’ve said there’s kind of like two chapters of the company. It was before chat GPP came out in was that November 22? And after. Have you seen something similar? Like, is there a big distinct difference between selling this product and selling the solution pre chat GPT and post chat GPT?
Berk Birand
Yes, there’s definitely much more discussion around AI, and there’s much more interest, especially on the enterprise side. I think one of the best things that chat GPD has done is to show users, non technical users, what AI could do. Because you have to realize many of our customers, industrial executives, or executives in enterprise world, having fed this AI narrative by consultancies, by other companies, startups and large companies alike, for many years, even back in 2015, there are these giant numbers produced by McKinsey and others. AI is going to bring trillions of dollars of productivity improvement. And as an executive, you’re reading these, and then you realize, okay, this sounds interesting, but how does this actually work? Then you start doing a few pilots here and there, and you realize, well, this is actually just pivot tables.
Berk Birand
Most of the things that are being fed to me is just basically advanced excel functions. And then there was that dip in kind of disappointment. But what chat GPT showed people is that, well, wait a second, I can type something and then I can see the results in a world that I understand. But if AI can do this with recipes, then it probably can also do the same thing for my factory. And that kind of created more confidence in the ability of these systems to drive actual value and not just be toy systems or just overblown software solutions that startups and enterprises are trying to sell them.
Brett
So it sounds like at a minimum, you were ahead of two mega trends that we are seeing today, which is sustainability and AI. Early on, did it ever feel like maybe it wasn’t going to work, that the market just wasn’t ready? Did you have any of those moments in those early days? Because now it almost seems obvious with sustainability, with AI. But was it so obvious back in 2015, 2016?
Berk Birand
It wasn’t obvious at all. Back in the day, in 2015, we definitely interacted with people, executives industrial world and executives and engineers alike, that didn’t think AI would find its place in the industrial world. That thought, no, no, we’re doing our own thing here. AI is for the tech sector. Let the googles and the facebooks of the world use AI. This will never work in my factory. My factory is so unique that it would need custom solutions built using physics. And ultimately, of course, that’s changed over time. And I believe that in 510 years, AI machine learning will be a core part of every factory in the world. And of course, our goal is to make sure that pharaoh plays a key role in this future. But we’re not quite there yet.
Berk Birand
We’re not there yet, mostly because of some challenges inherent to most AI systems that we’re also trying to break, which is around, revolves around explainability and building AI systems that are trustworthy, explainable. But of course, now we know that explainable AI has its place not just in the industrial sector, but in other parts of the enterprise software world as well, namely for combating misinformation or for making sure that certain parts of society are not treated unfairly when it comes to, let’s say, applying for credit cards.
Brett
What about the first paying customers? And the reason I ask, of course, every founder struggles with getting those first few paying customers across the line. I would imagine, especially in this world, you’re not just selling like an e commerce widget or a cybersecurity tool. This is serious stuff, industrials, you know, very much the real world. What was it like getting those first few customers to say yes and give you money?
Berk Birand
Absolutely. It was part skill, but also part luck. Frankly, as we know, the key thing to do in the early days to find ten champions, ten customers, ten users that really like your software. In our case, we can even trace it back to one such user who really believed in what were doing. And frankly, especially in the industrial sector, it’s a very conservative space we’re talking about, where startup with no customers, who claims that they can connect their new software into the operation that they’re running, where they’re taking 50, 60 tons of scrap steel, melting it into liquid steel, and then turning it into an actual product that goes into a building. Actually, our very, the very first factory that purchased the software built the steel beams that went into the world trade center, the new World Trade center fritten tower. Wow.
Berk Birand
So it’s a big deal. And luckily, we had one user, one of our first customer there, who really believed in us, believed in our software, but mostly believed in us individually as founders. And it really did everything he could do internally. And I remember in the early days going through procurement, and of course, there’s a whole lot of questions. The IT team got involved. There’s all questionnaires around cybersecurity and so forth. And as we’re having these conversations, we’re not compliant in any way. We didn’t have soc two anything at all while we’re having these conversations. This champion of ours just signed the contract. And he signed the contract. And then the IT team was like, wait a second. We’re just going through the IT security steps here. And then he goes, well, I signed the contract. What do you mean?
