Hardware is hard. Obviously. We’ve all heard this phrase and it has never seemed entirely untrue. Particularly when it comes to “smart” products — they have as much software development as a non-hardware product with the added effort to create the physical aspect.
However, recently, it seems that hardware, at least B2B hardware, has somehow gotten…easier?
In the past 6 months, my partner, Jennifer Gill Roberts and I have funded 3 robotics companies through our venture fund, Grit Labs. All were seeking their first round of institutional funding and walked into the pitch with a working prototype and a paid pilot.
And this story keeps repeating itself. What has changed? Well, a few things.
MVP — Working Prototypes
- The Candy Shell
Easy access to components from China has allowed companies to relatively quickly and easily build the MVP hardware shell for their AI software. One of the companies I mentioned above had a team of 2 and pilots with the top 3 firms in their industry. It doesn’t hurt that B2B has the added advantage of not needing to win a beauty contest. (Read: no custom molding, no shiny exterior — it just needs to work.)
2. AI Software — The Key to Robotics
Additionally, the accessibility of open source code is pulling years off the development timeline for many of these firms. Just 3 years ago, a company building an autonomous drone would start from scratch, spending years to get to an MVP. Now, open source allows these companies to quickly achieve their base use case, with most effort going towards additional feature creation. These products are able to get out the door at a pace never seen before (this is seen in slew of autonomous drones that have come to the market in the last year).
But all of that just explains the prototype bit. What about the paid pilots? Why did industry suddenly start having an appetite to rapidly adopt robotics into their operations?
GTM Traction — Paid Pilots
I failed to mention one thing about all 3 companies that we funded.
They all seemed to have happened upon a radical new business model at the same time. Robotics as a Service (RaaS).
Breaking into old industry with RaaS
We’ve seen this evolution before from data centers to AWS and from static enterprise software to SaaS. And each time, it has created an enormous boon for business. This time is no different.
Even just a few years ago, a robotics firm would go to an older industry, construction, manufacturing, agriculture — take your pick — and try to sell a robot. The offer — a large upfront capital expenditure, without the ability to upgrade, that generally required on-site staff and might break. It could not be less compelling.
Now, with the help of venture funds providing the capital for the first prototypes, they are able to walk in as a service. Offering to take just a small portion of the job (at least at first) and do it faster, cheaper and more reliably than the current solution.
They show up, do the job and leave — and they always have the most recent iteration of the robot in tow. The risk is so low and the ROI so rapid that it’s almost impossible to turn away the offer. All of this at a time when many older Fortune 500 companies are struggling for relevance in the era of tech.
Making Clients, Companies and VCs Happy at the Same Time
The robots are not just replacing manual efforts (of an often times disappearing workforce), the AI behind it machinery is able to push the industries to a new era of higher crop yields, less line defects, and increased warehouse efficiencies.
Not only is this model more appealing for the industries (customers), but it is better for investors and a much less risk for the robotics companies themselves. We’ve seen this story before, we’ve already been to this play — we know how it turns out. But this time, it’s with hardware.