robotics, business, and society for a better future
2013/06/10 Leave a comment
Friends, take a look and see what needs to be added. The definitive list of private funding in robotics for 2012 is out, help make it complete by adding a comment if you know of private funding for a robotics company that isn’t included.
http://www.hizook.com/blog/2013/06/10/venture-capital-vc-funding-robotics-2012
2013/02/18 2 Comments
Robohub just posted a great series on optimal funding schemes for robotics start-ups. I highly recommend reading it. I believe that it probably represents the best collective wisdom in our industry. Frank Tobe probably has the most informative response for someone actually looking to raise money: robotics is still at the point where you need to appeal to individual personalities who see it and get it, or find a government customer. However, I thought that all the authors raised thought provoking points. Here are the follow-up questions that I posed:
Rafello D’Andrea: What structural and cultural changes need to be made to robotics departments so that they become as entrepreneurial as computer science or biochemistry departments?
My own observation is that here at CMU–one of the most prolific robotics start-up hot beds–that robotics is pretty theoretical and academic compared with other engineer disciplines, particularly other disciplines in the computer science school. The revolving door between industry and academia just doesn’t happen in robotics the way it does in other disciplines. How do we get industry thinking into robotics departments? After staying close to the university for 40 years, it is going to be hard to change the culture of the robotics departments, however I think that universities that succeed have a chance to maintain or overtake the currently established leaders in the field.
Henrik Christensen: If much of the benefits from robotics R&D accrues to parties who didn’t do the research—whether competitors or society at large, economics tells us that subsidies are not only appropriate, but necessary, to get to the socially optimal level of investment. What portion of the gains from commercial robotics R&D is controlled by the company that does the research? How does this compare with other industries?
I know the Georgia political climate is such that private industry is always the answer. We all agree on the need for more private investment, but if robotics companies have trouble capturing the value that they create, we need to do one of two things: 1) Either subsidize their research in some rational way that creates the most social gain or 2) adjust intellectual property laws so that more of the benefit of robotics R&D accrues to companies making the investment. Some econometric research is probably in order here… any econ Ph.D. candidates reading?
Mark Tilden: Doesn’t your suggestion of investing in crowd funded start-ups point at the opposite of needing more innovative roboticists? If crowd funding is the shining star in our industry, wouldn’t that suggest that our roboticists are plenty innovative—as high end research is not required to make marketable stuff—but rather our entrepreneurs and business managers are behind the power curve?
Obviously, market traction is the key. Financing is for companies is in some way just a loan to future consumers–even if the consumers don’t know it. This question of what’s the real roadblock to creating more successful robotics start-ups is a key one. I’ve made my belief that the robotics “parts bin” has plenty of technology in it pretty clear on this blog as well as my belief that robotics has a shortage of qualified entrepreneurs and managers. The problem is not on the engineering side, it is with those giving directions to engineering.
Frank Tobe: If the individual / angels / VC route is more of the direction that we want robotics to go in, what do the special people that you point to in your response see that other investors don’t see? Or are they doing something different? What is the barrier to other investors who might want to do the same?
If robotics is at the point where it is being funded by visionaries, how does one go about finding, cultivating, or creating more? Are the visionaries right or is their compass off? I don’t have good answers to this, but I do think that robotics seems to require a more comprehensive understanding of engineering, current business practices, and what the future should be than most other industries do. That said, one would expect that there are extraordinary rewards for solving these hard problems, unless some of the basic economic problems that I want to suggest in my question to Henrik Christensen exist.
Nicola Tomatis: Software and biotech companies aren’t cheap to build in absolute sense either, but they are called capital efficient by investors. Financially, robotics is probably more like software and biotech than it is like retail or [green] energy businesses—which really require a lot of money. Is there data that supports the position that robotics is expensive compared to other capital efficient industries?
The part of this blog I’m most proud of is gathering the evidence to show, to a practitioner’s standard, that robotics companies are as capital efficient as software companies, conditional on success for both. While plenty of robotics companies waste investors money, I’m not sure that this that different from any other IP intensive industry. However, whenever a software company fails we blame management or the market–but when a robotics company fails we blame the underlying technology. We need to stop that. It makes it harder for the next guy to start a robotics company–the underlying technology is there–we just haven’t made many companies with it yet.