Berk Birand
He’s like, so there’s an internal discussion between them. And they signed the contract. So ultimately, the cybersecurity team went, okay, fine, you’re taking the risk here. And he played a key role, of course, he’s seen the return many times over in that they’ve seen huge results in terms of the improvements that they’ve seen with Faro, and we’re lucky to have them.
Brett
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Brett
Cause it sounds like they really did make a bet on you.
Berk Birand
Yeah, it definitely did. We did our best to make sure that the worst case scenario wouldn’t be that bad, but there wouldn’t be any, you know, explosions or anything. No one’s going to die. That would take down. Yeah, exactly. Worst case, they would have lost some money, and which is they also failed production normally in their normal operations as well. But it was really being very upfront, being very humble since day one, very clear that we don’t know anything about steel. Our value add here is not steel production. It’s not chemicals production. What we bring in is the data science part, and you guys are the experts, and I think that creates some trust in that. Yeah, these guys understand how things work here. We bring in our skill experience. They bring in the data science experience.
Berk Birand
So that created an atmosphere of not just selling something to them. Like, we have our skills, you have yours. Let’s bring these together. Ultimately, to develop something new, something that’s not there yet, then that should be there. So being humble and direct definitely played a key role. And yeah, ultimately the reason that technology is trustworthy and also the fact that our technology is trustworthy also played a key role because they could now see what was going on within our AI models. It wasn’t just a black box that would just blindly tell them to do things. Our software also tells them why these predictions, what recommendations are made. And as a result, there was this human in the loop aspect that actually reduced the off chance of something going wrong.
Berk Birand
And really making sure that they knew that they were in the loop and they were in control of what was going on was also a key part.
Brett
What about from a go to market perspective, what does the sales team look like? How do you actually bring this technology to market?
Berk Birand
Yeah, we’re very much of an enterprise sales organization. So we have an internal sales team that are doing an excellent job talking to individual customers within our ICP profile. It’s a hard sale. It’s a hard sale because of course we’re targeting very large companies. All of our customers are multinational companies that are 510 billion plus in revenue, usually with 5100 plans worldwide. We have some customers that are actually much larger than that. So the key thing to do, it’s a very long sales process. And of course, as someone, as a technical founder, to learn the sales aspect along the way is a pretty challenging kind of sale. Multi touch point.
Berk Birand
We’re talking about many months of sales cycles, but ultimately over the years we’ve honed in on building a process that builds trust along the way, where we provide value and prove data points to our customers and to earn their trust throughout these multiple touch points and resulting in customer base that we have now. But yeah, our sales team is excellent and a member in our marketing team as well.
Brett
What about the marketing philosophy? How would you describe or define the marketing philosophy?
Berk Birand
On the marketing side, we’re essentially creating a new class of software. Many of our customers don’t actively search necessarily for what we’re doing. Many of our customers don’t even think what we’re doing is feasible. Many of them think that the best way to run the factory is doing the same thing that they have been doing. So it’s very important throughout the space to have a marketing plan that make sure that gives them confidence of us, don’t teach them what we’re doing, why we’re doing things in the way that we are. And ultimately, again, a multi touch point process where at every point we give them information about how things work, what’s going to happen in the next stage. We use terminology to make sure they understand what we’re doing in terms of the trustworthiness.
Berk Birand
Explain to them the type of machine learning that we use. Most of our customers are not data scientists. They might have data science internally, but they’re not data science organizations. So to really explain to them what it is that we’re doing, what’s going to happen behind the scenes and building trust and buy in throughout the process is absolutely key.
Brett
And you mentioned it there too, with profitable sustainability. Is that the market category? Like do you envision? That’s going to be the line item that at some point everyone in the industrial sector is going to say, hey, we need to go out there and we need to find a profitable sustainability platform. Then they go out and say, okay, here’s some to choose from. The best is clearly Fero labs. Let’s go with them. Is that the idea here?
