March 26, 2018 | Investment Themes

Focal Systems: Computer Vision & Deep Learning to Improve Customer Experience

Greg Sands

Written by

Greg Sands

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Focal team at National Retail Federation’s expo with Focal Tablets

Writing in the 1940s about how emerging technologies push out the old, the brilliant economist Joseph Schumpeter coined the phrase “creative destruction.” It stuck — and has become even more relevant seven decades later in our era of digitization. Each week, in fact, seems to bring more examples of how the internet is reshaping the retail landscape. The changes are coming so quickly that it’s led some to wonder whether brick-and-mortar retail is doomed to go extinct.

Amazon has become the poster child for this rapid-fire transformation, and recent news about Walmart’s plans to add delivery to 100 of its stores only reinforce how dramatically the retail landscape is changing. But when it comes to groceries, consumers still prefer brick and mortar. The US grocery market remains a healthy $700 billion sector with 97% of purchases still happening in-store.

To continue to compete, brick-and-mortar stores must both improve the in-store experience and reduce costs. Think about a store experience where you can push a cart around, asking it questions if you need help. Or getting discounts as you pick an item, not post purchase. After choosing your items, you don’t head for the checkout counter — you head for the door because the items were scanned and paid for in your cart. That would be a game changing experience for customers and traditional retailers, who want to improve the in-store experience to keep people loyal to their local stores. Yes, digitizing the in-person shopper is a huge challenge for retailers but once they are digitized, loyalty can be gained and measured — which results in way more lifetime value for that customer for the chain.

This vision of retail transformed is why I’m thrilled to announce that Costanoa has led the Series A investment in Focal SystemsAt Costanoa, our core mission is to help entrepreneurs create and transform industries — and Focal Systems’ technologies have the potential to do precisely that. They are taking the very latest in computer vision, adding complex layers of Deep Learning, and creating a complete solution for grocery and convenience stores that can deliver this modern vision of customers’ in-store experience.

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Wayfinder tablet mounted on shopping cart handle bars

I am excited about Focal Systems for a number of reasons:

Improved customer experience and reduced operating costs. The company’s technology not only frees up employees to focus on higher value-added tasks, but easy-to-use self checkout gets customers out of the stores faster and improves customer experience.

A platform for retail automation. One of the challenges facing AI-oriented startups is how to acquire the training data. Simply put, you can’t do deep learning without data. But Focal Systems was incredibly clever about building a sequence of products that really is a platform for retail automation.

  • A Wayfinder tablet on shopping cart handle bars helps customers find items and deals. Focal got them deployed in local groceries, allowing them to build references and begin to collect data.
  • Later, their Out of Stock Detection product got deployed at both regional and national grocers that let them develop an even richer set of training data. There is an impossibly large market for leading grocers and mass merchants, not only in the US but all over the world.
  • Finally, the self-checkout alternatives currently in the market just aren’t good enough. Grocers have only been able to get people to use them by having fewer checkout lanes open which risks driving people out of stores completely. While it is a high-value offering, it requires great accuracy and consistency. That’s where Focal Systems hits it out of the park. Successful deployments in the first two applications (Wayfinder and Out of Stock) give it the necessary wealth of data to deliver the best self checkout product in the world.

The company’s three offerings combine to give customers different entry points depending upon their needs. In other words, they have many ways to reach full platform deployments. This strategic — and dare I say it — thoughtful approach to building the business is part of why we were so excited to work with Francois Chaubard, Adriano Quiroga and the rest of their team.

A tenacious team. Francois is someone who is willing — and able — to pull an all-nighter to refactor code in order to get something right. Francois received his Masters degree in Computer Science and Electrical Engineering at Stanford where he researched Deep Learning and Computer Vision. He later worked as a Deep Learning Researcher at Apple. When Francois was anxious about the company’s product priorities and its technical effort, he spent two weeks visiting customers while reading and rereading Andy Grove’s “High Output Management” to improve as a leader and as a manager. Those actions say it all. Adriano, who heads the technical and research teams, is an expert in Embedded Systems, Signal Processing, and Sensor Networks. He was working on his PhD at Stanford when he dropped out to start Focal. He works with a deeply technical team with a real technology advantage that will be hard to replicate.

We couldn’t be more excited to partner with Francois, Adriano and the team they have built.