The Early Days of 3D Laser Scanning: Part 11

This entry is part 1 of 7 in the series May 2021

The year 2000: The surprising ‘Dot-Com’ factor

By Geoff Jacobs

In 1998 I joined a small start-up, Cyra Technologies, which was pioneering 3D laser scanning technology. I had a senior product marketing role, reporting to the CEO. In my previous article (April 2021), I described Cyra’s approaches in 1999 to several, major survey instrumentation and AEC software vendors about investing in or partnering with Cyra. Those vendors included Trimble, Leica Geosystems, Autodesk, Bentley, and Intergraph. Topcon and Sokkia were also on Cyra’s candidate partner/investor list.

At that time, there was a good amount of publicity and early interest in this new-fangled technology. Feature articles on it were appearing in leading trade publications. Awards for technology innovation were being earned. A genuine buzz was starting in the market.

Beyond the buzz, Cyra was still trying to sell its first-generation scanner (Cyrax 2400) and software (CGP), while secretly developing its second-generation products. Sales were difficult (only 50 systems total for all of 1998 and 1999). That level of sales was well below what Cyra needed to financially support manufacturing, hardware, and software product development, expanding sales and marketing, and growing customer support needs.

Three other companies were also early 3D laser scanner entrants: Riegl (Austria), Mensi (France), and K²T (USA). Only Cyra and Riegl were having some modicum of success with sales. K²T quickly dropped out of selling systems altogether. A big factor for slow sales was that many early users were not having good business success with their systems — a big uh-oh and drag on adoption.

So, despite its buzz and the technology’s high “wow factor,” the business side of the technology was off to a rough start. They were nervous times. Some staff were refreshing their resumes and CVs, wondering if their companies were going to make it. By the end of 1999, it was apparent to many that something good and big needed to happen soon. A new, killer app? A surge in customer successes? A sudden, dramatic improvement in the technology?   

That good, big something did happen … in the form of Leica Geosystems. 

Cyra’s Bold Claim and Leica’s Bold Move

Of the companies that Cyra had approached, Leica quickly sprang to the front for partnership interest. Cyra’s first contact with Leica was at a trade show in March 1999. Senior Leica staff reported their interest in Cyra and 3D laser scanning to Leica Geosystems CEO Hans Hess, who then arranged to meet Cyra CEO Ben Kacyra during a San Francisco airport layover. Their meeting went well, and in July 1999 Hess returned to Cyra’s offices in Oakland, California, with a team of senior colleagues for a full-on demo, presentation, and review.

That was shaping up to be a pivotal meeting and presentation. Since I had worked in the surveying industry at Trimble before joining Cyra, Kacyra (who was my boss) solicited my thoughts beforehand on what would be okay to say and what would be “no-no’s” to say to Hess and others from Leica during the visit. At one point, Kacyra told me that he wanted to tell Hess that his 3D laser scanning technology was “the future of surveying.” I advised Kacyra not to make such a bold claim as that, as I was worried that Leica Geosystems, with its long, proud history in surveying, might take offense to such a bold claim.

During that visit to Oakland, Kacyra took Hess into the lab and showed him a non-working, physical mock-up of a futuristic 3D scanner that Cyra’s CTO Jerry Dimsdale had built. It was very small – about five inches high by three inches in diameter, roughly the size and shape of what is today a BLK360 scanner. As Kacyra later explained to me, “I got pretty bold with Hans. I showed him the small mock-up scanner and told him, ‘This is the future of surveying.’ “

Of course, I had briefed Kacyra beforehand not to say that, but Ka­cyra said it anyhow, and, as Kacyra later proudly reported to me, Hess’ response was, “Yes, I agree – this is the future of surveying.”

Wow! Didn’t see that coming!

The entire presentation to Leica went well. I gave part of it, focused on market segmentation and sizing, cost-benefit analyses for specific applications, adoption and growth rate projections, etc. This was also the first time that I had met Hans Hess. My prior image of Leica was that it had been an old-line, conservative Swiss company, but Hess wasn’t like that at all. He was energetic, entrepreneurial in his thinking and his questions, and seemed quite progressive to me. I was encouraged by the thought of a potential fit for Cyra with Leica. It didn’t take long.