Berk Birand
Yes, that’s exactly the idea. The idea is that at some point companies will realize that having just the way they have sustainability software to measure emissions and they have profitability software, which would be their finance software, there will be a software category that will have to tie these two together. Ultimately, factories have all these different objectives that they have to satisfy. I mean, of course they have to be profitable, sustainable, but also have to make sure they target quality goals, make sure that their uptime is high. And having a central piece of software that collects all the data that comes out from the production side of the factory and collects all of these different objectives and optimizes that is going to be a key part of the factory stack of the future.
Berk Birand
And of course, our goal is to be a key portion of that, of the stack.
Brett
What about from a regulatory perspective, what’s coming? Or is there anything that’s coming that’s going to really force their hand to double down even further on sustainability? I think the SEC just had something come out with climate disclosures maybe two weeks ago. Is that relevant to what you’re doing? Do you see that having a positive impact?
Berk Birand
I do think regulation is key in also driving sustainability goals globally. Europe is further ahead on this front. And we’re also, we have a subsidiary in Europe. We’re very active in Europe, and we’re already seeing the impact that these regulations are having in driving sustainability goals of entire plants and entire countries as well. In the US, we’re trailing slightly behind, but we’re on the right track. And there’s definitely different initiatives that will help accelerate this and ultimately what this will do, let’s say through carbon taxes or other such regulations. What this will mean is that the cost of not being compliant from a sustainability side will be higher. So if were to assign a cost function to the entire factory, having emitting more or wasting more resources will have a higher cost.
Berk Birand
And as a result, software like Ferro will be even more important to balance that cost. And that’s in fact what ties the sustainability angle with the profitability angle, hence the sustainable profitability platform.
Brett
What’s the typical day look like for you right now?
Berk Birand
So, yeah, I spend a lot of time, we have a small team, still our team of 25, but a very targeted team. I spent quite a bit of time making sure that we don’t experience growing pains. So as an early stage company, it’s natural that we’re still putting our processes in place. But I’m very proud of what we accomplished in the last few years in terms of addressing this. So as a result, I have a ton of one ones with individual team leads and with the broader team. As a technical founder, I try to be involved on the product side as well. And of course, I’m also very much involved in the go to market side.
Berk Birand
So I would say besides kind of the GNA items, I split my time between driving product strategy at a high level and also making sure that unblocking our go to market side, maybe a third of my time goes into unblocking the go to market side.
Brett
What’s that been like for you to learn to go to market side? Like you were saying there in the intro, this isn’t your world. You didn’t spend 1015 years at other companies being a marketing leader or a sales leader. So how did you learn that? And the reason I want to emphasize that is I think a lot of founders listening in, they’re in the same boat. They’re technical founders, they have no idea how to market and they’re starting from zero and have to learn. So, like, where do you begin?
Berk Birand
I would say the most important step was probably to begin with finding the right investors. Right. Early stage investors. Many of our early stage investors have a focus in terms of working with technical founders, and they have internal acceleration teams that are very much focused on instructing and teaching and coaching technical founders to pick up the sales and go to market side of things. So in the first few years, we definitely, the core team, have figured out a lot of the sales and go to market motion ourselves. But there comes a point where it’s time to hire executives that have been doing this for a long time. And for the past year or two, that’s exactly what we’ve done. We brought on executives for each of our go to market functions that have a ton of experience.
Berk Birand
They can bring in that relevant experience in terms of processes, in terms of go to market motions, and they can really do pattern matching, because ultimately, as a founder, this is my whole world. This is the only company I worked at. And then this is what I’ve been thinking for every hour for the past years. So I can’t really do much pattern matching with a sample size of one, but there are people, both investors and executives, that have been watched the movie, and that can bring all of that experience here. So I would say the early days is there’s a lot of learning, a lot of reading, and then it comes a point where one has to decide, okay, we’ve brought this to where we could bring it, and now it’s time to bring in executives that can fill in the holes here.
Brett
From a go to market perspective, what would you say has been, like, the most important decision that you’ve made to date?
