The Valley’s affinity for robotics shows no signs of cooling. Technical enhancements through innovations like AI/ML, compute power and big data utilization continue to drive new performance milestones, efficiencies and use cases.
Despite the old saying, “hardware is hard,” investment in the robotics space continues to expand. Money is pouring in across robotics’ billion-dollar sub verticals, including industrial and labor automation, drone delivery, machine vision and a wide range of others.
According to data from Pitchbook and Crunchbase, 2018 saw new highs for the number of venture deals and total invested capital in the space, with roughly $5 billion in investment coming from nearly 400 deals. With robotics well on its way to again set new investment peaks in 2019, we asked 13 leading VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunity in the sector:
- Shahin Farshchi, Lux Capital
- Kelly Chen, DCVC
- Rob Coneybeer, Shasta Ventures
- Aaron Jacobson, NEA
- Eric Migicovsky, Y Combinator
- Helen Liang, FoundersX Ventures
- Andrew Byrnes, Micron Ventures
- Ludovic Copéré Sony Innovation Fund
- Costantino Mariella, Sony Innovation Fund
- Cyril Ebersweiler, SOSV & HAX
- Peter Barrett, Playground Global
- Bruce Leak, Playground Global
- Jim Adler, Toyota AI Ventures
Participants discuss the compelling business models for robotics startups (such as “Robots as a Service”), current valuations, growth tactics and key robotics KPIs, while also diving into key trends in industrial automation, human replacement, transportation, climate change, and the evolving regulatory environment.
Shahin Farshchi, Lux Capital
Which trends are you most excited in robotics from an investing perspective?
The opportunity to unlock human superpowers:
- Increase productivity to enhance creativity leading to new products and businesses.
- Automating dangerous tasks and eliminating undesirable, dangerous jobs in mining, manufacturing, and shipping/logistics.
- Making the most deadly mode of transport: driving, 100% safe.
How much time are you spending on robotics right now? Is the market under-heated, overheated, or just right?
- Three-quarters of the new opportunities I look at involve some sort of automation.
- The market for robot startups attempting direct human labor replacement, floor-sweeping, and dumb-waiter robots, and robotic lawnmowers and vacuums is OVER heated (too many startups).
- The market for robot startups that assist human workers, increase human productivity, and automate undesirable human tasks is UNDER heated (not enough startups).
Are there startups that you wish you would see in the industry but don’t? Plus any other thoughts you want to share with TechCrunch readers.
I want to see more founders that are building robotics startups that:
- Solve LATENT pain points in specific, well-understood industries (vs. building a cool robot that can do cool things).
- Focus on increasing HUMAN productivity (vs. trying to replace humans).
- Are solving for building interesting BUSINESSES (vs. emphasizing cool robots).
Kelly Chen, DCVC
Three years ago, the most compelling companies to us in the industrial space were in software. We now spend significantly more time in verticalized AI and hardware. Robotic companies we find most exciting today are addressing key driver areas of (1) high labor turnover and shortage and (2) new research around generalization on the software side. For many years, we have seen some pretty impressive science projects out of labs, but once you take these into the real world, they fail. In these changing environmental conditions, it’s crucial that robots work effectively in-the-wild at speeds and economics that make sense. This is an extremely difficult combination of problems, and we’re now finally seeing it happen. A few verticals we believe will experience a significant overhaul in the next 5 years include logistics, waste, micro-fulfillment, and construction.
With this shift in robotic capability, we’re also seeing a shift in customer sentiment. Companies who are used to buying outright machines are now more willing to explore RaaS (Robot as a Service) models for compelling robotic solutions – and that repeat revenue model has opened the door for some formerly enterprise software-only investors. On the other hand, companies exploring robotics in place of tasks with high labor shortages, such as trucking or agriculture, are more willing to explore per hour or per unit pick models.
Adoption won’t be overnight, but in the medium term, we are very enthusiastic about the ways robotics will transform industries. We do believe investing in this space requires the right technical know-how and network to evaluate and support companies, so momentum investors looking to dip their hand into a hot space may be disappointed.
Rob Coneybeer, Shasta Ventures
We’re entering the early stages of the golden age of robotics. Robotics is already a huge, multibillion-dollar market – but today that market is dominated by industrial robotics, such as welding and assembly robots found on automotive assembly lines around the world. These robots repeat basic tasks, over and over, and are usually separated by caged walls from humans for safety. However, this is rapidly changing. Advances in perception, driven by deep learning, machine vision and inexpensive, high-performance cameras allow robots to safely navigate the real world, escape the manufacturing cages, and closely interact with humans.
