He’s a former “Big Six” auditor who moved into finance and operations with venture capital backing in a health care consolidation strategy in Detroit. Since arriving here, Malkes has partnered with Vig Sherrill, a long-time serial entrepreneur and a person he describes as his “best friend.”
Together, they founded four companies – ASIC International, which was acquired by Flextronics Healthspex, which they co-founded with Dr. Charlie Barnett who is still growing the business; Trade Winds, which was acquired by Sirit Corporation; and Aldis Corporation, where Malkes is Chief Executive Officer.
In a recent interview with teknovation.biz, Malkes talked about the evolution of Aldis, which he says “sees itself as revolutionizing traffic management with easy-to-use software that delivers intelligence to the intersection.”
“Vig and I wanted to be able to take high technology (and) create a tool for any city regardless of size,” Malkes says in describing their vision. “We wanted to make money, but we wanted to do something that had a bigger social effect as well.”
The friends had the idea for Aldis for about a decade, but “the cost of processing made the project impossible at inception of the idea,” he explained. Fortunately, Moore’s Law – the number of transistors on integrated circuits doubles approximately every two years – proved fortuitous, and a breakthrough for Aldis came in December 2006.
Things looked rosy in September 2007 when three venture funds – Meritus, Battelle and Innovation Valley Partners – participated in a Series A round. Aldis was developing its product that uses “situational awareness tracking algorithms to provide control, safety and data for signal management, optimization and intersection efficiency.”
For the layperson, a good explanation is that the system, once named Guardian Eye, uses a single fisheye camera to observe traffic at an intersection and the customized algorithms that Aldis developed to make intelligent decisions to keep traffic flowing smoothly and safely. This was accomplished through unparallel tracking, classifying and counting algorithms.
Malkes explained that early on, Aldis also included light emitting diode lights (LEDs) in a traffic signal as an “economic play” for cities because they reduced energy and maintenance costs. At this stage in its development, Aldis was deploying its beta systems in several East Tennessee cities.
“The world changed” in 2008, Malkes said about the economy, a fact that forced Aldis to sell the LED business. “That decision (and resulting revenue) kept us alive for two years.” It also changed the business plan considerably.
As they say, no plan survives first contact with the enemy. Malkes attributes Aldis’ success to being not only the best engineering in the industry and being the most customer responsive team in the space, but to being nimble and dynamic in strategic decision making.
Traffic signals were no longer part of the mix when the alpha version of the renamed GridSmart® system was introduced in 2009. Malkes describes the next two years – 2010 and 2011 – as “transformation from a product development to a sales and marketing company.” The product offered today is a single camera for the entire intersection that works in concert with a traffic controller device located at every intersection.
“We provide intelligence to tell the controller what to do,” Malkes explains, citing three words – size, speed and direction – to describe the knowledge that the product captures and uses to manage the intersections.
A classic example of a satisfied Aldis customer is Sevierville which initially deployed one unit and now has 10 GridSmart-equipped intersections to handle the heavy traffic flow that East Tennesseans who visit the Great Smoky Mountains via Sevierville fully understand.
Malkes is particularly proud of the latest version of the product that will be deployed this month. It will incorporate an infrared camera option, iPad applications and gives customers access to their own data and images that was never before available in the industry.
“It is a bold, in your face message to the industry that GridSmart® puts its results out there for the world to see,” Malkes said. “You cannot collaborate with customers by hiding your results.”
International markets have become critical to Aldis’ growth, Malkes says. Revenues are now about equally divided between domestic sales and those to customers in 20 countries throughout Europe, Asia, the Middle East and Latin America.
“The Middle East has problems with camels at roadside like we have with deer,” Malkes observed. The infrared camera option will help them detect the animals and alert drivers, reducing collisions. All business is local, and GridSmart® easily allows users to customize and localize.
Aldis recently moved manufacturing in-house at its facility off Hardin Valley Road because, as Malkes said, “We wanted to ensure quality and bring the jobs home.” Sherrill and Malkes feel very strongly that there is tremendous opportunity for job and value creation in small business that is not being maximized today.
Malkes points out that Aldis has been responsible for more than $2 million coming into the Knoxville economy from the Middle East in the last nine months. “Sometimes, we (as a community) get caught in thinking about the big wins from big companies and miss what the local entrepreneur can do,” he says.
During his entrepreneurial journey, Malkes says that he’s learned two important lessons.
“If you’re not passionate and not doing it 80 hours a week, with a wife that understands, don’t start,” he says about the first lesson. His second is simply that “you can’t do it alone. You have to have a good partner who has your back, and I am extremely blessed to have Vig Sherrill.”
In that vein, Malkes is highly complementary of Grady Vanderhoofven of Meritus Ventures. He says that he has worked with 30 to 35 venture capitalists and “never had a VC as helpful, involved or as caring as Grady.” We are blessed at Aldis to have great investors all around the table, but Grady and Ray Moncrief at Meritus take it to the next level. They are quality human being and they add the value that I have heard VC firms talking about for 20 years, but not always delivering on.”
Additional information about Aldis is available at www.aldiscorp.com.