Three Reasons Robotics Startups Fail to Scale
As a contract manufacturing company, we help many robotics startups who are struggling to scale their manufacturing. There is usually not one single reason why these startups fail but there are similar shared factors preventing scale and survival. Luckily, failure for robotics startups is not inevitable and is preventable. In this blog, we discuss three common reasons for robotics startups failing to scale.
Reason 1: Poor Economics- Lack of Captial, Investors, and Customer-Driven Values
The robotics manufacturing process relies on money, time, and investors for success. Interest from venture capitalists (VCs) in robotics startups grew after Amazon’s cash acquisition of Kiva Systems for $775 million dollars. A decade later, many VCs try to find “unicorn robotics startups” like Kiva Systems. Unfortunately, it isn’t that easy for robotics startups to penetrate the market or scale. The sales cycle and extended pilots are just two of a few reasons why. Not to mention, robotics often have a difficult technology stack for streamlined execution and affordability.
Thankfully, a reignited energy exists for the robotics industry and securing VC interest. Since the COVID-19 pandemic, market demand is occurring to help bring more automation and adaptability to businesses and people. Avoid the pitfalls of previous robotics startups and reduce your engineering risks by designing customer-driven products. No matter the budget or capital, sizing your solution to the market is easier when you engage with customers early. Then, you set up features against their wants (or what customers will pay for). Remember: Success won’t come solely from solving a robotics problem but it will come when meeting a customer's need.
Take the time to know your customer, the market needs, and the type of investors who can get behind you and your customer-centric innovation. The capital and demand will follow.
Reason 2: Problems with Business Model - Underdeveloped Plans and Priorities
Robotics startups often over-focus on technology and disregard its business fundamentals. The product and testing phases of robotics manufacturing won’t sustain well without a practical business model. That said, you can start or redirect at any time and create a business model built for scale.
Below are key considerations a robotics business model built for scale should have:
Company plan - legal entities, taxes, insurance, branding/marketing, permits, licenses, etc.
Real-world applications
Market need and purpose (in a proven market or a white space market)
Scope of solutions solving the need or problem
Requirements plan
Production and operational efficient plans
Target customers, demographics, and customer acquisition plan
Startup and ongoing costs
Pricing strategy and revenue plan
Pilot program plan
Manufacturing plan
Maintenance strategy
With the right application and matching your innovation plan to the right use case (specifically designed to customer needs), the above outline will help with identifying the priorities and most effective execution plans to scale successfully.
Reason 3: Not the Right People at the Right Time - Overhiring Team Members and Under Hiring Key Resources
It’s unfortunate but 75% of venture-backed startups fail. And based on an analysis from CB Insights from roughly 156 startups post-mortem, one reason they failed was not having the right team. You can redirect this outcome by considering the robotics ecosystem and vital roles needed at the start and when trying to scale. We recommend hiring a diverse team that will contribute different skill sets. Make key hires that focus on specific roles and objectives while outsourcing the rest to scale quickly.
There are many compelling reasons to outsource production, such as assembly. Reasons like keeping overhead costs down and development speed high. Another big reason is the ability to hire in-house experts that keep focused and work on the right needs.
For example, a lead engineer is hired to innovate and design when starting your robotics business. But as you begin to scale, the lead engineer often becomes a triage role. To keep up with the startup and manufacturing demands, the lead engineer is now attending all meetings regardless of role relevance and project managing many workstreams. They are now spending more time triaging than innovating. Not to mention, there is more risk of this lead engineer burning out or being inefficient due to a lack of experience in certain tasks or ownerships. Consider outsourcing an experienced contract manufacturing company to help execute plans and project management. With the right resource, they can also help with supply chain management and additional roles such as mechanical engineering. This lets you focus on investing in a diverse team while still leveraging a set of experts that fulfill multiple, critical roles needed at start and scale-up.
Why are robotics startups dying?
Building robotics companies is one thing but understanding how to scale a robotics company successfully is different. Robotics startups aren’t dying completely but are failing in a few preventable ways. Some preventions include focusing on:
Business fundamentals
Customer needs and the right market fit
The right people - employees, external partners or resources, and investors
Designing the right solution
Innovating solutions to the right problem
Launching at the right time
Why is it so hard to build profitable robot companies?
Simply put, if you do not build a robotics company that solves a market need or built from customer-generated feedback and what they value, the revenue and demand will not exist. You may get investors who are sold on the excitement around your robotics ideas and capabilities, but it doesn’t mean you will be profitable when your products go to market. Take the time to understand the market needs and design your solutions (features and offerings) to the customer’s needs.
How can I build a robotics start-up?
Before starting a robotics start-up venture, research market needs and talk with your target demographic. If you don’t know what the market fit is or your demographics yet, start by developing a business plan and creating your business model. When you have these preliminary stages set it is best to plan your team of people. Identify a diverse team that will be the right people at the right time. List additional hires or resources you want as you scale and obtain more capital. Don’t be afraid to outsource to contract manufacturing experts who can fill multiple roles under one entity and help allocate available funds to other key hires or business investments.
Scaling your robotics startup is possible and it starts with avoiding common operational and business missteps. Although we learn from our failures, we can also learn how to succeed better. View this Quick Guide on the three most important steps to take your robotics company from prototype to production - in a scalable way.