I think the biggest opportunities in robotics are those which attack enormous markets where it’s difficult to hire and retain labor. One great example is long-haul trucking. Highway driving represents one of the easiest problems for autonomous vehicles, since the lanes tend to be well-marked, the roads have gentle curves, and all traffic runs in the same direction. In the United States alone, long haul trucking is a multi-hundred billion dollar market every year. The customer set is remarkably scalable with standard trailer sizes and requirements for shipping freight. Yet at the same time, trucking companies have trouble hiring and retaining drivers. It’s the perfect recipe for robotic opportunity.
I’m intrigued by agricultural robots. I’ve seen dozens of companies attacking every part of the farming equation – from field clearing and preparation, to seeding, to weeding, applying fertilizer, and eventually harvesting. I think there’s a lot of value to be “harvested” here by robots, especially since seasonal field labor is becoming harder to find and increasingly expensive. One enormous challenge in this market, however, is that growing seasons mean that the robotic machinery has a lot of downtime and the cost of equipment isn’t as easily amortized in other markets with higher utilization. The other big challenge is that fields are very, very tough on hardware and electronics due to environmental conditions like rain, dust and mud.
There are a ton of important problems to be solved in robotics. The biggest open challenges in my mind are locomotion and grasping. Specifically, I think that for in-building applications, robots need to be able to do all the thing which humans can do – specifically opening and closing doors, climbing stairs, and picking items off of shelves and putting them down gently. Plenty of startups have tackled subsets of these problems, but to date no one has built a generalized solution. To be fair, to get to parity with humans on generalized locomotion and grasping, it’s probably going to take another several decades.
Overall, I feel like the funding environment for robotics is about right, with a handful of overfunded areas (like autonomous passenger vehicles). I think that the most overlooked near-term opportunity in robotics is teleoperation. Specifically, pairing fully automated robotic operations with occasional human remote operation of individual robots. Starship Technologies is a perfect example of this. Starship is actively deploying local delivery robots around the world today. Their first major deployment is at George Mason University in Virginia. They have nearly 50 active robots delivering food around the campus. They’re autonomous most of the time, but when they encounter a problem or obstacle they can’t solve, a human operator in a teleoperation center manually controls the robot remotely. At the same time. Starship tracks and prioritizes these problems for engineers to solve, and slowly incrementally reduces the number of problems the robots can’t solve on their own. I think people view robotics as a “zero or one” solution when in fact there’s a world where humans and robots work together for a long time.
Aaron Jacobson, NEA
Which trends are you most excited about in robotics from an investing perspective?
When it comes to supply chain robotics, startups have primarily focused on “zero mile” activities within the warehouse. This include successes such as Kiva and 6 River. However, the most expensive part of shipping is everything that happens after a package exits the loading dock doors which to date remains highly manual. I’m eager for solutions that bring transportation costs down by driving greater efficiency in the warehouse yard (“first mile”), between warehouses (“middle mile”), and final delivery to the customer (“last mile”). This includes everything from micro-fulfillment centers, autonomous vehicles (and planes!), to drone delivery and sidewalk robots.
Another key trend is the rise of “cobots” or robots that work in collaboration with humans by sensing the world around them. This has become especially important within specialized industries due to the shortage of skilled labor. Naturally, we are seeing new use cases for cobots within industries that already have a high degree of automation, such as manufacturing. However, what I’m more excited about is the potential for cobots to bring automation to new industries altogether. For example, in construction, Built Robotics is automating excavation, which allows on-site workers to focus on higher value tasks. Over the next few years, agriculture is another area where I expect robots to be increasingly deployed alongside humans.
Is the market under-heated, overheated, or just right?
The market for robotics investments is under-heated. While 2018 was a record year and I expect 2019 to also be strong, we are still in the early innings of automation. Penetration of robotics beyond manufacturing is still very low and a lot of value remains to be unlocked. And, economics aside, robots are critical to solving challenges we face in a world where climate change is making it increasingly difficult to fulfill basic human needs. For example, how are we supposed to feed a world in which three-quarters of the global food supply relies on “free labor” from a declining population of bees and insects? Ideally, we can reverse this problem altogether but realistically we should be investigating technological alternatives such as robotic pollinators or automated indoor farms.
Eric Migicovsky, Y Combinator
We’ve done a bunch of hard tech and robotics investments at YC over the last 2 years. YC is excited and eager to invest in all sorts of robotic ventures. We invest in companies that build autonomous vehicles (Bear Flag Robotics making autonomous tractors, Four Growers autonomous vegetable picking, May Mobility builds AV cars, Mars Auto builds AV trucks in Korea, and of course Embark and Starsky build trucks here in USA), drones for industrial use (Pyka builds heavy lift fixed wing drones for crop spraying, Lucid Drones does building/window cleaning, Aerones uses drones to do industrial surveying, Corvus does warehouse inventory with drones), in-door agriculture (Beanstalk), manufacturing (Mighty Buildings uses a massive robotic 3D printer to build homes, Relativity does this for rockets) and many many more.
