Nautilus Labs Interview – How Does A Small Maritime Startup Raise $11M?

Matt Heider is CEO of Nautilus Labs
Matt Heider is CEO of Nautilus Labs

This week we had the pleasure to interview Matt Heider, CEO of the fast growing startup Nautilus Labs.  

Nautilus is building artificial intelligence to advance the efficiency of ocean commerce. They deliver technology to help shipping companies reduce fuel consumption, maximize operational efficiency, and optimize fleet performance. By arming ship owners and operators with real-time predictive decision support, Nautilus is reducing greenhouse gas emissions and making global trade sustainable.

Big Data, Block Chain, IoT, there are a lot of technology buzzwords that most people in the shipping industry simply don’t understand. How can shipping companies educate themselves so they can adequately evaluate new technology?

I’d actually push back on that a little. Our experience, both with clients and prospects, has been that shipping companies are extremely advanced in their understanding of the newer technologies—both that are sometimes exciting and sometimes useful.

“Maritime is conservative” is a common refrain throughout the industry. But when you’ve got companies that have been in business for hundreds of years, there is a natural skepticism to whiz-bang or flash-in-the-pan solutions that address the moment and not the momentum. That’s not conservatism, that’s being careful.

We think we’ve created a platform that functions as a long-term competitive advantage where the industry already has velocity. And ultimately that’s the way most shipping companies do and should vet new solutions: by answering “what solutions meet my needs today” and “help me build for a better tomorrow”.

At SeaAhead’s recent Bluetech Summit in New York you said, “#Bluetech is the biggest opportunity to impact the environment inside technology, today.“ What is Bluetech, and how do you quantify the potential impact it will have?

The world’s oceans are where life began, where life is sustained, and where most life will continue to live–as long as we change the way we operate as a species. 90% of all commerce happens via seaways. And because of that, even marginal trends and improvements can have a massive environmental impact.

Bluetech, and Bluetech software specifically, is a way to make those improvements by correcting inefficiencies that may be blind spots for shipping companies who rely on manual data, try to keep up with new domestic and international regulation, or feel increased environmental scrutiny from third parties.

We’re starting to really feel the effects of the metaphorical climate-change-cliff. And those effects are measured in terms of pollutants, or man-made factors, introduced into the atmosphere or the oceans directly. So in a way, Bluetech (for firms like Nautilus) is an avenue to create the absence of those factors—quickly, profitably, and for the long term—for our clients.

Nautilus Labs recently received $11 million in Series A funding, led by Microsoft. What is Series A funding, and why is Microsoft interested in the shipping industry?

Typically, the Series A is a demonstration from investors that you’ve got a great product, a sizeable market opportunity, and a competitive edge that will translate directly into value for that market. So for us, the A is a vote of confidence from industry titans like Microsoft (via M12); and validation of how thoughtful innovation and deep client partnerships can support one of the world’s most storied and vital industries, all while benefiting the environment.

$11M in funding is a huge amount of money for a maritime startup but is relatively small compared to the amount venture capitalists have invested in other transportation segments like trucking, drone delivery and aviation. Why do the banks and silicone venture capital continue to short change shipping?

We’re extremely grateful to have a chance to bring maritime industry challenges to non-traditional players, who have the resources and global positioning to help us address those challenges in a thoughtful and supportive way.

But sea blindness, or the inability to understand the part that maritime plays in all our lives, is a real headwind. For most people, shipping is out of sight and out of mind and out of network. So there is less of a natural cognizance of maritime shipping’s role and opportunity. But that’s part of our job and one we’re honored to play—bringing attention and traction to the transportation source of all goods on the planet and one of our most addressable climate challenges.

You recently talked about the critical importance of desiloing the maritime industry. What do you mean by this, and why is it important?

Silos are persistent across maritime shipping due to legacy, regulation, and the sheer complexity and scope of global trade. At the “local”, or internal, level, silos can be detrimental to shipping organizations in a number of direct (and indirect) ways. For instance, Operations, Technical, and Chartering teams may be working off different datasets, with different tools, towards different objectives—all areas of potential risk for individual voyages or larger commercial competitiveness.

As we zoom out, we see silos persist between different critical support teams on behalf of shipping companies. The OEMs who build core systems, the service organizations that support ongoing operations, and the class societies that ensure safe operations—all have competing priorities, offerings, and relationships that produce a splintering of tools, data, and decision-making.

And finally, at a “federal” level, we see the complexity of different regulatory regimes, expectations of flag states, and the unique nature of each port and port state, that create a manifold, global operating environment.

Desiloing is a challenge for individuals, teams, fleets, and international consortia–and it’s something our platform is designed to address across the board.

Some startups (e.g. FLEXport) have purposely avoided hiring shipping industry professionals and attending industry events. Many others, like Tradelens, are deeply connected with shipping companies. Nautilus Labs seems to take a different approach. Why?

We’re lucky to have great backing from M12, along with other VC firms like Root Ventures, Trail Mix, and Amplifer. And what comes with that investment is a rigorous focus on spending capital wisely. Since our A, we’ve rapidly expanded around our client success, data science, and engineering teams to more deeply partner with owner/operators.