In March 2000, Leica made a minority investment in Cyra, with Hess getting a seat on Cyra’s board of directors. Everyone at Cyra was excited about it. The size of the investment provided invaluable funding to continue to develop the technology and Leica’s name added valuable credibility to the technology’s potential. Resume and CV refreshes were put on the back burner.

1999-2000’s Pervasive Backdrop: The “Dot-Com” Boom

We all thought that Leica Geosystems’ interest and investment was based purely on their belief in the future of the technology and Cyra’s early leadership in it. It turned out that was only part of the story. The timing of that investment — March 2000 — was part of another big story. The “Dot-Com” story.

I didn’t fully realize how much of a role the “Dot-Com” revolution of the late ‘90s and early 2000s played in Leica’s interest until well after the dust had settled, but it was BIG. 

Leica’s initial investment in Cyra in March 2000 was during the very heat of the Dot Com’s explosive stock market growth. On March 10, 2000, the Dot Com laden NASDAQ reached its Dot Com peak of 5,048 – double the previous year and five times its value from 1995. (After the Dot Com bubble burst by the end of 2000, it took 15 years for NASDAQ to reach that level again.)

Why was the Dot Com stock market phenomenon such a big factor in Leica’s interest in Cyra and 3D laser scanning? The answer was that at the same time that Leica was evaluating a possible partnership/investment in Cyra, Leica Geosystems was also secretly preparing to take itself public via an IPO. An IPO. During the Dot Com/Software revolution.

The big problem that Leica Geosystems faced with trying to do a successful IPO at that time was that the company was not seen as a Dot-Com/Software participant. The company was crudely (and unfairly) seen in the investment banking world as a “glass grinding, metal bending” company. Until Leica Geosystems invested in Cyra.

In a March 2000 press release about Leica Geosystems’ investment in Cyra, a hint of Leica’s “Dot-Com thinking” behind their investment was revealed. In the release, Hess seemingly harmlessly states, “Cyrax features high added-value software content, with promising extensions into web-based and enterprise-based solutions.” Leica was setting the stage for bigger things to come.

Unforgettable July 2000 ISPRS Congress and Exhibition

I didn’t fully understand Leica’s bigger picture intentions for investing in Cyra until I attended the XIXth ISPRS Congress in the Netherlands, held July 16-23, 2000. Cyra exhibited in a small stand in conjunction with a new Cyrax 2400 customer, Netherlands-based Delft Tech. It was only the second time that Cyra had exhibited in Europe. It was also the first time that Cyra publicly showed its next generation, smaller, better looking Cyrax 2500 scanner and Cyclone, its next generation point cloud software. (That new scanner surprised Delft Tech’s owner and I had a lot of explaining to do).

Leica Geosystems, with a long presence in aerial photogrammetry, was the biggest exhibitor and sponsor of that 2000 ISPRS conference. Leica executive, Dr. Erwin Frei, gave a presentation about Leica Geosystems to all ISPRS attendees at a special, Leica-hosted evening event. I sat in the packed audience curious to see if Cyra was somehow going to be mentioned. When you’re with a small start-up, like Cyra, you hope for any type of mention within a presentation by a big, respected company like Leica Geosystems.

What I witnessed in that presentation blew me away.

Even though ISPRS is essentially an aerial mapping conference and Leica only had a minority stake in Cyra at the time, Leica’s 2000 ISPRS special event presentation to conference attendees quickly steered toward Cyra/3D laser scanning. Moreover, it was filled with slide after slide of Cyrax point clouds, imagery, and fly-through movies. In fact, my take was that Leica’s messaging to attendees was very much a strategic, forward look into the company’s future direction and Cyra/3D laser scanning was at the heart of it. I was in a state of wonderful shock.

Leveraging 3D Laser Scanning for an IPO Pitch

That same month, July 12, 2000, to be exact, Investcorp, the private investment bank owner of Leica Geosystems, floated 70 percent of the potentially available stock in Leica Geosystems as an IPO on the Swiss Stock Exchange. It opened at 375 Swiss Francs per share, far above its initial target. That 70 percent float alone was so successful that it doubled the amount of money that Investcorp had paid to buy Leica Geosystems just two years earlier.

