What Robotics VCs Say About Investing In The Sector Now

Its Future and The Pitfalls To Avoid

Earlier this year, online tech media TechCrunch hosted a robotics even at the University of California Berkeley. One of the highlights of the event was a panel discussion featuring four major VCs – Peter Barrett of the Playground Global fund, Helen Liang of FoundersX Ventures, Y Combinator’s Eric Migicovsky and Andy Wheeler of GV.

The big topics in the robotics industry and its development were all discussed, including the future of last-mile delivery robots, driverless vehicles, smart cities, the extent to which future automation will cut out the need for human intervention, supervision and participation and the influence of climate change on how VCs are now calculating the future global economy.

The first big question the TechCrunch moderator put to the group was how they saw the likely differences between investments in robotics today compared with how they expect the industry and market conditions to evolve. The last question was framed within the typical VC requirement of realising returns within a decade of an initial investment. That’s a particular challenge that VCs in the robotics space face as a result of the practical reality that robotics start-ups typically take longer to ‘mature’ to the stage an exit might be realistic than other kinds of tech companies.

Peter Barrett responded that Global Playground’s approach was to focus on applications of robotics proven to work well and where the open question is more how to commercialise it and bring it to market. He offered up the example of Canvas, that develops autonomous carts that move goods around a warehouse. Backed by the VC, it was recently acquired by Amazon. Barrett praised the company’s strategy of developing robotics technology to solve an efficiency problem in a proven, large existing market.

Andy Wheeler responded that his fund’s approach to the longer term ‘exit’ horizon for robotics investments was to accept timeframes can be long and to compensate for that by taking stakes in companies they believe focus on large market opportunities. By doing so the fund balances a longer timeframe with investments they believe will, if successful, offer billion dollar-plus exits when the moment does arrive.

The next line of questioning directly tackled the significant VC investment trend in ‘small last-mile delivery robots’. With Helen Liang’s FoundersX Ventures invested in Robby, a start-up in this space, she was asked for her take on the appeal of last-mile delivery bots.

Ms Liang’s explanation of the reasoning behind the investment is that her VC sees last-mile delivery as an obvious market pain point to be addressed. She provided the scenario of the difficult business model behind a medium sized food order from DoorDash, a takeaway delivery service that is the market leader in the UK, when the delivery driver has to make a relatively long trip to drop off the food. “It’s tricky for that person in terms of economics”. She believes the answer to that business model pain point is a central delivery point that services a surrounding area human delivery drivers can drop off at with last-mile robots completing the last leg to the customer.

With Eric Migicovsky’s Y Combinator also an investor in Robby, he also had some input. He believes last mile delivery robots is a perfect example of a technology that smaller start-ups can compete with big companies in by combining “off the shelf technology” to solve real problems. He says they have seen “over and over” how very valuable products that don’t need large investment can be created in this way. Once the problem, solution and commercial model have been verified larger VC investments can then potentially be made to refine the technology and take it to market in a mass way.

The next topic addressed was ‘cool ideas’ for impressive technologies but which there isn’t necessarily an obviously big market or genuine pain point. Mr Barrett confirmed that they often see proposals that fit that description. A robot that has some impressive ability, such as a new feat of dexterity, is created and the inventors or team get excited about it and are convinced its an opportunity for a business. But there is if often, as innovative as the technology is, no really obvious application and market for it that will save potential clients significant amounts of money.

Mr Barrett also sees a significant opportunity in robotics ‘hardware and software platforms’ that mirror those that currently exist in other kinds of hardware and software. This would mean enterprises would not have to invest the significant amounts of money and time they currently do building and rebuilding robotics applications from scratch. He believes that the future of robotics will be based on ‘libraries’ and ‘frameworks’ of components that will be put together in different combinations to create useful products. That would represent a similar evolution to what happened in more established fields of hardware and software engineering.

The next big topic, with so many robotics developments in sectors strongly linked to climate change, such as transport, logistics and agriculture, is how much VCs factor that into their investment decisions. Mr Barrett confirmed that a major consideration VCs do look at how robotics can minimise their carbon footprint and how they can contribute towards maintaining and improving contemporary lifestyles and quality of life without causing further environmental damage.

When it comes to fully autonomous, ‘Level 5’ robotics that will help manage smart cities, logistics or farming, Mr Barrett believes we are still “decades before there’s any significant Level 5”.

When it comes to autonomous transport robotics, Mr Migicovsky believes that public transport solutions that run along specialised grids and routes that interact with the technology, supporting it, is a much more achievable shorter-term target and one that does not currently receive enough attention, with all eyes on fully autonomous cars that can handle the complexity of millions of different route combinations and possible external factors that are unpredictable.

Certainly some valuable insights and food for thought and a framework for evaluation for any private investor looking at the robotics space.

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