We want to become the Electronics Industry’s Operating System
A conversation with Timon Ruban, founder of Luminovo.ai.
Disclaimer: This article is based on a transcript of a recorded conversation.
Summary
- In this conversation founder Timon Ruban gives insights on Luminovo’s first product, their company vision and what it means to become the electonic industry’s operating system.
- Timon Ruban and Sebastian Schaal founded Luminovo.ai in 2017 as a machine learning consultancy. In 2020 they changed the company’s focus to build software that reduces the time it takes to bring products in the electronics industry from idea to life.
- Luminovo was listed by Forbes among the Top 25 Machine Learning Startups to watch in 2020.
- In 2020 Luminovo received pre-seed financing of €2.6 Mio. from Cherry Ventures, La Famiglia and further business angles.
- Get in contact with Luminovo via Hello@luminovo.ai
Tjark: Thank you Timon for the opportunity to talk to you about your company Luminovo. I read on your website that you are building the leading all-encompassing Electronics Operating System for OEMs and EMS. What does that mean? Could you explain with an example and please resolve for us what these two acronyms stand for?
Timon: Yes sure. First of all, we are actually facing a fun challenge because it’s quite a niche process in the electronics industry that we’re dealing with. We have this fun anti-thesis where on the one hand everyone uses electronics — every single person I know has probably like 10 or 20 electronic devices at home, including their smartphone, laptop, or fridge. In that sense electronics is really all-encompassing. But on the other hand very few people know how the processes in the electronics industry actually work and how the OEMs and EMSs bring these innovations to life. So the first thing to know before I explain what we do is to explain these two acronyms.
OEM stands for Original Equipment Manufacturer and EMS are Electronic Manufacturing Services. My favourite example, because everyone knows these two usually: Apple as an OEM designs iPhones and Foxconn as the EMS manufactures them.
So an OEM can be any company that designs and sells electronic products. This could be Apple making phones, Siemens making medical devices, or a bed company making a smart bed. And EMS are then the companies that actually build these electronic devices. They do the assembly, procure the different parts and have the actual production facilities.
“They are the hidden heroes of the electronics industry.”
You actually have quite a symbiotic relationship between the OEM and EMS. Only if they collaborate you can get your smartphone in your pocket. Now, before I tell you about our mission in a second, I want to tell you about the process we as Luminovo are starting with.
The first product we’re building is actually a tool which allows OEMs and EMS to collaborate during one tiny piece of the entire process from an idea to a market-ready electronic product. And this is the RFQ-process which stands for request-for-quotation.
When the OEM has designed a new version of whatever it is they want to build, for example a satellite, then they usually go to an EMS to get a quote on how expensive it’s going to be and how long it’s going to take to build. This supply-chain management for Electronics is one of the complexities that EMS knows how to deal with very well.
In electronic devices you have millions of electronic components that can be used. That’s a lot! You need to know where to buy these, for how much, and by when to get them. And if you’re unlucky and design the wrong piece into your electronic product, then the EMS later realizes that it’s actually going to take half a year to procure this one piece that’s in your design. And that means it’s going to take half a year until you get your first prototype.
So we want to build a tool, a web app, into which both OEM and EMS can log onto and exchange their data. And right now we focus on the EMS side so that we can facilitate the processes that they have to do to get the price and availability data to the OEM. We want to make this request-for-quotation process more automated, more collaborative and simply more usable.
Tjark: Your first product focuses on the request-for-quotation process (RFQ). After that what is your vision for Luminovo?
Timon: The vision that we’re really excited about is actually much larger than just this RFQ process. What we really want to get to at the end of the day is that we want to shorten the innovation cycle and the time that it takes for an OEM and an EMS to bring a product to life.
Today this is a very iterative process. You design something, you build it, you test it. And then again. In software engineering this process is already well established and iteration cycles are really short. But in hardware this process takes much longer because you need to physically build something. Everytime you want to build a new version you need a new RFQ. So our long-term vision is that we reduce the iteration cycles and shorten the innovation cycle so that you can get your next smart fitness tracker half a year earlier. And the RFQ is the first step for us. But then there are also a lot of other parts in the innovation process that we also want to make more efficient for the OEM and EMS.
