Are you asking what the main factors driving the robotics industry forward are? Are you grappling with the challenges of launching and scaling a robotics startup? Would you like to know what investors are looking for and how to align your startup's pitch?
You are in the right place.
In this episode, we had the privilege of hosting Karthee Madasamy, Founder and Managing Partner at MFV Partners, who shared his profound venture capital expertise.
Welcome to the 46th episode of Deep Tech Catalyst, the channel by The Scenarionist where science meets venture!
Key Themes Covered:
🦾 What’s Driving Momentum in Robotics?
🚀 Understanding Investors' Expectations in Early-Stage Robotics
✅ 4 Key Factors VCs Consider When Evaluating Robotics Startups
🤖 Robotics from Lab to Market: A Case Study
📈 4 Tips to Balance Scalability and Early Product Development in Robotics
KEY INSIGHTS FROM THE EPISODE
🦾 What’s Driving Momentum in Robotics?
Robotics has long been associated with high-cost, precision tasks in settings like government-led unmanned missions.
Let’s first go back and look at how robotics was five or six years ago.
Robotics, at that time, focused on a limited range of tasks—relatively simple and repetitive tasks that robots could perform with high precision due to their mechanical nature.
However, these robots were extremely expensive.
As a result, they were primarily applied in industries where high costs could be justified by the need for precision and automation, such as in painting, welding, or other specialized manufacturing tasks.
What has fundamentally changed in the past five years are the following:
First, the significant reduction in the cost of components—whether it's computing power, sensors, actuators, or other hardware. This price drop has been driven by advancements in other industries, such as electric vehicles (EVs) and smartphones. Consequently, robotics technology is no longer prohibitively expensive.
Secondly, artificial intelligence (AI) has drastically enhanced the capabilities of robots. Now, robots can perform more complex tasks such as advanced navigation and intricate pick-and-place operations. These improvements in capability, combined with lower costs, have allowed robots to be applied in a much broader range of industries.
Today, robotics is used in many different sectors and for a variety of purposes. This recent progress in technology has given rise to thousands of robotic startups worldwide, all focused on solving different problems. Much of this growth has taken place in just the last five or six years, driven by these technological advancements.
3 Core Challenges of Robotics
There are 3 fundamental complexities of robotics, and while each dimension can be explored much further, these are the primary challenges:
One key aspect is movement. Robots need to move and navigate through various environments. This includes autonomous navigation capabilities to move through warehouses, factories, outdoor and indoor spaces, complex rooms, and office environments. So, the first type of robot focuses on movement and autonomous navigation.
The second type involves picking and placing, which may seem simple to us as humans. Even a small child can pick up complex shapes, whether it's a mug or a piece of paper. However, for a machine to perform these tasks, it is quite complex. So, the second category involves robots designed for picking and placing objects.
The third aspect is balance, particularly when operating in human environments. Much of what we've built—whether in workplaces, offices, homes, factories, or warehouses—is designed for humans. Navigating and working within these human-centric spaces adds another layer of complexity for robots. So, creating robots that can function effectively in environments not specifically designed for them is a significant challenge.
🚀 Understanding Investors' Expectations in Early-Stage Robotics
Entrepreneurs should seek out investors who align with their current stage of development. Investors who are not focused on pre-seed stages typically expect some form of technology to have been built—whether it's a prototype, an alpha product, or a simulation model. This tangible progress allows them to delve into the technology, evaluate it thoroughly, and make confident investment decisions.
Pre-seed investors are willing to invest based on a strong concept, even if nothing has been built yet. However, some later-stage investors may invest at this stage if the entrepreneurs have substantial prior work, such as technology developed in a university lab or significant industry experience. These entrepreneurs might have already achieved breakthroughs, published papers, or conducted simulations and technical analyses.
Lastly, investors expect entrepreneurs to identify a significant problem, propose a viable solution, and demonstrate initial technological progress. This helps investors assess the potential of the product, its market need, and the business viability. Entrepreneurs should facilitate this by clearly connecting their technology to the value it unlocks for customers.
Value Proposition > Tech
Often, founders tend to focus on developing complex technology first. However, this is the wrong way to approach it. Ultimately, they must be able to build a business.
There has to be a willingness on the part of the customer to pay for a product, and it must solve a meaningful problem for the customer.
The technology or unique technical breakthrough you develop should serve as a means to achieve that goal, but on its own, it doesn't hold much value.
“So my suggestion to robotics entrepreneurs would be to figure out: what is the more pressing problem? [...] A problem that, if you solve it, it's actually going to unlock a lot of value for customers. And then build the robots."
That being said, for robotics startups seeking investment, understanding what differentiates pre-seed from seed investment criteria is crucial for aligning their pitches with investor expectations. Here are some important criteria to consider.
