Robotics Investors are Focused on Return

Here in robotics, there are, thankfully, institutes and organizations whose work isn’t wholly driven by the profit motive. These are places where a simple technological breakthrough is reward enough, and where studies entail more than just customer demographics. These bodies have played an outsized role in advancing the state of the art. These are circles where phrases like “ROI” and “go-to-market” are better avoided in mixed company. 

At times, the world of venture capital feels similarly disinterested with turning a profit — at least not in any sort of hurried way. This is often true in deep tech, where technology goals make for long delays and long shots. Some problems are big and take time, requiring trucks full of money, long runways, and a whole lot of patience.  

Self-driving offers a good example of what happens when longshots start to pay off, as they finally appear to be for Waymo in particular. The landscape in Google X,which kicked off the Self-Driving Car Project 17 years back, is now wholly unrecognizable. From countless startups to big names like Argo, Mobileye, and Google’s semi-top-secret car project, very few have survived long enough to see an entirely new round of companies emerge.  

For many, the self-driving car offers a helpful roadmap, as physical AI and humanoid robotics firms break fundraising records left and right. Each round arrives amid huge promises, with every update couched as a major break-though. I, however, believe we are in the midst of a bubble, as many expect. What happens when the impressive demos don’t translate to actual dollars? 

“Companies raise based on some sort of a financial forecast,” Cybernetix Ventures’ Fady Saad tells me on a recent call. “The financial forecasts basically predict in a year or two we will start generating revenue, right? So what happens is after a year or two, investors look at the forecast and realize that revenues are not coming? What are we going to do? And this is, things start to slow down.” 

Most third parties I’ve spoken with expect the physical AI and humanoid landscapes to look very different than today. Even well-funded startups may struggle as long as they remain independent. It’s no coincidence that Waymo, the autonomous driving company that has thus far come out on top, has Google’s backing. We’ve already begun to see humanoid firms snatched up by big conglomerates, like Amazon buying Fauna or Meta picking up Assured Robot Intelligence (ARI). 

“People start to look for an exit and you start seeing consolidations happening, either out of fear, like large corporates, they are afraid that they will be left with no solution, so they start acquiring companies, or companies that go out of business because of that,” says Saad. “They lost interest and now they're looking at something else. And then eventually two, three dominant players will emerge after that and those are the ones that will kind of capture the market. So I think this is probably what will happen.” 

Saad, a cofounder of MassRobotics, who launched investment firm Cybernetix Ventures in 2021, says his firm is focused on startups with a well-defined revenue potential. That’s a tricky notion when discussion humanoids and other general-purpose robot form factors. 

“We like to invest in companies that will generate revenue in kind of six to twelve months,” says Saad. “We need to have a clear path for revenue, we know that they can generate revenue, and we know that there is, there's a customer need for them. We go to the customers and speak with them. I just think that this is the way to build like sustainable, successful robotics companies that will stay around for ten, twenty, thirty, forty years. I think this is what we need and those are the kind of companies we should be building and scaling, because we have serious problems and we need to solve them.”