Tjark: I would like to better understand how you ended up taking this path. You have started out as a consulting company for AI projects. And a while ago you changed gear and are now focusing on creating your product to make processes in the electronics industry more efficient. Can you tell me about the young history of Luminovo and about this change in focus?
Timon: Yes, so far actually there has been Luminovo 1.0 and 2.0. And they are very different companies. As you said we started as a consulting company. We consulted clients such as Volkswagen, Daimler, or Infineon to solve challenges with machine learning.
And after doing this for 2 years my Co-Founder Sebastian and I decided we wanted to switch things up. Business-wise we were very lucky. The consulting worked very well for us but we thought by building a product we can have a much more scalable impact.
And we were actually very lucky because we did this well ahead of Corona. So by the time Covid came around we had already transitioned the entire company to be a product company.
Tjark: How did you end up working on a product for the electronics industry?
Timon: It all started with a very painful process to find out what product we wanted to build and in which industry. Before we were industry-agnostic. And we now had to pick our favourite. This was a very long process that took us almost half a year until we finally found the problem we’re working on now in the electronics industry.
“And after six months of painful searching and soul-searching we finally found a topic that now a year later I can say I have zero regrets that we picked it.“
Tjark: And why did you choose the electronics industry in particular?
Timon: So there are many angles to it. In some sense it was a little bit of a back-to-the-roots movement for my Co-Founder Sebastian and me. We are both electrical engineers. I was trained in Zurich at ETH, Sebastian at the Technical University of Munich (TUM). So that personal fit was definitely there. And we actually have also other electrical engineers on our team.
And a second factor is that the electronics industry is one of the largest industries world-wide (cf. Statista 2016: approx. €3 trillion). Not all of this is of course the request-for-quotation tool that we’re building for a first step. But it already shows you that there are a lot of opportunities in this space. And this was a check mark that we were missing in some of the other industries that we were looking at. In other industries we also found some cool problems but the market size was to small.
And a third factor that was important to us and also the reason why we build this company from Munich, Germany, is that there is still a lot of electronics manufacturing for industrial or medical devices in Germany and Europe. Of course not for consumer electronics. These are all manufactured in Asia. But that’s why it makes sense that we started Luminovo here as opposed to Silicon Valley or Shenzhen. And those would have been valid places to start as well, but I think so is Munich, Germany. And that was important to us.
And then the last decision factor that now has a big impact on my quality of life day-to-day was the question:
Are the people you are working with the people you can imagine to work with for the next ten years?
In the electronics industry it turns out that the people are very down-to-Earth, even though they are building cutting-edge technology. They are a little bit more like “Handwerker” (craftsmen). And that is a great fit for us.
Tjark: The request-for-quotation challenge you are solving with your first product is located in a large market and at the same time sounds like a very niche challenge that few companies focus on. To what extend do you focus on an underserved niche?
Timon: Yes, so of course we think it’s a blind spot. That’s why we’re putting all of our eggs in that basket. To me it sometimes seems quite ridiculous how few startups there are compared to how large the market size is.
BUT and that’s critical: It’s really easy to say that the global electronics market is huge but that tells you really nothing about the exact market size of the exact product that you tackle. So in our case, the market for this specific request-for-quotation product is not very large. But it is in a market that is gigantic. So there are a bunch of other things we think we can do to shorten the overall innovation cycle for electronics.
Because in electronics — and this is different from other industries in which production is more transactional — design and manufacturing are so closely interlinked. The earlier the OEM and EMS talk to each other, the earlier they understand the complexity of manufacturing already during the design phase and can react with necessary changes. The real value comes when an OEM like Apple can offer its iPhone six months earlier than the competition. That’s the real big value you are creating. It’s not that you shorten the time for the request-for-quotation process and that you spend less money.
And so it still remains to be proven whether the RFQ-tool is the holy grail with which you can build a big company. I definitely think there is a pain to be solved and a somewhat successful company to be built if you do this very well, but is it going to be the next unicorn if you just enable a better RfQ process? Probably not.
But if you do something that really, really shortens these innovation cycles — and the RFQ-process is a part of that — you can be guaranteed that this is going to be a big company.”
Tjark: Thank you very much for this conversation Timon and I wish you and your company Luminovo all the best.
