Fast-growing Westerville startup Nikola Labs has raised $20 million in venture capital to add features and speed deployment of its sensor system that saves manufacturers costly downtime.
G2 Venture Partners, which was founded by veterans of VC firm Kleiner Perkins, led the Series A, with participation by Triangle Peak Partners. Both are based in Silicon Valley.
Nikola more than bounced back from grinding to a halt early in the pandemic: 2021 sales were more than five times that of 2020.
That traction is a large part of why the startup was able to raise its first institutional round at a time when VC investment has slowed around the country, CEO Brian Graham said.
"We've proven this business is real," Graham said in an interview. "The growth we've been able to show and the stickiness of or value proposition has been a comment we've heard from multiple potential investors."
Even though sales are growing, Nikola is taking on outside capital to amp that up. It's also hiring in customer service and engineering to expand data analytics and other features.
More than 100 manufacturers are clients, including Columbus' Worthington Industries Inc.
Some have multiple sites, and clients span various industries such as chemicals, metals, plastics, packaging and energy. The common thread is equipment with gears and other moving parts: Nikola's sensors detect vibration and overheating that signal a problem well before it leads to a breakdown.
"We go in, we do a (free) trial. Invariably that turns into a subscription within 30 days," Graham said.
"Our vision is to build out what we refer to as the leading proactive maintenance platform," he said. "We really proved product-market fit in 2020, and 2021 was a growth year."
Client heads of reliability or maintenance become "champions" of the devices' return on investment, he said, leading to expanding within the manufacturer to more equipment and more sites.
Last week Graham received an email from a plastics manufacturer executive, a customer for one year, who said leadership "went from skeptical to a fear of going without, in a short time." Nikola's system caught wear in a 1960s-era gearbox, he said, saving 1,200 hours of labor by maintaining instead of rebuilding.
Nikola has almost doubled to 52 employees, from 27 at the end of 2020, and expects to top 100 this year. The company is based at Otterbein University's Point, but most staff work remotely.
A Central Ohio contract manufacturer makes the devices that Nikola designs. Interestingly, that manufacturer is not a client – assembling circuit boards in devices doesn't require moving parts.
Some repeat investors also joined the round.
G2 was founded in 2017 by former partners in Kleiner Perkins Green Growth Fund, and started investing from a $500 million second fund last June.
“Nikola Labs has seen spectacular customer and revenue growth and we have been impressed by their ability to deliver immediate ROI for world-class manufacturers,” David Mount, G2 partner, said in a release.
After record-high VC investment in Ohio and nationwide in 2021, Graham saw impending signs of trouble as early as October, he said. Boutique tech-focused investment bank Union Square Advisors, with offices in New York City and San Francisco, and Nikola's own "aggressive" outreach led to the introduction to G2.
The firm focuses on emerging technologies that transform traditional industry and make it more sustainable. Preventative maintenance extends the life of equipment and keeps it running optimally, resulting in less waste and energy savings.
G2 has already advised Nikola on navigating expansion to a larger company, such as how to organize operations groups and reporting structures.
"Once we made the connection with them there was a very quick and obvious fit," Graham said. "Culturally there’s a very, very good fit. We really love the way they engaged."