The Leica Geosystems presentation that I was seeing at ISPRS eventually became clear to me – this was a key part of the presentation that Investcorp and Leica Geosystems had made to the global investment community prior to floating the IPO. It was heavy on 3D laser scanning technology – the scanner and, more importantly, its 3D point-cloud software and web potential. [Note: That “web potential” was realized in 2006 when Leica introduced TruView – a friendly, web-based 360-degree point-cloud/imagery viewer, with measurement and mark-up capabilities. Web capability would eventually become ubiquitous for laser scanning. Matterport’s 3D Walkthrough marketing app for homes-for-sale is a prime example.]

In September 2000, the remaining 30 percent of available Leica Geosystems stock was floated and the price of Leica Geosystems stock had risen further. Just two months later, in November 2000, Leica and Cyra jointly announced that Leica Geosystems agreed to fully acquire Cyra Technologies. The acquisition was formally completed in February 2001. There were no official announcements about the price Leica Geosystems paid for Cyra, but many rumors had it north of $80 million. That level of valuation obviously would have taken into account the long-term potential for the technology, not just the then-current financials of Cyra.

It had also become clear what Hess and his team had pulled off. By investing in Cyra Technologies in March 2000, they used the futuristic sex-appeal of 3D laser scanning technology, its heavy 3D point-cloud software content, and its web potential to better align Leica Geosystems with the Dot-Com/Software obsession that was dominating the IPO world.

Moreover, with an overwhelmingly successful IPO under its belt, Leica Geosystems was then in a great financial position to be able to spend the amount of money that it took to acquire Cyra. It was a huge win-win-win for Leica Geosystems, for Cyra Technologies, and for the fledgling 3D laser scanning industry. And it was fueled, of all things, by the Dot-Com/Software boom.

Note that Cyra wasn’t the only company that Leica Geosystems was interested in acquiring. Flush with a successful IPO in 2000, in April 2001 Leica Geosystems also acquired ERDAS and the remaining 50 percent of LH Systems, which itself had acquired aerial lidar start-up, Azimuth Corp. In July 2001, Leica Geosystems also acquired Laser Alignment.

The flurry of acquisitions greatly expanded Leica’s product offerings and re-set a broader stage for its future. The company’s August 2001 financial report stated as much, “[With these acquisitions] Leica Geosystems has fundamentally changed from being a pure manufacturer of surveying equipment and has become a supplier of solutions to the demands for comprehensive spatial information.”

Impact of Leica’s Entry

The overall market impact of Leica’s initial investment in and then full acquisition of Cyra Technologies cannot be overstated. A novel – but financially struggling – technology that only two years earlier had plopped onto the scene via a few, very small companies was being heavily invested in by one of the respected giants of the survey world. In the eyes of the survey market, 3D laser scanning had been legitimized. It was a major milestone for the fledgling industry.

Leica’s entry into 3D laser scanning products provided global reach, with a promise of associated global customer support. It also removed early users’ fears of a small company, like Cyra, simply going out of business. Leica’s entry also added a brand that stood for high product quality … something that users felt they could also count on in the future.

Leica’s acquisition of Cyra also helped and stimulated other laser scanner vendors. For example, prior to Leica’s acquisition of Cyra, Riegl had a difficult time penetrating survey companies and departments, as Riegl was not a traditional vendor in that space. Once Leica jumped into the technology, Riegl’s sales to those types of firms also got a big boost.

Leica’s entry also prompted Optech (Canada) to dust off some previous, space-related lidar technology and develop its own long-range 3D laser scanner. Leica’s investment also further encouraged Germany-based Z+F (which had previously supplied a high-speed phase-based laser to K2T) to continue to develop its own laser scanner. Overall, Leica’s investment in the technology prompted lots of additional investment in the technology. It was great for the overall market.

Finally, during this same time period, Cyra announced its second-generation 3D laser scanner and point-cloud software. Interest in the technology and Cyra’s new products was sky high. Many progressive Leica customers and others who had been watching the new 3D laser scanning technology from afar were now ready to jump in. Early adapters were licking their chops.

In my next article, I’ll describe other important happenings in the technology’s third year, 2000 – some ground-breaking user success stories, an evolving competitive landscape, persistent business challenges for early users, and the fact that putting a Leica Geosystems label on a Cyrax scanner didn’t suddenly make it reliable.

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