Acerta Analytics, which uses machine learning to help automakers perform quality control, has announced a $7 million USD ($9 million CAD) Series A round led by OMERS Ventures. Two million dollars of that round, however, comes via convertible notes secured in 2018, leaving the AutoTech startup with $5 million USD in new capital.
“The automotive sector is undergoing a period of transformative change with new needs emerging.”
OMERS is a return investor in Acerta, having contributed to the startup’s seed round in 2017. M12 (the venture arm of Microsoft), Radical Ventures, and Techstars also participated in the all-equity Series A, along with women-focused firm StandUp Ventures and Export Development Canada (EDC), the latter through its investment matching program.
The Series A capital brings Acerta’s total funding to date to $9 million USD.
Actera was launched in early 2017 by Cutulenco, CTO Jean-Christophe Petkovich, and chief scientist office and University of Waterloo professor, Sebastian Fischmeister.
Acerta has developed a platform used by automotive manufacturers to help perform quality control at various stages of vehicle development. It uses assembly and vehicle data to detect “the earliest indicators of future product failures.”
Prior to launching Acerta, Cutulenco worked for major automotive supplier Magna International as a safety engineer for its advanced driver assistance systems, which spans rear-view cameras, assisted driving, and more.
Cutulenco told BetaKit in a recent interview that during her time at Magna she realized the process of assessing the quality and operation of advanced technology systems being added to vehicles was very manual.
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The Acerta CEO then took that knowledge to the University of Waterloo, where she and her co-founders began doing research on automated pattern recognition and anomaly detection of vehicles; data, Cutulenco said, that was becoming more commonly available in the automotive industry. The trio then launched Acerta as a business in 2017.
“[Acerta is] providing a platform that can leverage data from across the lifecycle of a vehicle and its components,” said Cutulenco. “Basically, whether the data is being collected during initial stages of design and development, in production testing, in pre-production testing, … [or] from connected vehicles within our platform, we can normalize and collect and leverage all of this data and then apply AI and machine learning to help manufacturers find earliest indicators of future product failures.”
This can help automakers avoid warranty claims, Cutulenco argued, by allowing them to catch issues early before cars are even shipped, as well as assess vehicles while they are on the road to predict potential issues in the future.
Still in the early stages of its growth, Actera has already caught the eye of major automotive manufacturers, including Volva, Nissan, and General Motors. The startup, based out of Kitchener, currently operates in Canada and the United States, with burgeoning opportunities in Japan and Europe.
A portion of the Series A capital will be used to expand Acerta’s geographic presence, notably in the Japanese and European automotive markets. Cutulenco told BetaKit that Actera hopes to build a “strong presence” in both regions, known for having strong automotive industries.
Actera began its fundraising efforts at the beginning of the year, with the majority of its raise coming amid COVID-19 before the round closed at the end of June.
The effects of the COVID-19 pandemic on the automotive industry have been heavy. At the onset of the pandemic, production came to a screeching halt and sales plummeted. Recent reports currently predict delays in customer purchases, with an overall acceleration in sales beginning in 2021.
With a major market disruption taking place during its fundraising, Acerta faced some difficulty securing capital. Brian Kobus, partner at OMERS Ventures, told BetaKit that Acerta’s raise process was “slowed down, as many of the investors Acerta was speaking with decided to pause their investment activities to assess the impact of COVID-19 generally, and on the automotive sector in particular.”
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It was at this time that OMERS decided to lead the Series A. “We remain bullish on Acerta’s long term prospects and were confident that us stepping up to lead the Series A round would be a catalyst for other investors to commit to the round as well, which proved to be the case,” Kobus said.
OMERS’ relationship with Acerta dates back to 2017, when the firm invested in the startup’s $2 million seed round. It is not common to see the major investor participate in seed rounds, as OMERS prefers to focus on Series A to C with investments ranging from around $5 million to $25 million per round.
“At the time of our initial investment in Acerta, the company represented an exciting intersection between our work in the Mobility theme and a team with rare expertise in AI/ML focused on the automotive realm,” Kobus told BetaKit regarding the decision to invest at seed stage.
“Any kind of solution that helps [manufacturers] effectively drive cost reductions and cost containment…is really impactful right now.”
Microsoft also showed renewed interest in the problem Acerta is tackling. Cutulenco told BetaKit that M12 chose to double its investment in the Kitchener startup on top of a $2 million prize that Acerta won from the firm in 2018. Female Founders Competition, launched by M12 in partnership with EQT Ventures and SVB Financial Group, awarded Acerta $2 million in convertible notes at the time, which the startup has added to its Series A announcement today.
Despite the initial difficulties, Cutulenco said the pandemic has had what the founder called “good impacts” for the startup. “Now, manufacturers are starting to look more into these types of solutions [like Acerta],” she said.
The Acerta CEO pointed to two trends she has seen over the last number of months: manufacturers doubling their efforts around digitization, and looking for opportunities to reduce their costs.
“Any kind of solution that helps them effectively drive cost reductions and cost containment in terms of their operations is really impactful right now,” she told BetaKit. “Basically, as volumes reduce, they can keep more of the margin from each sale, because they’re reducing the scrap, they’re reducing all the failure and wastage internally.”
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Cutulenco claimed Acerta has seen increased customer interest amid the pandemic. She also noted that one of Acerta’s major tier-one manufacturer customers doubled its number of implementations with the startup, adding Acerta’s technology to an additional two product lines, despite budget restrictions.
“The automotive sector is undergoing a period of transformative change with new needs emerging,” said Kobus, adding that OMERS feels confident Acerta is “well-positioned to see strong growth well into the future.”
Actera also plans to use a portion of its Series A capital to expand its existing partnerships with manufacturing industry players. The startup currently works with Microsoft to integrate with its Azure cloud platform, as well as Amazon Web Services, Telus, and more.
A team of around 40 to 50 employees currently, Acerta plans to increase its global headcount to approximately 70 over the next few years.
Image source Acerta via Twitter