The Amazon Alexa Fund is US-listed retailer Amazon’s first venture capital fund, started in 2016. It is dedicated to finding and supporting startups that work with voice technology. Paul Bernard leads the fund, and said: “Our goal is to identify startups creating new experiences with Alexa or advancing the state of the art in voice technology, and to give them the resources they need to grow their business.
“We have invested in more than 60 companies across a range of segments from smart home and wearable technology, to education, entertainment, and health and wellness, as well as technologies like microphones and processors that unlock new use cases for Alexa.”
There are two parts to Alexa’s success – hardware and software. Amazon wants Alexa, as Bernard said, to be “a ubiquitous service”. He added: “For Alexa to be successful, we need to bring Alexa to more people in more places, and we need to introduce features that make life easier and more convenient for customers. Our investments reflect that. We have invested in hardware manufacturers like Ring, Ecobee and North, as well as services companies that span entertainment (Novel Effect), wellness (Aaptiv), developer tools (Pulse Labs) and workplace productivity (Tact.ai).”
Yet as Bernard also pointed out: “In some ways, the debate over hardware and software is artificial. Some of the best companies we come across are using hardware as a mechanism to deploy advanced artificial intelligence and machine learning-based services.”
Becoming ubiquitous means that Alexa needs to find a role in every area of life. The variety of startups the fund has backed is remarkable and moves the fund well beyond the smart home niche in which most consumers who have an Echo or other Alexa-enabled hardware would place it.
“The smart home continues to be a place where we see significant potential, and we are increasingly looking at products that make Alexa more useful on the go. Vesper microphones and Syntiant processors are good examples, as is the new Parkwhiz skill for Alexa, which enables you to find and book parking spots with your voice. We are also excited about services that put Alexa at the centre of family life through products.
“Part of the benefit of our approach is that we can work with a range of companies and technologies across the spectrum on the so-called hype curve. I would rather take a risk with an entrepreneur than look back and wish I had leaned in.”
Alexa is still a platform in its infancy, despite Amazon pushing Alexa-enabled devices heavily on its sales platform. Amazon recently revealed that more than 100 million Alexa-enabled devices had been sold, although it is not yet clear on how many of those were Amazon’s own Echo devices.
The Alexa Fund is one way Amazon is supporting adoption through a greater range of services and products, but Amazon also offers access to the Alexa Skills Kit and Alexia Voice Service for companies looking to offer Alexa as part of their product. For Bernard, these tools make finding potential startups for investment relatively easy.
“We see voice technology as a major leap forward for customers, and we are looking to invest in startups that share that enthusiasm. In many cases, these are companies developing new Alexa capabilities with the Alexa Skills Kit or creating devices with Alexa built-in using the Alexa Voice Service.
“In others, startups may be working on the underlying science and technology that powers Alexa – things like machine learning and hardware component decision – or enabling new experiences that leverage voice-first interactions. At the same time, we are focused on ventures that have the promise to be compelling businesses – it is important that the companies in which we invest have compelling venture capital outcomes.”
Finding companies has become easier as time has gone on. The fund was launched at the same time as Alexa was launched as a service, which restricted the initial wave of investments. Now, says Bernard, the pool is much greater.
“Our pool of potential investments was limited to start. That changed quickly as startups’ interest in building with Alexa increased, and word spread quickly that we were open for business and that entrepreneurs valued our product. What has evolved is the expansion of domains in which we find compelling entrepreneurs. Sometimes these companies are already thinking about voice and have built an integration. Other times we meet a compelling company and realise they would benefit from having Alexa as part of their offering.”
Investing in technologies related to Alexa does put the fund into a niche, despite Amazon’s aims towards ubiquity. How much competition does the fund find itself up against?
“We see Alexa intersecting with a range of daily habits – at home, on the go, at work, for fun, to learn and more. We already work with many of the top venture investors who are co-investors in our portfolio companies. Where we think we differentiate ourselves is the extent to which we treat our companies as customers. We have a team dedicated to providing our portfolio companies with technical, program, marketing and other relationship support, all designed to help them be as successful as they can be with Alexa and across Amazon.”
That pitch is simple enough: “Want Alexa in your product? Come to us.”
Alexa is now in millions of devices, from televisions to light bulbs to plugs. As these devices become “smart”, one trend is clear – a smart device is more expensive than a regular device. Costs will come down, but it would be easy to caricature Alexa-enabled devices as little more than expensive indulgences for tech-savvy urban-dwelling west coast Americans. Although one might argue this, the developing world needs key infrastructure more than consumer luxury, so the support the fund has given to startups outside the US is commendable.
“The Alexa Fund was launched with $100m to invest in voice-first companies, and we later announced a subsequent $100m to support startups and entrepreneurs based outside the US. There are hundreds of thousands of developers from more than 180 countries building with Alexa, and we are especially excited about the number of startups emerging in places like Latin America and India.”
Bernard said Amazon needed to support startups over the entire company lifecycle, and pointed to two Amazon initiatives to do so – the Alexa Accelerator and the Alexa Fellowship.
“We need to evolve and create new ways to work with companies across the lifecycle of company evolution. Examples of what have created to address these opportunities include the Alexa Accelerator, a 13-week program geared toward early-stage startups, and the Alexa Fellowship, which supports university faculty, researchers and student entrepreneurs. I expect to see more innovation in our approach and capabilities going forward.”
Amazon has created an ecosystem for Alexa, from developer tools to startup support, all to enable Alexa’s commercial success. Alexa now offers a panoply of services and there are more Alexa-enabled products. Yet Alexa does not feel essential to modern life in the same way that a smartphone does. Smartphones have reached ubiquity in almost every society on the planet, and Alexa is aiming for nothing less.
Technology adoption often revolves around the idea of a killer app, the one product or service that becomes so essential that it demands purchase of the platform. Atari had Space Invaders, Microsoft had Powerpoint and Internet Explorer, the social networks were their own killer apps, the smartphone had everything. What demands adoption of Alexa?
That is not necessarily Bernard’s problem to solve, but he is part of Amazon’s solution. As he said: “We obviously cannot invest in every compelling startup that embraces voice technology. But we do try to identify some of the most compelling ones, support them to bring their vision to Alexa, and, in so doing, help them build a great company. If we keep doing this, it can only help move us toward the vision we have for Alexa to be a ubiquitous service that makes daily life easier and more convenient for customers.”