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Capable, self-operating machines are increasingly becoming available to help people reduce time spent completing tedious, repetitive tasks and improve levels of quality. The promise of robotisation within many areas of life potentially suggests that we are at the dawn of a new industrial revolution that will spur on the global economy over future years.  Consequently, robotics looks likely to emerge as one of the hottest areas of early-stage investing in 2017.

For years seed-stage investors have treated hardware start-ups with a certain amount of scepticism due to the high level of cost associated with bringing products to market.  However recent rapid falls in the cost of low-run component production (by use of 3D printing etc) and the growing sophistication of widely available cognitive computing packages (from IBM, Google and others) has created a new opportunity for much leaner hardware start-ups to cost-efficiently develop their  ‘minimum viable product’ and demonstrate some initial commercial viability.

Until recently the vast majority of robots were sold to automate high-volume manufacturing tasks, however much of the excitement around the new generation of robotics start-ups appears to be focused on applications outside the factory.  Robotics increasingly is becoming a general-purpose category which can be applied to a wide variety of activities across a broad range of business sectors such as logistics; agriculture; construction & civil engineering; domestic appliances; security; or specialist medical equipment. 

There is some initial evidence to suggest that a vibrant scene for robotics innovation is beginning to emerge in the UK.  British universities are home to some of the best robotics and artificial intelligence labs in the world and, as the pool of national expertise grows, we are now starting to see this spill out into applied commercial activities. 

For example: Amazon Prime Air, in the last month, has commenced in East Anglia the first field tests, anywhere in the world, of its autonomous drone-based parcel delivery service; Google DeepMind, based in London, continues to pioneer the application of cognitive computing to real-world problems; and Dyson released its 360 Eye vacuum-cleaner in 2016, its first commercial robot. 

Alongside headline-grabbing developments within institutions and large corporations, we have seen increasing numbers of robotics start-ups being born over recent years.  The first incubator programmes, such as the one at the Bristol Robotics Laboratory, are now acting as the launch-pad for some exciting companies like Open Bionics and Reach Robotics.  Additionally, the recent launch of the British Robotics Seed Fund, the first investment fund focused on UK-based start-ups, will allow promising businesses to finance their formative activities and become investment-ready for the larger amounts of later-stage capital needed to scale-up a promising product.

In terms of the specific investment themes that we might look out for in 2017, there are three which really stand out: (1) Frugal robotics; (2) Addressing labour shortages; and (3) Stepping stones to autonomy.

1.       Frugal robotics is a trend looking to find ways to aggressively reduce the cost of robotics components and platforms so that the amount of upfront capital investment that a user is required to make can be minimised or, in some cases, be completely substituted by a monthly service payment.  This approach is sometimes known as “robotics-as-a-service”.  London-based start-up Automata Technologies, a maker of low-cost robotic arms, won ABB’s global innovation challenge in October last year and is heading down this route by charging its customers a sub-£300 monthly fee for an arm, where currently an equivalently specified alternative would cost in excess  of £25,000.

2.       Addressing labour shortages that have arisen from of a lack of human appetite for particular types of work is an obvious application-area for robotics.  For example, since the fall in the value of Sterling following the Brexit vote, it has become extremely difficult to find agricultural labourers to work on British farms.  In recent times much of this work was done by casual workers from Eastern and Southern Europe, but now they are less inclined to come.  Without this pool of labour, farmers are having to take a serious look at robotic substitutes.  Dogtooth Technologies, the developer of a strawberry-picking robot, is undergoing trials with a number of major fruit-growers with an automated picker that promises to deliver price improvements versus human labourers and substantially improved levels of quality.

Equally, labour shortages for carers-of-the-elderly are well documented.  There are a number of teams looking at ways that robotics solutions could be introduced to deliver higher levels of care to older citizens whilst reducing the manual cost of service provision.

3.       Whilst, in the popular imagination, robots are seen to be sophisticated, multi-functional and anthropomorphised, the current realty is very different.  Successful robotics start-ups must be laser-focused on addressing a very specific task or problem-type.  Eventually, their robots are likely to need to be largely autonomous (ie to work by themselves without needing a human operator).  However, the technical challenges of reaching high levels of autonomy are significant.  In the early iterations of a robot’s design it is sensible to build in hybrid-controls.  This means that in routine, well-understood environments the robot can operate on its own, but when more complexity arises, control is transferred to a manual operator.  Building stepping stones to autonomy into the product roadmap is essential to managing the cost of robot development. 

In December Just Eat made its first driverless take-away delivery in Greenwich in South-East London using s a small land-based robotic cart developed by Starship Technologies.  These carts are fitted with nine external cameras, a speaker and a microphone so that if they encounter a complex situation, such as needing to cross a busy road, a remotely-based human operator will take control until the autonomous mode can safely be resumed.   

As the tools and expertise required to build a robotics business become more widely available, expect in 2017 to see a Cambrian explosion of creative start-ups, all hunting for early-stage investors. There’s every reason to believe that some of this new crop of British robots will become world-leaders in this new robotic industrial revolution.