Here’s how a Finnish startup landed $10M from Baidu. In a McDonald’s
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Photo Credit: PR Screenshot/ IndoorAtlas

IndoorAtlas is an indoor positioning system that relies on a building’s unique magnetic field to help people pinpoint specific locations with ease.

Tech in Asia

Eight-figure investment deals are often inked in boardrooms with long mahogany desks or high-floor offices with a view of the bustling metropolis below. It’s hard to imagine such a large amount of money changing hands at a place like McDonald’s, with sticky soda rings and French fry salt lingering on the plastic table tops.

If said McDonald’s was located inside a Walmart, you might expect a handshake agreement over a nickel bag of pot or a rusty old Chevrolet, not a $10 million deal pairing European tech geeks with one of China’s top tech titans.

But that’s exactly where IndoorAtlas, a Finnish startup now headquartered in Silicon Valley, landed Chinese search giant Baidu’s first ever investment in a European venture. And this is how it went down.

Magnetic mapping

As you can probably infer from its name, IndoorAtlas wants to become Google Maps for shopping centers, train stations, stadiums, and any other large, enclosed structures. In that context, a Walmart meeting might not sound too far-fetched. Understanding how the startup’s tech works makes the decision clearer.

IndoorAtlas uses a smartphone’s existing magnetometer the sensor that allows the compass function to work, to detect variations in the surrounding geomagnetic field.

“Every building has unique magnetic field based on its size, shape, and interaction [with surrounding] buildings,” Wibe Wagemans, IndoorAtlas’ president, said, “Imagine the magnetic landscape as mountains and valleys. A single measurement doesn’t work, but as you move around [the magnetometer] makes observations from multiple angles and remembers features like hallways, doors, and shelves.”

In the same way that Google deploys Street View cars to visually map public roads, IndoorAtlas’ business partners send local teams to walk through shopping malls and other indoor spaces to generate these geomagnetic maps – a process the startup calls ‘fingerprinting.’ IndoorAtlas claims that its magnetic mapping tech,  complemented by dead reckoning, sensor fusion, wifi, and Bluetooth, is accurate to between one and two meters.

Not only can IndoorAtlas tell you where specific stores are in a cramped shopping mall, but the startup envisions being able to tell users where specific items are located within the store. Want to get in and out of the grocery store as quick as possible? The IndoorAtlas app could show you the quickest route to the bread, milk, eggs, and cash register. Forget an iBeacon promotion saying there’s a sale at a particular store. IndoorAtlas will direct you to the store, then straight to the sale rack.

“[Mapping] multiple floors is easy for magnetic tech,” Wagemans said. “A single floor with high ceilings [like Walmart] makes it harder, really wide aisles also make it harder, so it was the perfect testing ground to really show IndoorAtlas’ capabilities.”

“Anyone can do a demo in a small office by installing lots of beacons and routers, but aisle after aisle in a Walmart without any infrastructure, no one else can do that,” he added.

Greeted by a giant

The startup announced its sizeable $10 million series A funding round from Baidu last September. It was about six months prior to that, in March 2014, when members of the IndoorAtlas team drove from their Palo Alto office to the Walmart shopping center in Mountain View.

Earlier that week, Wagemans had phoned Baidu’s local office in Silicon Valley to set up the meeting. “I remember asking, ‘Can we meet at the Walmart?’ They knew the place because some of them had kids studying in the Valley, and I explained that I had to do the demo there because it’s the hardest place in the US to do it. I told them, ‘If it works at Walmart, it’ll work anywhere,” he said.

Not only did Baidu bite, but when the IndoorAtlas team arrived at the Walmart entrance, they were greeted by a giant: Tang Hesong, the firm’s vice president, in charge of mergers and acquisitions and major investments.

Tang was the man behind the $1.9 billion acquisition of Chinese app store 91 Wireless in 2013. He also led the $306 million investment in online travel portal Qunar in 2011 which went public just two years later. Tang’s portfolio is filled with investments and acquisitions bearing enough zeroes to make your eyes go blurry.

“[Tang] is probably among the top 10 biggest players in the world for M&A,” Wagemans said, “So I walked through the aisles of Walmart with this multi-billion dollar man.”

McDonald’s coffee

The IndoorAtlas team spent a few minutes showing Tang and his associates how accurate their “blue dot” was within the cavernous Walmart, demonstrating not only the positioning capability on an aisle-by-aisle basis, but also using the app to locate specific products on a specific shelf.

After the demo, the group headed back toward the Walmart entrance. Instead of driving off to either of the groups’ offices, they opted to sit down for coffee at the McDonald’s situated just inside. Thoroughly impressed with what he saw, Tang expressed his interest in investing.

“Baidu was the ideal partner because China is really driving [the location services] space,” IndoorAtlas founder and CEO Janne Haverinen, who was also present at the meeting, said, “I think they’re perfect for us because they already have a 75% share of the [Chinese] mapping market and they’ve expressed interest about going indoors, and they have 270 million monthly active users on Baidu Maps.”

IndoorAtlas agreed to license its tech to Baidu with a two-year exclusivity contract that began last September. Baidu agreed to pay 8 figures for the privilege.

“His decision boiled down to our non-reliance on wifi and Bluetooth,” Haverinen said “We didn’t foresee having a major Asian investor, but after we met, both parties immediately saw the opportunity. Baidu already owns the Google Maps of China. The timing was just right,” he added.

Before Baidu, IndoorAtlas had raised $5 million from the Finnish government and Mobility Ventures. The Chinese web giant started toying with its own indoor maps in late 2011, around the same time that Google rolled out some of its own.

Korea, Japan, and Singapore

Outside of China, IndoorAtlas has been busy seeking additional partners in Asia. In July, the startup announced a $3 million partnership with SK Planet, a wholly-owned subsidiary of SK Telecom, South Korea’s oldest wireless carrier with almost 50% domestic market share. IndoorAtlas’ technology will be used to complement SK Planet’s O2O shopping service dubbed Syrup, along with its digital wallet and mobile navigation platforms.

The startup is also in discussions with potential partners in Japan, but wouldn’t disclose specifics as those talks are ongoing.

“Asian shopping complexes are huge and you’ve got sprawling train stations everywhere, often with malls attached to them. Even in New York, there’s nothing that compares to the big-city train stations and shopping centers in Japan and other big Asian cities. They need indoor positioning more than [Western countries],” Wagemans said.

Haverinen concurs, while alluding to Singapore as a possible next step on the startup’s expansion road map.

“Go to Orchard Road [in Singapore], which has some of the biggest malls in Asia, and you can walk for kilometers underground without seeing the light of day – you need a solution for that,” he said, “That’s why the usage is going to be much higher here in Asia than in Europe or the US. They just don’t have structures as humongous as what’s here.”

Every building in the world

IndoorAtlas’ indoor mapping tool has been available in the App Store for almost two years. Its building showcase app will launch later this year. There are more than 16,000 developers registered to work with IndoorAtlas’ APIs. The core team is comprised of 40 members across the globe – including 3 professors and 12 PhD students. The startup also opened its Beijing office last month, with the first full-time employees scheduled to move in this week.

Apart from inking partnerships around Asia, the startup is also hoping to raise additional venture capital funds. “The idea is to provide a de-facto platform for every building in the world. Very much what GPS did outdoors by hanging up a few satellites,” Wagemans said.

This post was originally published on Tech in Asia.

Featured Image Credit: PR Screenshot/ IndoorAtlas

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