July 18, 2024


Technological development

Robco links up with $14M led by Sequoia to bring modular robotics to industrial SMBs • TechCrunch

After years of outsourcing and offshoring manufacturing to countries with cheaper labour and bigger production ecosystems, the U.S. and Europe are on a mission to bring some of that industrial work back to its own shores. Today, a startup that believes it can help with that shift is announcing some funding. Robco, a Munich-based startup that has built a platform for designing low-cost modular robots for small and medium industrial businesses, has picked up €13 million (abut $13.8 million). The round — a Series A — is led by Sequoia, with Kindred Capital, Promus Ventures and Torsten Reil, Christian Reber, and Daniel Dines all also investing.

Roman Hölzl, the CEO of Robco who co-founded the company with Paul Maroldt and Constantin Dresel, said the plan will be to invest the funds both in expanding the capabilities of the existing modules and to continue adding on more clients to its modular-based ‘robotics as a service’ model.

Robco’s current offering is based around three components that focus on lathe turning, laser engraving and palletizing, with its business model based around clients ordering what they need made and that in turn being delivered as a service to them — the robots themselves are not purchased and stay on Robco’s balance sheet with the idea that they can be reconditioned and reused for other clients when needed. The plan is to bring on more modules in milling and quality inspection, as well is to look at further geographical expansion, for example into the U.S. market.

Even with the hundreds of millions of dollars that have been poured into a variety of industrial automation and robotics companies over recent years (and some of the very notable failures that have inevitably come out of that) Robco believes that it has found a niche in the market by focusing on tricky tasks and building cost-effective solutions to address the needs of smaller manufacturers. In short, SMBs might need to scale up productivity at times but — either due to the economics of the need, or labor shortages, or both — are unable to hire people to fill those jobs on a permanent basis. This is an area that those making larger machines for bigger industrial clients had yet to address, he said.

“When we think about the market we think there are two categories that have dominated,” Höltzl said in an interview. “The first is component manufacturers, and the other is a fragmented market of system integrators building costly and craftsman-like robots where you pay $250k per solution. No company yet has crossed the chasm to [provide] great, delightful technology that could be deployed in days or months. We are not selling robots nor software. We are basically offering an automation service, and solving a concrete problem.”

Höltzl describes the traditional approach of hiring machine operators as “the classic status quo” — something he saw first-hand in his parents’ own small factory, which was the inspiration for founding the company in 2020 — not, as you might have thought, Covid-19 and the pressure it put on in-person work, although that certainly gave Robco a strong current on which to generate interest and eventually sell its ideas into the market.

One reason was that many factories had to lay off rather than just furlough their staff, and then when it came time to get back online, they couldn’t fill out tasks and some of their costly manufacturing machines just sat vacant, and that was before considering the weekends and evenings when staff that was there didn’t work. He cites stats that say there are around 2 million vacant labor positions in Europe, with costs for labor increasing 6.6% annually on average.

It will be interesting to see how and if the question of “putting people out of jobs and making them obsolete” — one of the big sticking points for any kind of AI or robotics play that replicates what a human might have done for a living — becomes an issue longer term for a company like Robco.

For now, the overriding pitch appears to be that it’s able to fill a gap quickly that otherwise can’t be filled (for the reasons we list here; that is, either because it takes too long to hire and train the workforce to fill the immediate need, or because of timings or length of contract), and that is something that needs to be addressed, especially at a time when the economy is teetering into deep recession.

The cost comparison with using a Robco robot is big: the company today, he said, charges typically $1,000/month, with costs changing based on length of engagement (costs go down if contracts are longer), with overall charges being as high as $4,000/month depending on the complexity of what the client needs. Typical deployments start at 10 modular machines, he said.

This is taking off massively, he noted, with strong triple-digit revenue growth, “exciting unit economics,” and so far four patents on its hardware and techniques from a founding team spun out of a big research university and thus grounded in AI and engineering expertise — all details that would have attracted investors like Sequoia that have only relatively recently really doubled down on Europe with a shiny new office in London, but like others in the world of VC are facing huge pressure around existing portfolio companies and how they are weathering the significant storms that have hit the tech sector.

All of that spells more prudent, and perhaps less exuberant, investing, which likely means more strict adherence to theses around making returns and less about exploring interesting ideas.

“Robco’s approach is unique [in the SMB manufacturing space] because what they are doing is a little like Lego. They are taking a modular approach,” said Luciana Lixandru, who led the investment for Sequoia. “Whatever your use case is you tell them what machine you need and they create the right format. Implementation times are short, one or two days. Then they have created a software platform where you put the modules together creates a digital twin. Then the configuration and control is easy — something that previously would have required more technical expertise or outside consultants.”

She believes this is a big gap that has yet to be tackled in the market, with out 70% of tasks for SMB manufacturers capable of being automated. “This isn’t a surgical robot, but something that can do repetitive tasks that happen in manufacturing.” In that regard, interestingly, there is a correlation between what a company like Robco is looking to fix and what a company like UiPath (a huge investment in Lixandru’s past, and partly how she established her name in VC) focused on with robotic process automation, at the administrative end of running a business.

“This company got very far so far with very little,” she added, raising one of the other big signals investors are especially relying on these days, pointing out that Robco raised only “a couple of million dollars before this, [and] they have real customers, with a bunch of robots already deployed. We have a lot of data and evidence that it’s working. I’m skeptical of 99% of robotics [pitches] and I can see how it’s hard to build a marketplace around it, but we see the ‘why now’ here and that’s why we think it will take off.”