✅ 4 Points VCs Consider When Evaluating Robotics Startups
1. Have Founders Enough Entrepreneurial Drive and Resilience?
Founders need to have the resilience to handle difficult days when things may not go well. So, the first criterion to consider is to understand if the entrepreneur can actually build a company. Do they possess the drive and determination to make it work? Are they motivated by a genuine calling, exhibiting extreme passion and strong intuition about the problems they aim to solve?
2. Is the Problem Big Enough?
The second consideration is whether the problem being addressed is worth solving. While companies can pivot and adjust their focus, if the problem does not seem significant or pressing for people, it raises questions about the venture's purpose. Therefore, assessing if the problem holds substantial value and is top-of-mind for potential customers is crucial.
3. What’s the Key Differentiator?
The third aspect involves whether the entrepreneur has a fundamentally different approach to solving the problem. Why is the current status quo inadequate? Merely entering a market with existing momentum without offering significant differentiation is less compelling. Presenting a fundamental breakthrough or a novel method that provides a substantial improvement—rather than just incremental changes—is particularly interesting.
4. Is Relevant Expertise Well Balanced in the Team?
Finally, it is important to determine if the entrepreneur is the right person to execute this solution. For example, if someone aims to innovate in robotics but lacks experience in actuation, sensing, artificial intelligence, or other key components, it raises concerns about their ability to achieve a breakthrough. While outsiders can and do disrupt industries, having technical depth and understanding in the relevant area is essential, especially given the complexities involved in robotics. Currently, more AI-first professionals are approaching robotics problems, which is acceptable; however, possessing a background in the area is crucial for effectively addressing and disrupting the problem.
For instance, someone highly skilled in artificial intelligence but lacking experience with physical systems might partner with someone knowledgeable in physical actuation and sensing. Together, they can collaborate to build a better robot.
🤖 Robotics From Lab to Market: A Case Study
Agility Robotics serves as an exemplary case. They have developed a humanoid, bipedal robot with specific capabilities, such as walking on unpaved floors and performing tasks like reaching into higher shelves or bending down to place items on lower shelves.
The Problem: Challenges in Human-Centric Environments
The problem statement is that warehouses, logistics centers, and factories are all designed for human use. These environments feature shelves, walkways, and pathways tailored to human accessibility. Traditional robots, like wheeled robots, often require significant modifications to operate in these spaces, such as installing specialized flooring and sensors. They also typically cannot function effectively alongside humans, necessitating dedicated areas. This limitation creates a bottleneck in automation within human-centric spaces.
The Solution
Developing a humanoid robot that can navigate and operate in these environments addresses this significant customer challenge.
A Complementary Team
Agility Robotics has been working on humanoid technology, starting from the legs upward. They deeply understand the problem and have built a prototype—currently an alpha product—that can perform initial functions, such as walking and operating in human spaces to some extent. The team comprises individuals with substantial expertise. One founder has focused on humanoid, bipedal robots throughout his research career, providing deep knowledge in this field. The other founder brings startup experience and is also highly technical. Together, they form a strong founding team with both business acumen and deep technical expertise. This synergy exemplifies the ideal combination of understanding the problem, developing a viable prototype, and having a team capable of executing the solution effectively.
📈 4 Tips to Balance Scalability and Early Product Development in Robotics
1. Avoid Premature Optimization
Emphasizing the importance of balancing scalability and product development, it's advised not to focus excessively on scalability in the very early stages. The initial priority is to get the project moving and to learn extensively throughout the process. Prematurely optimizing for scalability can lead to solving the wrong problem or spending a significant amount of time on irrelevant issues.
2. Keep Scalability in Mind
While building the project, it's important to keep scalability in mind by considering questions like, "Can this be scaled up?" or "Is this process scalable?" Noting any potential scalability challenges allows for addressing them before they become major obstacles. Ignoring modularity and scalability concerns might result in reaching a point where progress is hindered.
3. Strike the Right Balance
It's a delicate balance. Over-optimizing too soon can prevent the development of a viable product and hinder problem-solving. Learning and adaptation are crucial, and many changes are likely to occur during development. On the other hand, neglecting scalability considerations may necessitate a complete re-engineering effort later on, possibly starting from scratch.
4. Focus on Learning and Customer Feedback
Therefore, it's recommended to remain vigilant for any steps or processes that could pose significant challenges in terms of modularization or scalability. Beyond that, the focus should be on completing the initial product, presenting it to customers, and learning from their feedback. Assumptions made during development might need to be revised based on real-world insights.
For example, unexpected requirements such as specific incline capabilities or balance features might surface, requiring additional work. The goal is to get the product in front of customers to facilitate learning and adaptation. Simultaneously, it's important to be aware of any fundamentally non-scalable aspects that might be encountered down the line.
