Why robot startups now? Part 2

2. Broader Financial Climate

A positive indicator for robotics startups is the improving financial climate. There are signs that the US housing market is stabilizing. Fannie Mae, the government backed mortgage company, has posted a profit for the first time since 2007 without needing a government bailout. The decline in home prices is slowing, as are mortgage delinquency rates and the rate of American home purchasing is on the rise again.

“We expect our financial results for 2012 to be significantly better than 2011,” Susan R. McFarland, Fannie Mae’s chief financial officer, said in a statement. “As our serious delinquency rate declines and home prices stabilize, we expect to reduce our reserves, which combined with revenue from our high-quality new book of business will drive our future results.” [1]

While not everyone is getting rich yet, the overall financial indicators show that the U.S. economy has rebounded faster than predicted. The stock market has doubled since 2009, corporate profits are surging and the U.S. economy is growing at 3% pa. As financial journalist Daniel Gross puts it:

“Like the world’s first bionic man, the U.S. economy has come back—better, stronger, and faster than most analysts expected, and than most of its peers.” [2]

While this is a U.S. centric view and some of Europe is still in financial crisis, nonetheless China and S.E.Asia are surging and many African economies are showing very promising proportional growth rates. There are other sources that describe the current world economic status but it’s no longer a bad time for a capital intensive industry like robotics to grow. Particularly if business models lower the risk by utilizing lease models or the rapid cheap trial and error methods of startups.

Where Defense budgets are tightening on traditional robotics, like unmanned systems, the Whitehouse is committing spending towards other newer robotics growth areas. All this indicates that robotics is ready to support itself as an industry, rather than be supported as a research project. Legislation is being passed allowing the introduction of driverless cars and by 2015 we may see changes permitting the commercial use of small drones in U.S. airspace.

3. Maturity of Robotics Technology

Rodney Brooks, founder of iRobot and current CEO of Heartland Robotics, is one of many expressing the view that robotics has progressed beyond a cool new research area and into the world of robot products. While making new discoveries is exciting, there isn’t enough effort going in to using those same exciting new technologies in everyday applications.

 ”Users just want to get a task done. They don’t care if it’s a cool robot. You may, but they may not care if it’s a robot at all,” [3]

So, the question now isn’t what robots can we build, it’s what can we do with the ones we’ve built already. The robots that are successful products seem simple and boring, eg. industrial arms, vacuum cleaners, cars. But when applied to the right problem, even simple robots are transformative. The first successful consumer robot was of course iRobot’s Roomba vacuum cleaner with more than 7 million sold worldwide. But the biggest acquisition of a robotics company was Amazon buying Kiva in March 2012 for $775 million.

Kiva’s system relies on small orange turtle like robots that move shelves around in warehouses. The brains are largely on servers. The robots aren’t ‘cool or exciting’. They are barely even robots. But they solve the problem that sank WebVan, one of the most spectacular e-commerce failures. You can only do half your e-commerce in the cloud. Somewhere real products have to be shipped to real places.

Kiva founder Mick Mountz is an MIT engineer who worked at WebVan. “We decided products that could walk and talk on their own would be the best way to solve the problem,” he laughs. [4]

Think of Kiva bots as the hands and feet of the Cloud.  They are not autonomous Star-Trek-like agents, but are wirelessly connected to and controlled by the Cloud in real-time. [5]

Amazon, like WebVan, has to ship product. Reportedly, phsyical order fulfilment cost nearly 9 percent of Amazon’s $40 billion global revenues. This is a big enough pain point for some companies to be willing to trial the Kiva System in a few locations, especially smaller retailers, like Staples in 2004, who faced increasing competition in cloud commerce.

Kiva’s robots today are processing millions of orders a year in retailers’ warehouses across the United States, the UK, and Europe, quietly driving Kiva’s startling 80 percent annual growth. On the distant horizon is a plan to bring Kiva’s approach to the manufacturing sector. [6]

Jeff Bezos from Amazon is also investing heavily in Heartland Robotics. Brooks has a vision of transforming the workplace by making robots that can be safely worked with, shifting robots out of sterile, safe factory environments and bringing them alongside people. His analogy is with mainframe computer systems in the 1960s to the personal computer of the 1980s.

“Originally ordinary people couldn’t touch computers. Now they can. What if ordinary people could touch robots?” [7]

The future of robotics is exciting, but we’ve barely begun to fully explore the potential of the simple robots we already have.

next post: Increasing modularity & commonality plus decreasing component costs

1. http://www.nytimes.com/2012/05/10/business/fannie-mae-profit-signals-a-stabilizing-housing-market.html
2. http://www.thedailybeast.com/newsweek/2012/04/29/myth-of-decline-u-s-is-stronger-and-faster-than-anywhere-else.html
3. http://news.cnet.com/8301-11386_3-57391570-76/robots-still-lack-the-human-touch/
4. http://www.forbes.com/sites/markpmills/2012/03/23/amazons-kiva-robot-acquisition-is-bullish-for-both-amazon-and-american-jobs/
5. http://www.alumni.hbs.edu/bulletin/2012/march/innovation-mountz.html
6. http://www.alumni.hbs.edu/bulletin/2012/march/innovation-mountz.html
7. http://www.boston.com/business/technology/innoeco/2012/05/heartland_robotics_will_unveil.html

Andra Keay is the Managing Director of Silicon Valley Robotics, founder of Women in Robotics and is a mentor, investor and advisor to startups, accelerators and think tanks, with a strong interest in commercializing socially positive robotics and AI.

Andra Keay is the Managing Director of Silicon Valley Robotics, founder of Women in Robotics and is a mentor, investor and advisor to startups, accelerators and think tanks, with a strong interest in commercializing socially positive robotics and AI.