2013/02/07 3 Comments
This is what I’ve been working on that’s been keeping me away from the blog:
2012/10/15 Leave a comment
On Friday, I had the pleasure of attending Rodney Brooks’ first public talk on the Baxter robot, “A New Class of Industrial Robots.” Although, there wasn’t a great deal of new technical information available beyond what the barrage of press exclusives has already announced, it was a fascinating look at the thought process that went into building the Baxter. I’ll attempt to share some of the ideas that he shared at Carnegie Mellon to best of my deficient note taking abilities. You can can also watch the video here.
My general impression is that the Baxter is a real product. That’s really exciting to see in robotics! We don’t get true products all that often. I mean this robot can be used by people who cannot code and don’t know how to do math. You can use a Baxter at a basic level just by pressing some buttons and moving the Baxter’s arms. A ‘power user’ might use the menu system to enable (or more likely disable) features that make the Baxter so easy to use. A forthcoming software development kit will let the robotics engineers tinker if they like. The overall impression I got however is that the Baxter is a not a fundamental breakthrough so much as a breakthrough product. It is designed around a specific set of user needs, responds to their preferences, and doesn’t attempt to do everything. I could see how it might delight people who need a box packed or something sorted.
Another interesting aspect of the Baxter is how it takes an alternative design approach to current industrial robots. The Baxter focuses on tasks that have some degree of compliance. Most industrial robots are focused on precision. It will be interesting to see how these two classes of robots end up interacting, competing, and complementing one another.
ReThink has an ambition to bring back a lot of manufacturing value to the United States. The idea that much of the drudgery in a factory can be completed at an all in cost of $3/hr definitely puts the economic rationale for taking production offshore into question. We all know that there are tremendous efficiencies achieve from having production close the large markets and design centers, this will make it possible to further substitute capital for the lowest skill labor and create many more valuable manufacturing jobs in the United States.
“Advanced Manufacturing doesn’t mean manufacturing advanced stuff.” Dr. Brooks pointed out that although employment in manufacturing has remained stable or declined over the last several decades, the output of American manufacturing has been on a nearly uninterrupted increase. This has been driven, in part, by a march up the value chain into business to business and complex products. Dr. Brooks hope that the Baxter will let us look at having
Why isn’t Baxter mobile? First, Baxter doesn’t need to be mobile to fulfill its intended function and adding mobility probably would add cost and complexity that the customers don’t require. Baxter can be moved on casters easily by a worker, but it doesn’t need to move on its own for most applications. Second, Dr. Brooks’ non-compete agreement with iRobot prevented him from working on mobile robotics until recently. Maybe, we’ll see a mobile Baxter soon.
Finally, I’m really curious to see how the end effector strategy plays out. ReThink is going to publish an interface that includes mechanical, electrical, and software specifications. Currently they provide an end effector that appears to be only a two finger gripper that can be customized for size to some degree. I’m curious if there will be a lot of end effectors that come out and to what extent the Baxter and ROS become a platform for further innovation in robotics.
The Baxter was designed in conscious analogy to the PC. Will it usher in a new age of robotics the way the PC did? From a business perspective will Baxter-type platforms become commoditized and can ReThink retain its edge? Dr. Brooks was refreshingly humble about the future, but it was clear that he is optimistic and willing to learn more from the market for this disruptive product.
If you’re going to RoboBusiness have fun at the public unveiling of the robot!
2012/09/03 3 Comments
Image: Fairchild Semiconductor Successor Companies
Source: Steve Blank’s Testimony to House Science Committee
I was harassing my asset management friends to get them to help me develop the synthetic short instrument I want to put into the robotic stock tracker and we started discussing capital use in robotics. Their question, was, “Okay, if robotics are not inherently capital intensive, why does it take more money to get a robotics company up and running? Isn’t that initial expense an inherent characteristic of the robotics industry?”
In a word, no. The fundamental problem with robotics companies is that management doesn’t have a well developed process for synchronizing customer and product development to use Steve Blank’s terminology. Or put another way, a lot of robotics companies spend a fortune on unnecessary engineering when they frankly suck at discovering what customers want. iRobot has a whole museum dedicated to their market failures. I contend that much of this engineering effort is not necessary to development of viable robotic businesses–this same learning could be done with vastly less expense.
Much of this problem comes from the difficulty of porting over rapid-cycle software development best practices for discovery of true customer needs. Most of our hardware development methodology comes from environments where customer needs are relatively well understood and engineering improvements require a lot of time. Robotics companies still have engineering cycle times (the amount of time to go through the engineering build, test, analyze, decide cycle) that are much longer than pure software companies at least 3 times longer and often much more as best as I can estimate from anecdotal evidence. Companies are very reluctant to reveal this information, so my estimate may be off by several factors, but it is clearly much longer for robotics companies.
