Why robotics companies fail? – 10 tips from successful investors

In the previous post, we saw some top robot companies that haven’t made it in recent years. In this post, we discuss the reasons behind this.

Despite massive funding, none of these robotic companies have been able to remain unbeaten in the market for a long time. So what is wrong? So what is wrong? Are people not ready for robots after years of sci-fi acculturation? Is robotics complicated, or is something else happening in the industry?

Some experts believe the answer has more to do with a massive failure by automation entrepreneurs to recognize a market capitalism bedrock. Tip: no matter how impressive a piece of automation technology is, it’s not a very good product if it doesn’t solve a clear problem or increase efficiency in a big way.

Some say companies fail because “robotics is hard.” It’s hard to make metal, electronics, and other human-engineered bits work in the same purposeful, elegant way human bodies can. Getting machines to do seemingly simple tasks like climbing stairs, sliding down fire poles, assembling complex components, and exhibiting the dexterity that most people can be challenging.

Some experts argue that selling just hardware doesn’t work! Where’s the recurring income model? Free smartphone apps offer in-app purchases to make money. Maybe the consumer / social robotics company that figures out how to provide new, engaging content to complement hardware can create a sustainable, profitable company.

Chasing Customers in Tough Markets

The failure of robotics companies can be attributed to a confluence of factors that ultimately undermined their sustainability and growth prospects. Firstly, the allure of e-commerce as a lucrative market drew numerous VC-backed AI-powered robotics firms into the fray. Recognizing the potential to replace costly human labor in fulfillment centers, these companies sought to revolutionize the industry. However, they encountered significant challenges, such as stringent KPIs and protracted sales cycles with large corporations. Negotiations often languish, draining resources and stalling progress. Moreover, the allure of proof-of-concept projects misled startups, leading to prolonged pilot phases without clear paths to deployment.

Overestimating Robot Tech

Secondly, many startups overestimated the capabilities of their technology, particularly in transitioning from controlled lab environments to real-world settings. Unforeseen complexities and corner cases emerged, undermining confidence in these bleeding-edge solutions. Prospective customers, wary of unproven technologies, remained hesitant to adopt them at scale. Scaling operations posed further challenges, highlighting the disparity between building prototypes and deploying fleets of robots in practical scenarios.

Business Model Flaws

Thirdly, a fundamental flaw in business and pricing models exacerbated the struggles of robotics startups. High upfront costs deterred potential clients, rendering hardware-centric approaches financially unviable. Attempts to pivot towards software-only solutions encountered their hurdles, as customization requirements necessitated involvement from slow-moving systems integrators. The mismatch between the perceived value of robotics solutions and their actual costs proved insurmountable for many companies.

However, these failures have not deterred the broader robotics industry. Despite some skepticism from investors, capital remains abundant, with renewed interest fueled by the pandemic’s acceleration of automation. Crucially, lessons learned from past missteps inform emerging startups’ strategies. By targeting smaller businesses with genuine automation needs, diversifying market focus beyond e-commerce, and embracing robots-as-a-service models, a new wave of companies is charting a more sustainable path forward. Additionally, established players are adapting their approaches, leveraging insights gleaned from previous setbacks to drive innovation and market penetration. With a newfound emphasis on pragmatism and adaptability, the robotics industry is poised for a resurgence characterized by greater resilience and strategic foresight.

10 Tips To Remember Before Investing

Investing in the robotics industry can be lucrative, but navigating the landscape with care is crucial. Despite substantial funding and development efforts, several robotics companies have shuttered their operations, raising questions about the viability of investments in this sector. Experts attribute these failures to various factors, including a failure to address market needs effectively, the inherent complexity of robotics technology, and a lack of sustainable business models.

  • Focus on Software Over Hardware: One crucial aspect to consider is the company’s emphasis on software development rather than hardware prowess. Companies like Jibo, despite excelling in hardware, faltered due to a lack of corresponding software excellence. Investing in startups prioritizing software ensures a stronger foundation for sustained success in the dynamic robotics market.
  • Evaluate the Founder’s Profile: The founder’s background plays a pivotal role in assessing a company’s potential. Academic founders may lack the business acumen necessary for commercial success. Preference should be given to founders with a strong software background and user experience (UX) design expertise.
  • Understand the Primacy of Software: Recognize that software holds greater significance in robotics than hardware. Hardware is increasingly commoditized, while innovative software solutions drive differentiation and market adoption.
  • Choose the Right Platform: Assess the company’s alignment with established robotics platforms such as ROS (Robot Operating System), Apple, or Arduino. Compatibility with widely adopted platforms can enhance interoperability and facilitate faster development cycles.
  • Consider Price Sensitivity: Evaluate the affordability and scalability of the company’s robotic solutions. Overly expensive robots may face limited market adoption, hindering long-term viability.
  • Exercise Patience and Discernment: Resist the temptation to hastily invest in the burgeoning robotics market. Historical parallels, such as the decline of automotive companies, underscore the importance of patience and strategic foresight in investment decisions.
  • Assess Scalability: Scrutinize the company’s scalable growth and market expansion potential. Collaboration with established entities like Apple can leverage existing distribution networks, enhancing scalability prospects.
  • Analyze Cost Structures: Evaluate the balance between software and hardware costs within the company’s operations. A disproportionate focus on hardware expenses may indicate inefficiencies and strategic misalignment.
  • Integration with AWS: Consider whether the company’s artificial intelligence (AI) capabilities leverage cloud computing infrastructure like Amazon Web Services (AWS). Integration with AWS signals a commitment to scalable, cost-effective AI solutions.
  • Focus on Innovation and Differentiation: Prioritize investments in companies focusing on enhancing existing technologies rather than replicating competitors. Companies striving to make existing robots smarter demonstrate a clearer path to sustained competitive advantage and market relevance.

By adhering to these ten tips, investors can navigate the complexities of the robotics industry with greater confidence, making informed decisions that align with long-term growth objectives and market dynamics.