Artificial intelligence-powered manufacturing process optimization startup Fero Labs Inc. today closed on a $15 million growth funding round.

Climate Investment led the round, with participation from Blackhorn Ventures, Innovation Endeavors and DI Technology, bringing Fero Labs’ total amount raised to $30 million.

Fero Labs is the creator of a “white-box” AI platform that helps engineers at manufacturing companies become more sustainable by increasing the efficiency of their production processes. It’s a noble cause, because the manufacturing industry is estimated to account for about 25% of global carbon emissions, with two-thirds coming from the steel, cement and chemicals industries.

The software enables manufacturing plant operators with no data science background to unearth insights into the root cause of the carbon emissions at their facilities. They can use these insights to improve their production processes and make their plants operate more sustainably without affecting performance.

One of the unique selling points of Fero Labs’ platform is that it uses white-box AI, which provides an explanation of the decisions and predictions it makes. That’s different to the likes of ChatGPT, which is a “black-box” AI tool that doesn’t reveal the reasoning behind the responses it generates. By using white-box AI, Fero Labs says customers can trust the insights it provides.

Fero Labs co-founder and Chief Executive Berk Birand said the industrial sector is one that has always been notoriously difficult to decarbonize. Traditional hardware-based solutions, such as carbon capture and storage, are expensive and difficult to implement, he explained, so little progress has been made.

“White-box AI software requires no capital expenditure and can be quickly implemented,” Birand said. “This means companies can immediately start reducing emissions and quantify emissions reduction more accurately with easy-to-understand dashboards and reports. Tangible proof of impact is a crucial part of the sustainability journey.”

The proof is in the pudding, and Fero Labs says customers that include Covestro AG, Gerdau Sociedade Anônima
and Grupo Celsa’s Celsa Nordic have realized more than $20 million in savings while reducing carbon emissions by around 100,000 tons since using its platform. The last year was a successful one for Fero Labs, which tripled its revenue in 2022, off an undisclosed base.

Felicity O’Kelly, an investment principal at Climate Investment, said Fero Labs’ software has proven its ability to improve the sustainability of companies in industries that have particularly high carbon emissions. “The white-box algorithm approach engenders confidence even at the operator level, which is something that we haven’t seen in the market before,” she said.

Constellation Research Inc. analyst Holger Mueller said Fero Labs is another example of how AI can be applied to solve some very specific problems, in this case helping manufacturers to become more sustainable. “This innovation is coming out of the startup space with Fero Labs, which is doing an important and beneficial job in reduce the environmental impact of manufacturers,” Mueller said. “It’s a promising use case because manufacturing accounts for a good portion of the world’s carbon emissions, so it’s an industry that definitely needs help.”

Looking ahead, Fero Labs said the funds from today’s round will help it to deploy new sustainability features in its platform and accelerate its adoption in key industries. The company has an internal goal of helping to reduce carbon emissions by at least 800,000 tons by the end of 2025.

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