I believe that we in the robotics industry need to tailor the customer and product development methodologies to the peculiar challenges of robotics. We will need to reduce cycle times of engineering teams down closer to software levels. 3D printing and continuing improvements in supply chain should make this feasible. Management should make it a priority and a reality, and be willing to incur some expenses to do so. Even more, management needs to do a lot of work to reduce market risk much earlier in the product development cycle.
iRobot’s museum show that it is proceeding to engineering while far too much of what is required to make a viable commercial product remains unknown. This isn’t to pick on iRobot, they may be among the best in the industry, but it is just to show that even the most advanced practitioners in our industry are not very good at understanding customers compared to other industries. Yes, for some customers, such as the government, just doing research can be a viable business model, but this won’t grow the industry. We need to develop ways to reduce market risk and we need to get good enough that we’re showing the software industry how they could learn about customers more and code less.
I don’t propose to give a complete answer on how to do this here, but it is clear that there is more than one path to reduce market risk in a product. Both Intuitive Surgical and Liquid Robotics seem to have taken the approach of building a robot that is so awesome and widely applicable that it will find a use even if it isn’t in the application that management originally intended. Other robotics companies, like Kiva Systems and RedZone (since Eric Close took over), seem to have taken a more traditional minimally viable product approach and iterated upon the original product. Both strategies appear to win in certain circumstances and companies that took the opposite approach in the same markets failed. How do we distinguish which set of market and technical circumstances we find ourselves in?
This interplay between technical and market risk and how it applies to robotics management is only beginning to be understood. Few people have proposed measurable distinctions that would allow management to make decisions about what risks to accept and what risks to mitigate before committing capital to a project. This area of research more than any other will unlock the potential for robotics to become the next tech boom.
2012/08/29 1 Comment
Image: Front Cover; Source: Amazon
If your experience of Moby Dick was that you were constantly aware that you were reading one of the best books of all time that was opening your mind to new ideas if only you could keep your eyes open, you understand. Four Steps to the Epiphany is the great white whale of start-up books for a reason. Although it is not nearly as easy to read as his disciple Eric Ries’s more famous book, The Lean Start-up, it is much more systematic. This books has some profound insights about understanding why some start-ups can do it one way and others need to do it completely opposite.
Instead of abstracting and generalizing the insights, Blank focuses on the issues of managing under extreme uncertainty in their native context. He tackles every aspect of the non-engineering side of the business. Most of the book is about how to systematically eliminate the market risk for your product, this will be somewhat familiar to you if you’ve read the Lean Start-up. However, seeing the original idea and seeing it laid out in full detail, in the context it originally sprang from adds a lot of richness and practicality to the idea. Blank devotes a good deal of time to understanding how to make technology push and market pull work together. He covers when to go for broke spending money to enter a market and when to hold back and let the customers come to you. Most importantly, this comes with some practical steps to discover when to do each. He even covers how to start converting to mature company once you’ve almost made it.
Much like Melville, Steve Blank will say something really profound and insightful, then launch into a description of whaling–er, uh–start-up processes that are needed to implement that idea. This can make the book a tough slog, because reading a process description around bed time can definitely have soporific effect. However, this tough slog is absolutely worth it if your a practitioner in the world of technology start-ups. You can’t hand it to your cousin that works at a big company and expect him to read it. This is meant for the start-up community. If you are a start-up practitioner, get this book and make yourself read it. You will not be disappointed. I expect my copy to become much more dog-eared than it already is before it gets confiscated for some future company museum.
So how does this relate to robotics…
Reading this book will further persuade you that many if not most management teams of robotics companies don’t have a clue. You’ll even be able to look at robotics success stories and realize–wow–compared to software our industry’s state of management practice is pretty dismal. Many successful robotics companies just fell bass-ackwards into their success. Many were product driven companies to a fault that were able to expensively keep trying until they finally hit a success. This is not the same thing as systematically eliminating and consciously balancing market versus technical risk to produce the greatest chance of creating successful business that uses robotic technology to make money and make the world a better place.
We’ve got a long way to go as an industry. Luckily, now that we know that there’s nothing inherently ‘capital intensive’ about the robotics industry we can start addressing why we have so often screwed it up before.
2012/08/27 1 Comment
I’m working on incorporating a start-up and I discovered something very interesting, Delaware is NOT necessarily the best place for initial incorporation of your start-up. If you are profitable, public corporation, Delaware is almost a no brainer. However, there is no tax liability associated with moving to Delaware and most start-ups are not profitable or public.