We also invest in the technology that powers new robots like ARI (Augmented Radar Imaging).
If you’re building robots that solve meaningful and valuable problems, then YC is interested in talking to you! I am the partner who spends the most time with our robotics investments. We usually have 5-10 robotics-related companies in each batch.
Helen Liang, FoundersX Ventures
Which trends are you most excited in robotics from an investing perspective?
At FoundersX, our team is excited to see more robotics startups focusing on delivering disruptive solutions economically viable, i.e. more focus on being cost-effective and human friendly in operation. We see more teams shifted from research-driven to application-driven approach, being more pragmatic in solving big problems in logistics, transportation and healthcare.
How much time are you spending on robotics right now? Is the market under-heated, overheated, or just right?
Timewise, we are probably spending about 10% of our time looking into robotics companies lately. There were hypes in robotics in the past 3 years for sure. We think the market is now more rational and realistic. That also means we have higher bars in making early-stage investments on robotics companies. We want to see the founder teams with clear focus on scalability very early on.
Are there startups that you wish you would see in the industry but don’t?
We hope to see more startups working on smart and agile robotics in healthcare and agriculture.
Plus any other thoughts you want to share with TechCrunch readers.
Robotics market is still very early. A successful robotics company has to start with deep industry insights in delivering products with a great combination of intelligence level, low cost and high scalability, which is very challenging but also exciting.
Andrew Byrnes, Micron Ventures
Which trends are you most excited in Robotics from an investing perspective?
Flexibility in manufacturing and industrial settings. In the U.S. and Asia, we’re seeing the same story from industrial customers of all kinds — maintaining a stable workforce for highly repetitive yet specialized manual tasks is the big challenge. It’s the same for logistics, security, manufacturing and assembly, agriculture; the robotics startups offering base level capability but with a new level of user flexibility — an ease of performing new or different tasks in complex environments — seems to be the recipe for customer success.
How much time are you spending on robotics right now? Is the market under-heated, overheated, or just right?
Right now a surprising amount! I think this speaks to an inflection point in the space on the industrial robotics side — at Micron, we’re interested in robotics both for application in our operations but also to better understand and optimize the compute workloads for deployed robotic, autonomous systems.
I believe the space is under-heated. One of the trends I think is particularly interesting is the trend of “reshoring” production — the days of outsourcing manufacturing to areas with cheap labor are winding down, and that’s a good thing from a sustainability perspective. I like the idea of building what we consume, where we consume it, and I think thats the kind of future robotics and industrial automation as a whole can enable.
Are there startups that you wish you would see in the industry but don’t?
I’ve seen more weird robotics startups building fantastic concepts than I ever imagined I would. The diversity of builders in the space — really exploding over the past 10 years — has led to a dreamscape I don’t think any single person could come up with and say “man, this is the thing that’s missing.” I’m also seeing robotics startups with strong revenue ramp, which really hasn’t been seen for a while and which we’re obviously looking for in venture.
Plus any other thoughts you want to share with TechCrunch readers.
It’s an extremely exciting time in the artificial intelligence and robotics spaces. Yes, there is a lot of noise, but there is also a ton of disruption happening across industries in real time. Micron Ventures is a new fund in a relatively old company — at 40 years old, Micron is now the only DRAM manufacturer in the western hemisphere! But Micron is also company that’s positioned right in the middle of these intelligent automation systems, enabling new technologies and startups to build faster, more efficient machines.
Ludovic Copéré & Costantino Mariella, Sony Innovation Fund
Which trends are you most excited in robotics from an investing perspective?
Robotics is no longer just hardware — as the category broadens across industries, business models are evolving and becoming more viable.
Copéré: Similar to the evolution of AI and Big Data, the robotics space is more than just standalone businesses and goes well beyond hardware. Now robotics are being used across almost every industry, which are opening up bigger market opportunities for start-ups developing advanced, and often IP-rich elemental technologies (e.g., sensing, actuation, gripping, new materials).
Business models are also evolving and becoming more viable. While some have explored offerings such as robots as a service (RaaS), we are now seeing founders who are repeat robotics entrepreneurs or have co-founders with a deep enterprise track record move away from justifying selling hardware to increasingly operational KPIs (ARR, LTV, Churn), which are strong selling points to investors.
