IoT Startup FogHorn Raises $25 Million Series C Funding As Edge AI Takes Off

'We've been pushing the state of the art on how you do AI and machine learning on high-velocity data,' FogHorn CEO David King tells CRN about the startup's edge intelligence capabilities.

FogHorn Systems CEO David King said when the startup got its start nearly five years ago, people thought edge computing was a niche market. But things have changed.

Major companies, including cloud service providers, are now making a play for the growing market, and FogHorn has reached scale-out mode, racking up multimillion-dollar contracts from industrial giants like Stanley Black & Decker and Honeywell.

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"People thought we were fish swimming upstream. Now everyone's in our pond," King told CRN in an interview Tuesday, pointing to Gartner's prediction that 75 percent of enterprise-generated data will be created or processed outside a traditional data center by 2025.

As a sign of FogHorn's momentum in the industrial IoT space, King said the Sunnyvale, Calif.-based edge intelligence startup has raised a $25 million Series C funding round led by South Korean industrial conglomerate LS Corp., with participation by return investors, which include Dell Technologies Capital, Intel Capital, Honeywell Ventures and GE Ventures.

While FogHorn got its start with a software platform focused on enabling streaming analytics at the edge, the company is now laser-focused on streamlining artificial intelligence and machine-learning workloads in edge devices, whether they're edge gateways from Dell EMC or Adlink.

The big advantage for FogHorn—which has more than 100 employees now and plans to hire more this year—is the ability to process a large amount of data in real time, whether it's coming from high-definition video cameras or vibration sensors, and changing AI models on the fly.

"We've been pushing the state of the art on how you do AI and machine learning on high-velocity data," King said. "We're there now in a big way."

After years of working on proofs of concept and developing more than 100 industrial IoT use cases with dozens of customers, King said FogHorn has found a path to scale its software business. Last year, annual license bookings grew nearly tenfold, and the company is now signing multimillion-dollar, multiyear enterprise licenses with large industrial companies, which represent a variety of verticals, including automotive, consumer packaged goods, chemical, pulp and paper, and mining.

An important scaling mechanism for FogHorn's business is channel partners, according to King. The company already counts more than 20 systems integrators and IT consulting companies on its channel roster, including Accenture, Capgemini, NTT Data and Wipro.

"Systems integrators are now starting to play a bigger role because with advanced edge technology, you're really showing the way for the end customer to extract breakthrough business insights from their industrial data," the CEO said.

At the same time, FogHorn is starting to turn to systems integrators on the operational technology side, like Anixter, a data communications and security distributor that is getting acquired by electronics distribution giant Wesco for $4.5 billion.

King said OT systems integrators are crucial because they're working directly with the sensors and industrial control systems that are central to industrial IoT applications. That means they're uniquely qualified in understanding how to connect the various sources of data to FogHorn's software.

"The challenge is how do you connect our stack to all the data sources," King said. "That's where the OT folks come in."

The primary opportunity for FogHorn's partners is through services revenue, according to King. The company can offer a reselling agreement for partners to receive a cut of the subscription revenue, but he said that is not the main way the company is looking to work with partners.

"As we scale out, partners will be generating a lot of services revenue," he said. "That's their scaling opportunity."