Berk Birand
Yeah, from the go to market point, the most important decision that we made in the early days, especially, is to avoid doing free work. And this is controversial because especially when you’re a young startup and you’re talking to these giant companies, you just feel like you’re just honored that they’re talking to you, and you’d be like, I’ll do whatever is necessary to work with you, and it means we’ll do free work, free pilots, you have free studies or whatever. One of my advisors in the early days told me that to never do that, to always, even if it means hurting your chances of getting this company, getting this customer, don’t do free work, because if you do that, then companies will see you as kind of an extracurricular activity of sorts.
Berk Birand
They’ll see as a way to learn from you as much as they could, so that to see if they could build it internally. And as a result, even when our deal flow was not that high, we always charge something, even if it’s a small amount. And as a result, we made sure that we knew which cost center were targeting. We knew who was the one, who was the person who’s going to approve this contract, and that’s served as well. So this is probably one of my recommendations for early stage enterprise founders, is to be aware of large enterprises that are trying to learn as much as possible from young startups and implement things internally?
Brett
What about advice related to funding? So, as I mentioned there in the intro, you’ve raised 28 million to date. What have you learned about fundraising? And let’s maybe narrative. I’m sure you’ve learned a lot of things. What’s like the top learning or top couple of learnings that you’ve had about fundraising?
Berk Birand
I would say one of the most important things is to target the right type of investors. So were very happy to have found the right investors all along, starting from seed investors that were very good at working with technical founders. Then progressively, as sustainability become more and more of a focus, we started working with sustainable climate investors. And that’s been incredible, just to make sure that we are doing the right thing in terms of our positioning and in terms of targeting customers in the right way. And also finding many of our leads and opportunities have come from the network of our investors as well. So this notion of finding an investor who understands your space, who can actually bring value through their own knowledge, but also through their network, is absolutely key.
Berk Birand
And we’ve seen this over the past four or five rounds that we’ve raised.
Brett
What excites you most about what you get to do every day?
Berk Birand
What excites me most is, well, number one, the team that I work with, I would not change anything about the team. I’m working with excellent people and I’m very proud to have the team that we have. And the second one is the impact that we’re having. It’s just incredible that as a technical person, as a computer scientist, I can sit in an office in front of a computer and be part of a process that builds a software that is used across the US, across the world to help companies operate physical systems. And we’re seeing incredible numbers. In one case, one of our customers, a single steel plant, saved a million pounds of raw materials over the course of a year just by following our recommendations of thorough AI recommendations.
Berk Birand
And it’s just quite incredible to bring in a team together that can drive this much impact across the world just by redoing digital software through software. And that’s definitely the thing that keeps me really excited to be working in this space.
Brett
Final question for you before we wrap, let’s zoom out three to five years into the future. What’s the big picture vision here?
Berk Birand
I believe in five to ten years, the whole notion of industry 4.0 will finally come to its fruition. The way that I see it is that factories today are built around a very solid set of hardware, infrastructure or foundation. What we want to be is to be the dynamic, the intelligence layer that sits on top of this hardware. And I believe that AI machine learning will play a key role in being that intelligence layer. And this is not just going to be restricted to individual factories. We take the industrial sector. The industrial sector is very much like an organism, where you have factories that produce one thing in one side and then send it to the other. And there’s a lot of exchanges in this kind of global industrial sector.
Berk Birand
And I really believe that we can go from optimizing a single factory to optimizing the entire organism using AI. And so that factory a manufacturers only what it needs to and specification that it needs to, doesn’t waste any resources. And as a result, factory b downstream will also do the same thing and only use as many resources as it needs to. And this is achievable. And we believe that there will be that intelligence layer that sits on top of these hardware factories.
Brett
Amazing. I love the vision. We are up on time, so we’ll have to wrap here before we do, if there’s any founders that are listening in and they want more of you, they want to follow along with the journey, where should they go?
Berk Birand
I would say follow our LinkedIn. Fero labs on LinkedIn is where they should go. And, yeah, drop me a line if you have any questions. My first name@company.com.
Brett
Amazing. Thanks so much for taking the time. It’s been a lot of fun.
Berk Birand
Great talking to you, Brett. Thank you.
Brett
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