Mariella: Today, the category definition is blending into the problem the startup is trying to solve rather than the underlying technology that is utilized. For example, a company developing a new type of robot for picking fruit will tend to say that they are an agritech company even if they have filed a dozen of patents on their robot.
Another trend we’re excited to see from the investor standpoint, is the emergence of foundational technologies which have now become more commonplace such as robotic platforms, standardized sensors and dedicated robotics cloud infrastructure — there is even a Robotic Operating System (ROS) to ensure compatibility between components. This allows robotics companies to focus more on the higher value of their business proposition rather than needing to be an expert in every part of the system.
How much time are you spending on robotics right now? Is the market under-heated, over-heated, or just right?
While the consumer market has cooled, we are looking at the enterprise robotics space where there’s a large opportunity to improve operational efficiency and integrate with adjacent ecosystems i.e., enterprise IT and FinTech/InsurTech.
Copéré: We’re spending more time now exploring the enterprise robotics market. While these startups may be less flashy from a consumer standpoint, what we find most compelling is the interplay they often create with adjacent enterprise IT and FinTech/InsurTech ecosystems, especially in verticals where there is a measurable operational efficiency benefit.
Take StrongArm Technologies for example (an investment from our firm), which has evolved from offering a robotics hardware solution (industrial exoskeleton) into an integrated workers’ protection solution tightly aligned with major insurance carriers.
Are there startups that you wish you would see in the industry but don’t?
Two areas with great potential: The combination of Edge & Cloud AI , with built-in privacy, and “Hardware-less Robotics”
Copéré: With the growing adoption of robots in both the consumer and enterprise worlds, there’s increasing concerns around data privacy. We feel there are still many unexplored use-cases of combining Edge AI (on-device) and Cloud AI in more astute ways that will be compliant while also greatly improving robotics by bringing the intelligence and decision-making as close to the sensors as possible.
We are also looking for companies that can prove the viability of “hardware-less robotics.” As robotics becomes more prevalent across a wide array of enterprise scenarios, there is bound to be a tipping point that validates the need for players moving up the stack and (more or less) device-agnostic.
From devops to operations, it will be interesting to see how start-ups leverage the initial momentum of robotics in the enterprise to bring it to the next level, something core to our investment thesis. We recently made a robotics investment in the industrial space – but instead of betting on a specific point solution, we backed Sight Machine, whose real-time streaming analytics platform ingests a wide array of data and offers a holistic, end-to-end digital twin view of the factories’ operations.
Plus any other thoughts you want to share with TechCrunch readers.
A Drone Comeback Fueled by Regulations and Commercial Adoption is Coming
Copéré: While there have been many recent reports stating the end of the drone VC bubble, we believe this space in particular will once again pick up speed. While it is true that the market uptake has been slower than anticipated to materialize, regulators (especially in the U.S.) are finally unlocking the true potential for drones by putting together the appropriate regulation for fully-automated flights. For example, Matternet (another U.S.-based SIF portfolio company), recently became the first to be authorized nationwide to fly its delivery drones beyond visual line of sight.
Mariella: This is becoming a global trend as well. We invested in Switzerland-based startup Fotokite, which is already delivering tremendous value, particularly in emergency services, with the regulatory approval to do so. The company develops a vehicle-integrated aerial camera system that provides public safety teams like firefighters with mission critical situational awareness. Teams are able to fly and land drones with the single push of a button, no pilot license required and all authorized by the FAA.
Copéré: 2020 is also gearing up to be the year when many large enterprises are moving beyond the trial phase into full commercial adoption of drones within their complex workflows. This opens up a significant opportunity for robotics start-ups – not just on the hardware side (which is ripe for more competition), but also on a wider array of advanced AI pre and post-processing.
Cyril Ebersweiler, SOSV & HAX
Which trends are you most excited in Robotics from an investing perspective?
We’ve been investing in the robotics space for a long time and some of those companies are reaching a certain degree of maturity, with deployments in the hundreds of machines or more (Avidbots, Simbe, etc…). Robots are already among us, but if you ask around you will notice that people have barely seen one in their lives… for those reaching product/market fit, the sky’s the limit.
There are a number of accelerants for robotics companies on the technical side of things. With more powerful sensors, processors and the advent of 5G we will see cheaper, more capable and more powerful machines coming to life. This will help those startups test and scale their offerings faster.
How much time are you spending on robotics right now? Is the market under-heated, over-heated, or just right?
We regularly invest in companies which are developing robotic solutions, as long as it is solving a problem in the most effective and efficient way. It’s easy to get enamored with something that moves or is technically advanced while forgetting that it might be easier to solve said market problem differently.