Being incorporated in Delaware adds complexity and several fees and expenses that you might not incur when incorporating in your home state. Especially if your state follows the model corporation act, you might consider incorporating there. If you are not profitable, the corporate income tax rate of your state is irrelevant, you save a bunch of fees, the complexity of having registered agents, and having to qualify as a foreign corporation in your state.
The advantages of being in Delaware are in legal provisions that only apply once you have many classes of stock, the taxes on profits once you have them, and the power of officers and directors, particularly once the corporation is public. None of these matter if you are pre-seed stage and may not matter at all until an IPO. If the VCs demand that you be a Delaware corporation, okay, no big deal it can get done in less time than it will take them to finish their paperwork, but in the meantime, you’ve saved some money and most importantly some headaches of dealing with a state that is constantly trying to put its hand in your pocket.
I had been told by several entrepreneurship professors that Delaware is the only choice for incorporation of a start-up. I was surprised to learn that this is not necessarily the case. Others seem to think so as well. Pass it on and consult with your counsel to make a decision that is right for your circumstances.
2012/08/15 Leave a comment
I got to spend two days at the Association for Unmanned Vehicle Systems International (AUVSI) North America 2012 trade show last week. As a first pass, the industry continues to grow even as defense cuts start to put a damper on things. Other domains besides air are also starting to look like real possibilities though their manufacturers don’t always see fit to join AUVSI. There is still tremendous excitement about the FAA’s recent moves that seem to indicate real progress in the last year. Privacy concerns are being taken seriously, hopefully early enough to nip the issue in the bud, because the safety issues seem to be close to resolved.
2012/08/01 Leave a comment
source: SEC.gov
My overview of the Firms Behind the Hizook 2011 VC in Robotic List has graciously been published at Hizook.
Bottom line: We don’t have a cadre of dedicated robotics investors, but we can get investment from the industries that serve as our customers.
I wish you all luck in getting some of that VC Cash. …on second thought, no, actually, I don’t–I wish you all luck in signing up major partners who will give you progress payments to complete your product without diluting your investment.
But whatever your situation I hope that you use the appropriate capital structure to make lots of robots, lots money, and lots of good in the world.
robocosmist 
We need horizontal migration for robotics
2012/10/11 by Robert Morris Leave a comment
Despite the tremendous potential for robotics to transform people’s lives, robotics is not nearly as widespread as information technology. Traditionally this has been ascribed to the high capital costs of starting a robotics company, but this explanation does not bear scrutiny[i]. More realistic explanations for the lack of proliferation of robotics are that management in most robotics companies cannot effectively match customer development and product development cycles, and robotic solutions are not easily ported from one industry to another.
The lack of synchronization between product and customer development leads to a much slower and more expensive development cycle than in software based businesses. This is not an inherent problem of robotics, but a product of the management practices employed in robotics versus software businesses. Better management is already leading to falling iteration cycle times. Many of the leading robotics firms on the West Coast have cycle times that are within a factor of 2 or 3 of software best practice.
The more fundamental problem in robotics is that robotic solutions are not easily ported from one industry to another. Solutions tend not to be universal but rather quite tailored to specific industries. As a result, successful robotics firms tend to think of themselves as serving specific industries and being participants in that industry rather than having a core technological competence.
Contrast this with solution providers for information technology. Ten years prior to the start of Automated Healthcare, Oracle was being started as a relational database company. Oracle did not stay fixed on any particular industrial niche, but rather became a database solutions provider to practically every industry that uses databases. This portability allowed Oracle to grow to a thousand times the size of Automated Healthcare, even though material handling probably generates as much revenue as do relational databases. The sad part is that the acquisition of Kiva Systems by Amazon indicates that this trend robotics material handling solutions being aligned to particular industries is likely to continue.
ReThink’s Baxter may point at a broadening of robotics to serve several sub-segments of manufacturing. I hope that Baxter can also become the mail clerk in an office and serve lunch in the cafeteria. Once we get to that point, our industry will really start to take off. My suspicion is that there are enabling technologies and infrastructure that we haven’t developed yet to do this. A truly universal dispatching system and some other key enabling technologies are likely to have to fall in place before this happens. I hope to devote a future post to what those key enabling technologies and infrastructure pieces are.
[i] http://atomic-temporary-36605249.wpcomstaging.com/2012/09/03/if-robotics-arent-inherently-capital-intensive-does-management-in-robotics-just-suck-yes-heres-why/
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