But we’ve also maintained a strategic presence at events around the world—that means we’re looking at AI conferences, eco-conferences (like SeaAhead), as well as the industry stalwarts of Posidonia, CMA, Marine Money, SMM, and Nor-Shipping. We like places where we can shake hands and directly hear the needs of the industry. But dealing with the scale of ocean commerce also requires borrowing from other industries, and we’re not afraid of ideas outside of Maritime, that work for Maritime.

There are many new resources for maritime startups like SeaAhead, Katapult Ocean, theDOCK, NYMIC and the Athens Maritime Innovation Center. There are also traditional startup programs like MassChallenge, Techstars, and NewLab that are starting to focus on BlueTech. Are these resources a benefit or distraction for today’s startup founder?

The more participants in Bluetech, from any angle—the better. The one thing that every human being on earth innately shares is being an earthling, and there’s a responsibility incumbent on each of us to be good stewards of the planet. All of these incubators, accelerators, and ecosystems will only help to bring attention to the space—both for entrepreneurs aiming to solve big problems, and investors looking to support them.

Europe and Asia have more shipowners and operators, more maritime innovation centers, more government funding for maritime startups, and more shipping related resources, but Nautilus Labs is located in New York. Why? We’re a global company with clients operating around the world.

What continues to be really evident—at SeaAhead and other ocean or Bluetech community events—is that it’s incumbent on everyone to be accountable for the world’s oceans and help affect change. We were founded in New York, but that doesn’t mean we have any less responsibility to help an industry that is at once the backbone of the world economy and responsible for 3% of CO2 emissions. Those emissions affect us, too. On top of that dire reality, New York has been a consistent, historical global shipping hub—financially and otherwise—and we’re proud to source talent and be headquartered here.

Nautilus Labs has planted one foot in the technology sector and one foot in the maritime industry. Both are male-dominated industries, yet Nautilus Labs actively recruits and trains women. How and why do you accomplish this?

The question isn’t “why” so much has “how”. There are many studies that consistently prove diversity in organizations lead to better outcomes, culturally and financially. But beyond third-party stats, we’ve seen success in making sure our teams have different viewpoints, backgrounds, and representation. This is part of our core values—independent of Silicon Valley and shipping. While we’re outperforming gender ratios in those industries—we’re not satisfied. Women currently comprise 39% of our full roster and we will continue to make increasing that number a priority.

You worked for IBM and your cofounder worked for Google. How do we get more people like you interested in this industry?

Ultimately, I see it as a core question of cross-pollination: how do we get more people with tech backgrounds engaged in Maritime, and how do we get more experienced maritime people engaged in building great technology?

We all have a part to play.

It’s about bringing meaningful technology to people in the industry, help them solve problems, while also establishing avenues like those you’ve mentioned (ecosystems, accelerators, et al) for them to bring strong business ideas into contact with entrepreneurs, investors, and technologists.

But it’s also about raising the visibility of the industry, being transparent and vocal about the challenges that we’re facing, and building a culture that fosters creativity and risk-taking. We hope to do our part by raising awareness, attracting talented people to help solve some of the world’s most existential issues—and communicating the importance, necessity, and impact that maritime shipping has.

Nautilus Labs has ambitious goals for changing the shipping industry, impacting climate change, and making significant returns for your investors. Many cleantech companies made similar claims a decade ago and failed. What is different today?

I would say we don’t just have, but also share, ambitious goals with the industry. There is a shift happening among governments, financiers, owner/operators, and crews to not only have the desire to be better stewards of the oceans, but to seek out and partner with technology solutions that get them there, while positively affecting their bottom lines.

Ten years ago, people were not advocating for changes because a lot of what was on the table was impractical, uneconomical, and unscalable. Today, Nautilus, and others, are building solutions that deliver strong unit economics, fit naturally into the existing operational profile of the industry, and leverage cloud-based software to deliver value, globally.

It’s the convergence of a strong impact on our clients’ bottom lines with a massive, positive impact on the environment.

What other shipping industry problems can be solved with software solutions, and what types of problems do you think technology is just not ready to solve?

Perhaps it’s the optimist in me, but I see very few problems that can’t be solved by people equipped with better, human-centric software and technology.

The clearer question is the ordinality of it: which problems will deliver the fastest, easiest, and highest value if solved first, along with the readiness of certain components of the industry to leverage technology across groups of stakeholders and deliver broad value.

Our perspective is that all good things start small.

Individuals and teams within shipping companies (supported by better technology) can improve their working lives and also their output. And there’s a massive amount of fast and simple high value to be captured there.

On the other end of the spectrum, global interconnectedness has the potential to create huge value. But it’s compex, slow, and requires collaboration across so many divergent stakeholders. That’s where improving market efficiency, eliminating all the paper-based legacy systems, and increasing uniformity among system providers is super interesting; and we’ll have to be comfortable with longer technology adoption cycles to improve it. Because the industry isn’t waiting to move on technology that will get them to yesterday—but rather, they want and need solutions to move them five, ten, fifteen years into the future.

Ultimately, the only limitation of technology boils down to one question: what challenges can we fix and rally others to help solve?

The rest is just execution.