The market overall is still very much focused on proven robotics solutions which have generated $B companies or exits, particularly in the field of warehousing management and robotic arms. It is much more perplexed by the new wave of companies which have as much if not more potential, but at the same time could be capital intensive and needy in terms of time to market as well as scaling. As soon as one of those models are validated we will see a golden age for robotics companies.
Are there startups that you wish you would see in the industry but don’t?
It’s actually difficult to think about an industry that isn’t touched one way or another by robotics already. If it’s dull, dirty or dangerous, a task will eventually be automated.
Plus any other thoughts you want to share with TechCrunch readers.
Startups and their investors will have to think hard about whether or not they should verticalize their industries. Up until now we’ve seen companies providing their wares and services to their business clients, but we’ve rarely seen a direct-to-customer company leveraging their automation prowesses for their own advantage. Think about cleaning robots becoming cleaning agencies, construction robots becoming general contractors, or ag-tech robots becoming land-owners. In order to capture more value, some bold moves will have to be made.
Peter Barrett, Playground Global
Modern robots are capable of extraordinary feats of strength and accuracy but are dumb as a bag of nails. We want to invest in technologies that fill significant gaps in their dexterity, perception and intelligence. We’re aiming to bridge the gap between robot and human capabilities with platforms that don’t require every automation effort to start from scratch. We are investing in new kinds of AI tools that aren’t greedy, brittle, opaque and shallow. We’re also searching for startups aiming to apply advancements in robotics to underserved sectors such as agriculture or life sciences, as therein lies the opportunity to create a market-defining product or a new market altogether.
The market isn’t overheated. Robots and automation have transformed civilization, a transformation that is arguably still in its early phase and most of the investments in automation that will have multi-generational impact are yet to be made. The question we must ask ourselves is how does their presence improve civilization? What do we want from our robots and AI? Recent examples remind us that tech does not always make the world better for everyone. Robots create wealth but also tend to concentrate it, and sometimes in the process of creating new jobs they steal old ones. Do we really want our skies darkened by drones delivering pizza? Do we really want autonomous flying cars for the 0.01%, or do we want better, equitable mobility for all? These questions are top of mind for us at Playground Global when making investment decisions.
Bruce Leak, Playground Global
The next revolution in legged robotics will be fueled by breakthroughs in power efficiency for both mobility and human-like cognition. To be practical, robots need to be able to operate for a full day on a single charge. But simple locomotion is not sufficient, at Playground Global, we are looking for computing approaches that can deliver orders of magnitude more cognitive performance for the same amount of power.
Robotics offers immense promise for sectors like agriculture where humanity can’t afford to fail. Intelligent automation will yield more crops out of the same amount of land using fewer chemicals, all while solving for the labor challenges the industry is running up against. We look for startups that reverse engineer large societal challenges, using their deep domain expertise to shape the future they envision.
Jim Adler, Toyota AI Ventures
Which trends are you most excited about in robotics from an investing perspective?
We believe robotics-as-a-service (RaaS) will continue to grow in importance. Deploying robots without the capital burden or maintenance expense presents compelling economics. For example, our portfolio company Cobalt Robotics offers enterprise customers a RaaS solution for security and facility operations.
Another area is in-home robotics technologies — and we don’t just mean robot vacuums! People are acclimating to automation and robots in the home, and we’re excited about how these technologies can improve people’s lives. We recently announced an investment in Bumblebee Spaces, which uses robotics and AI to help people make the most of small living spaces by storing furniture and fixtures in the ceiling. We’re looking for those kinds of innovative applications, especially when they address larger issues like the lack of housing space in dense urban areas.
Robots making their way into large, unsexy industries where there’s a lot of potential to assist people by automating repetitive, day-to-day tasks — particularly where there are labor shortages — is also something we’re watching. Agriculture, construction, and mining are great examples.
How much time are you spending on robotics right now? Is the market under-heated, overheated, or just right?
We’re pretty focused on automation. In terms of where we are in the hype cycle, some markets are climbing and some are troughing. For example, ag-tech robots are climbing, and AV robots are troughing.
More broadly, the robotics market peaked as a whole a few years ago and has troughed with a wave of startups shutting down. But, destructive capitalism is working and now we’re seeing cost curves come down, more examples of robots performing value-added tasks especially where workers are hard to find, and at price points that are compelling to customers.
Are there robotics startups that you wish you would see in the industry but don’t?
It’s always fun to think about what robots could do. Some of the folks on our team are hoping for robotic masseuses and dog-walkers.
Though, as I referenced earlier, we’re focused on finding startups that have a plan for solving real problems for real customers with a business model that makes sense.
