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Why Robot Startups Now?

Now is the right time for robot startups. Why? The reasons range from changes within robotics to changes in the broader financial and technological environment. There is a critical mass which we believe has been reached. This list attempts to capture the zeitgeist and define all the reasons why we’ve hit the tipping point. I started out with 4 or 5 reasons. I’ve got 10 or more now.

1. Disruptions to funding models
2. Broader financial climate
3. Maturity of robotics technology (backlog of product)
4. Increasing modularity vs commonality
5. Decreasing cost of sensors (and other components – via democratizing/sanguine)
6. Object recognition no longer robotics problem (same as next?)
7. Internet of Things
8. Changing manufacturing/prototyping environment
9. Overall internet/software eats the world (or is this also object recognition?)
10. Lean Startup Methodology
11. Popular discussion = zeitgeist

this list is subject to change :)

1. Disruption to Funding Models

The Kauffman Foundation’s recent report on 20 years of investment in VC funding called it ‘a triumph of hope over experience’.

Venture capital (VC) has delivered poor returns for more than a decade. VC returns haven’t significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested in VC. Speculation among industry insiders is that the VC model is broken, despite occasional high-profile successes like Groupon, Zynga, LinkedIn, and Facebook in recent years. [1]

Dave McClure from 500 Startups is (in)famous for promoting a ‘spray and pray’ funding style which focusses on making many small early investments, testing often and only keeping the best. However he recently declared that VC’s should be ashamed.

“Because we SUCK at EXACTLY the thing we’re supposed to help entrepreneurs do — build BIG, SCALABLE companies.” [2]

The lean startup mantra of ‘fail fast and cheap, challenge all assumptions’ is shaking up the orthodox investment models. This goes hand in hand with the crowdfunding movement which connects product ideas directly to customers, outsourcing the early stage production funding eg. KickStarter, IndieGoGo, Wefunder, CircleUp, etc.

Crowdfunding sites are springing up like mushrooms since the JOBS (Jumpstart our Business Startup) Act was signed by President Obama on April 5, 2012. Although the details still need some work before the process starts in earnest.

 As the President said at today’s signing, “this bill is a potential gamechanger” for America’s entrepreneurs. For the first time, Americans will be able to go online and invest in small businesses and entrepreneurs. Not only will this help small businesses and high-growth enterprises raise capital more efficiently, but it will also allow small and young firms to expand and hire faster.  [3]

next post: Broader Financial Climate & Maturity of Robotics Technology

  1. http://www.kauffman.org/uploadedFiles/vc-enemy-is-us-report.pdf
  2. http://500.co/2012/04/06/scaling-venture-capital/
  3. http://www.whitehouse.gov/blog/2012/04/05/jobs-act-encouraging-startups-supporting-small-businesses
  • http://twitter.com/michaelharries Michael Harries

    I like the top 10 list (+1). I’m particularly looking forward to the discussion on demand side (zeitgeist?). Can you elaborate more on how funding will work for robot startups is likely to work after the initial hit of crowdfunding? Is robotics the path to a more reliable return for the VC?

    • http://robotlaunch.com/ Andra Keay

      Kickstarter is simply one form of crowdfunding which will make VC investment less relevant to many robot startups. For those robotics startups going the VC route, then the rise of robotics service industries, less capital intensive business models, repurposing existing robot platforms and introducing leasing structures all make robotics a more attractive ROI for VCs.