3 Ways to succeed as a robotics company trying to commercialize

With inflation raging and the labor market tightening even more, it’s no surprise that the number of robotics companies has continued to grow and will do so for the foreseeable future. And while logistics has been front and center in automation technology, numerous other sectors are also adopting robotics. 

In food service, for example, Domino’s Pizza Enterprise has adopted Picnic, an automated pizza system that can assemble up to 100 pizzas an hour. RLH Corporation, which runs Red Lion Family of Hotels, introduced housekeeping robots in collaboration with Peanut Robotics

So how are these robotics companies making money as they traverse the path to commercialization? Is there really a viable path for these robotics companies to triumph in a world where software is eating up every opportunity in its wake?

1. Sell widgets

Let’s face it: selling a widget with mark-ups on a one-off basis is a bad business model for startups. Investors love recurring revenues. They want the company to monetize robotics for its lifetime usage, not a one-time installation. Recurring revenue is more predictable, which leads to lower volatility and, therefore, valuation. 

So why would any company in their right mind sell widgets?

For one, many customers do not like to pay recurring revenue to startups. In their view, they took the risk to work with an early-stage company so they might as well reap the long-term benefits. 

Most early stage startups are not able to get debt financing for their pilots. Robots are expensive, costing anywhere between $30k to $250k. Selling widgets helps with cash flow to fund the upfront cost of robots.

Or perhaps the industry demands it. One such example, the construction industry, generally gets contracted on a project basis. All hardware is either bought once or rented for a short period of time and then budgeted against the project. Field construction does not allow for recurring revenue to prosper at all. This makes selling widgets a “necessary evil” approach to go to market. 

Few hardware companies can start off without going through this process. Fewer can make this model make sense, unless their product’s lifetime is very short and behaves more like a consumable. 

2. Sell services

In an ideal world, the goal is to sell the service your robots perform, as their true value is not in the robot itself but in the work it can perform. The robot is simply an extension of your company and the service it provides, albeit automatically. 

In other words, a robotics company is a service provider. It’s the company, not the customer, that has automated the work your robots can perform. The companies I mentioned above, Picnic and Peanut, provide services in this way. Picnic performs pizza assembly, while Peanut cleans hotel bathrooms. The amount they can charge is equal to human wages multiplied by the pain of recruiting and managing them. 

And the pain is key. If it is very painful—perhaps because the job is very crucial and laborers are hard to find— then customers will be willing to pay a multiple of what they pay human workers for the stability of service. 

Now, the added benefit here is the company’s product need not be a full-on product. If a robotics company can sell a function of a robot, they can still services. 

FORT Robotics provides safety and a security layer for mobile robots, and they do this by providing a wireless e-stop button and endpoint controller. By rights, they should be selling widgets to every company building mobile robots—and they started that way before switching to long-term commercial contracts that move their revenue model to be closer to recurring revenue. Earlier this year, FORT raised $25 million from Tiger Global and Prologis.

Again, it doesn’t matter what product you sell. It only matters what the value is and whether the customer feels enough pain for you to be able to capture the value of solving those pains over the entire customer’s lifetime. If such pain exists, and you have a product for it, you can build a recurring revenue model regardless of the product itself. 

3. Sell platforms

Some companies aspire to become a platform rather than settling on vertically focused applications. 

The no-code industrial robotics programming saw a number of platform companies, such as Wandlebots and Southie Autonomy. Industrial robotics programming is complicated and costly, so these companies are building platforms that allow laymen to program robots easily and quickly, rather than engineers. 

These companies didn’t start as a platform; nobody is going to use them as such from day one. Similar to how some companies began by selling widgets before moving to sell services, however, platform companies generally start with a certain application or vertical, expand the number of applications, and become an uncontested platform of choice over time. 

Platform companies may also pick specific verticals to focus on. For example, companies like InOrbit, which helps robotics companies with mass deployment, could choose to focus on certain verticals like logistics and become a platform of choice for one such vertical before expanding to other verticals.

The key to winning the platform play is to select and win a sizable beachhead market using technologies that can be scaled effortlessly to other verticals. It is the hardest business model, but also one with the highest upside.

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