Robco links up with $14M led by Sequoia to bring modular robotics to industrial SMBs
The U.S. and Europe have been attempting to bring back some of the industrial work that was outsourced and offshored to other countries for years. A startup that believes it can make that shift is now announcing funding. RobcoA Munich-based startup, whose platform allows for the creation of low-cost modular robots suitable for small and medium-sized industrial businesses, has raised EUR13 million (roughly $13.8 million). Sequoia is leading the Series A round, with Kindred Capital and Promus Ventures, Torsten Reil and Christian Reber, and Daniel Dines also investing.
Roman Holzl, Robco’s CEO, co-founded the company along with Paul Maroldt, Constantin Dresel, and stated that the plan is to invest the funds in expanding the capabilities and adding more clients to its modular-based “robotics-a-service” model.
Robco’s current offering consists of three components: lathe turning and laser engraving, and palletizing. Robco’s business model is based on clients ordering what they need and having it delivered to them as a service. The robots themselves are not bought and remain on Robco’s balance sheet. Robco also believes that the robots can be reconditioned and used for other clients. The plan is to add modules in milling, quality inspection, and to expand into new markets, such as the U.S.
Robco believes it has found a niche market in the market by focusing its efforts on difficult tasks and developing cost-effective solutions for smaller manufacturers. SMBs may need to increase productivity from time to time, but are unable to do so due to labor shortages or economics. He said that this is an area that the people who make larger machines for industrial clients have yet to address.
Holzl stated in an interview that there have been two dominant market segments. “The first is component manufacturers. The second is a fragmented marketplace of system integrators who build expensive, craftsman-like robots. You pay $250,000 per solution. The chasm has yet to be crossed by any company. [provide] Amazing, fun technology that can be deployed in days or even months. We do not sell robots or software. We offer an automation service and solve a specific problem.
Holzl refers to the traditional method of hiring machine operators “the classic status-quo” — something he witnessed firsthand in his parents’ small factory in which he was inspired to create the company in 2020.
One reason was that factories had to layoff rather than furlough their employees. When it was time to get back online, they couldn’t complete tasks and some of their expensive manufacturing machines just sat empty. This was before you consider the weekends and evenings when staff didn’t work. He cites statistics that show there are approximately 2 million unfilled labor positions in Europe. On average, labor costs rise 6.6% annually.
It will be interesting for Robco to see if the issue of “putting people out jobs and making them obsolete” — a major sticking point for any type of AI or robotics play that replicates the work of a human — becomes a longer-term concern.
The overriding pitch seems to be that it can fill a gap fast that otherwise cannot be filled (for reasons we list here, that is, either because it takes to train and hire the workforce to fill the immediate demand or because of timings and length of contracts), and this is something that must be addressed, especially in a time when the economy appears to be heading into deep recession.
Robco robots are expensive. Robco charges $1,000 per month. Prices change based on length of engagement (costs decrease if contracts are shorter), and overall charges can be as high as $4,000 per month depending on the complexity of the client’s needs. He said that 10 modular machines are the most common deployments.
He noted that this is taking off tremendously with strong triple-digit revenue and “exciting unit economies”, and four patents on its hardware. The founding team was spun out of a large research university and therefore grounded in AI, engineering expertise — all details that would have attracted Sequoia investors. Quite recently With a shiny new London office, we have really doubled our efforts in Europe. However, like many others in the world VC, we are under immense pressure to manage existing portfolio companies and how they are handling the severe storms that have swept the tech sector.
All of this means that investors are more prudent and perhaps less exuberant. This likely means that there is less interest in exploring new ideas and more focus on making returns.
“Robco’s approach to life is unique.” [in the SMB manufacturing space] Because what they are doing is somewhat similar to Lego. Luciana Lixandru who was responsible for Sequoia’s investment, said that they are using a modular approach. “Whatever your use case, you can tell them what machine you require and they will create the right format. The implementation time is usually only one to two days. The software platform allows you to put together the modules and create a digital twin. This makes it easy to configure and control the modules, something that would have been difficult if you had more technical knowledge or hired consultants.
She believes that this is a huge gap in the market. About 70% of tasks for SMBs can be automated. “This robot is not a surgical robot. But it can do repetitive tasks in manufacturing.” This is interesting because Robco’s goal is similar to UiPath’s (a large investment in Lixandru’s past and partly how she established herself in VC) which is focused on robotic process automation at the administrative end.
She said, “This company got very far with very little,” adding that raising is one of the major signals investors are relying on these day, noting that Robco only raised “a few million dollars” before this. [and] They have real customers and a lot of robots deployed. We have lots of data and evidence to prove that it works. I am skeptical about robotics in 99% of cases. [pitches] It’s not easy to build a market around it, and I can see why. But we see the “why now” here and that’s what we believe will make it successful.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.