Tech Explained: AI startup CVector raises $5M for its industrial ‘nervous system’ in Simple Terms

Industrial AI startup CVector built a brain and nervous system for big industry. Now, founders Richard Zhang and Tyler Ruggles are tasked with a bigger challenge: showing customers and investors how this AI-powered software layer translates to real savings on an industrial scale. 

The New York-based startup has had some success following its pre-seed funding round last July. Its system is now running with real customers, including public utilities, advanced manufacturing facilities, and chemical producers. It’s given the duo more concrete examples of what problems they can solve — and money they can save — for their big industry clients

“One of the core things we’re witnessing,” he said, is customers “really lack the tool to translate a small action, like turning on and off a valve, [into] did that just save me money?”

As a homeowner with bills to pay, it’s a bit unnerving to think about one nondescript valve making such a big difference in the bottom line of a company and its customers. But it’s examples like this that helped CVector reach a new milestone, as it has now closed a $5 million seed round, Zhang and Ruggles told TechCrunch.

The financing was led by Powerhouse Ventures and included a mix of venture and strategic backing, with participation from early stage funds like Fusion Fund and Myriad Venture Partners, as well as Hitachi’s corporate venture arm.

With the funding round closed, CVector is talking a bit more about some of its first customers — and just how different they are.

“The joy of the last, say, six to eight months has been going to the industrial heartland, to all of these places that are just in the middle of nowhere, but have massive production plants that are either reinventing themselves or really transforming how they make decisions,” Zhang said in an interview.

One of those customers is a metals processing company based in Iowa called ATEK Metal Technologies, which makes aluminum castings for Harley-Davidson motorcycles, among other things. CVector is doing things like helping spot potential problems that could lead to equipment downtime, monitor the whole plant’s energy efficiency, and keep an eye on commodity prices that impact raw material cost.

“That is, to me, such a good example where this is really skilled labor, and they will need all the help they can get from for us, from the software side, from technology side, to really help that group of people transform, take the business to the next level so they can keep growing,” Zhang said.

Finding optimizations in older plants might seem like the most obvious path for a company like CVector. But it has also picked up startups as customers, too, including Ammobia, a materials science startup based in San Francisco that is working to lower the cost of making ammonia. And yet the work CVector is doing for Ammobia is surprisingly similar to what it’s doing for ATEK, Zhang said.

CVector is also growing. The company is up to 12 people, and it’s locked down its first physical office in the financial district in Manhattan. Zhang said he’s been attracting talent from the worlds of fintech and finance, especially hedge funds. The latter is ripe for recruiting, he said, since the people who work in the hedge fund industry are already pretty focused on using data to gain a financial edge.

“That’s the core of our sales pitch, it’s what we call ‘operational economics,’” Zhang said. “We position it to sit between the operation of the plant and the actual economics — the margin of how much you’re making money.”

Zhang still sees public utilities as a great place to apply CVector’s technology, though. (That’s where the valve example came from.) And he’s found that even these types of customers have become far more fluent in talking about the kinds of work CVector does.

“Tyler and I were just talking about how when we first started company almost exactly a year ago, it was still like a taboo to talk about AI in general. There was a 50/50 chance if the customer would embrace AI or just kind of discredit you, right?” he said. “But now, over the especially last six months, everyone is asking for more AI-native solutions, even when sometimes the ROI calculation might not be clear. This kind of adoption craze is real.”

Ruggles said that’s in large part because what CVector does ultimately comes down to one thing: money. And with so much uncertainty in the world, managing costs has only gotten harder.

“We’re at this time when companies are really intimately worried about their supply chain and the costs and variability there, and being able to kind of layer AI on top [to make] economic model of a facility, it’s really resonated with a lot of customers, whether it’s old and industrial in the heartland, or whether it’s new energy producers who are trying to do new and novel things,” he said.