VCs and Robotics: Connections are Few
The venture capital community has mixed feelings about the robotics industry, the result of few applications and fewer success stories. But can the same the same yardstick used to gauge success for say, Web 2.0 startups (or Web Bubble 1.0), be applied to robotics?
The National Venture Capital Association (NVCA), for example, decided years ago that robotics would no longer be a category in its funding reports. In the NVCA’s opinion, each ‘robotics’ company fit better into its own industry category. Many companies prefer not to be known as a robotics company, but rather a visioning company or a sensor company and so on, that happens to employ robotics to deliver its service.
“The industry is searching for applications,” says Stan Reiss of Matrix Partners, a Waltham, Mass.-based venture capital firm, of the robotics industry. “The military buys a lot of robots, but the companies that make them do not scale very fast. The toy industry seems to be doing well, trying lots of things, but I’m not sure what the third leg of the stool is.”
“The investment opportunities are few and far between. I’ve spent a lot of time looking for robotics investment opportunities. The military-funded companies are slow to develop and we are in the fast-to-develop business,” Reiss notes.
There might be hope. “Opportunities for robots should be increasing; but they have to be cheap. Robots in the toy business are low margin and hit or miss. It’s tough to put millions of dollars into them until you see some record of success. You could have the next Cabbage Patch Kids or something viewwed as not being cool,” Reiss says.
Reiss impressed with the toy company WowWee, makers of the affordable Robosapien humanoid robot, which have sold millions.
WowWee was founded in 1988 as a manufacturing company focused on incorporating cutting-edge technologies into toys and other leisure-time products. After early successes as an OEM, the company introduced Robosapien in 2004, which became highly successful. The company then shifted focus to the development of breakthrough consumer robotic and electronic products. In 2008, the company is producing products from four divisions: WowWee Robotics, WowWee FlyTech, WowWee Alive, and WowWee Fun. The company promises “technologically advanced innovations that walk, talk, crawl, fly and purr.”
The most successful plays in robotics startups in Reiss’ opinion have been iRobot and Intuitive Surgical. iRobot produces both mobile ground robots for the military, as well as a variety of consumer robots, most notably the Roomba robotic vacuum cleaner. Intuitive Surgical produces surgical robots. “I wish there were more,” Reiss says. “I do think the industry is moving forward. It is not at all short on innovation and technology; it is short on applications.”
The VCs clearly have their own point of view. However, a different one is held by Rick Shindell of Zyn Systems, who runs the SBIR Gateway site (http://www.zyn.com/sbir) as a resource for entrepreneurs seeking government funding for specific projects. “Commercialization has different meanings depending on the observer. For the VC community, a success would most likely be a big score. But the Department of Defense considers a transitioning of SBIR technology back to the DoD as a commercial success,” he says. Because the government limits the amount of profit that can be made transitioning SBIR-supported technology to the commercial sector, VCs may consider the opportunity too limited.
Future columns will continue to explore the differing opinions of what constitute robotics success, along what that implies for the industry as a whole.
John P. Desmond is a Contributing Editor to Robotics Trends. He can be reached at .
