In the past half-dozen years, the robotics & drones vertical has grown from a blip on the VC radar into a sector generating dozens of new investments every month. It’s a diverse space that includes companies developing new products of all varieties, ranging from the sort of quadcopters that probably first come to mind when you hear the word “drone” to automation software to full-on humanoid robots.
In the wake of a year that brought new global records for VC deal count and capital invested in the vertical, it seemed worth taking a closer look at a space that looks to be primed for further growth in the years to come as the high-powered technologies that make it all possible continue to develop.
During 2018, investors around the world lined up 364 VC deals worth a combined $4.9 billion in the robotics & drones space, according to PitchBook data, setting new annual highs in both categories. As you can see if you switch between the two graphs below, though, the number of accelerator and incubator investments in the vertical experienced a sharp decline, in what could be taken as either a sign of the industry’s growing maturity or a symptom of an overall global decrease in accelerator rounds across every sort of sector:
The most valuable VC pact to be struck last year in the space involved Ubtech, a Chinese maker of various humanoid robots with names like Lynx, Jimu and Walker; last May, the business brought in $820 million in new funding at a $5 billion valuation, a 5x valuation increase in less than two years. The biggest deals of 2018 also included UiPath, a robotic process automation startup that brought in at least $225 million in November at a $3 billion valuation, as well as Auris, a maker of robotic micro-surgical devices that collected $220 million the same month at a $2.16 billion valuation.
The space has stayed red-hot in the early weeks of 2019, including major new deals for two of those 2018 headliners. News emerged in mid-March that UiPath was raising up to $400 million in new funding at a potential $7 billion valuation, while in February Johnson & Johnson purchased Auris for an estimated $5.75 billion. Meanwhile, a Chinese maker of computer chips used for AI and other automation processes called Horizon Robotics brought in a reported $600 million of new funding in February, the second largest VC round ever for a company in the robotics & drones vertical, per PitchBook data.
For those who have kept a particularly close eye on the space, it’s perhaps unsurprising that New York-based firm Lux Capital was among those who will exit Auris once the company’s sale is finalized. Lux has been one of the most prominent investors in robots and drones ever since the sector began to boom, tying for the top spot on our list of most active VCs in the space since the start of 2008:
The robotics & drones vertical includes companies that make commercial products and healthcare products, machinery and electronic equipment, several different types of hardware and even more varieties of software. Yet of the 364 VC investments in the space that occurred around the world last year, more than a third took place in three specific sub-sectors: aerospace & defense, B2B electrical equipment and B2C electronics.
Let’s take a closer look at each, highlighting the dollars spent and some of the most notable companies raking it all in:
Aerospace & defense
During the past four years, the level of VC interest in drones & robotics companies with military applications seems to have leveled out: Between 2015 and 2018, the annual number of investments in the space hovered between 37 and 40, while overall investment in drones & robotics underwent a dramatic rise:
As you can see, the total value of those deals experienced a marked decline last year, dipping from more than $400 million in 2017 to about $238 million in 2018. But aerospace & defense is still a significant part of the wider robotics space—and the government use of drones as unmanned death machines is certainly one of the sector’s most controversial applications.
Perhaps the most notable company in the sub-sector is ExPace Technology, a maker of rockets, drones and other space-exploration technologies that’s been described as “China’s very own SpaceX.” The company was responsible for a major part of 2017’s lofty funding figures, bringing in a round worth a reported $180 million. In the US, North Carolina’s PrecisionHawk raised $75 million at a $210 million valuation in 2018, bringing in a boatload of cash for its business intelligence drones.
B2B electrical equipment
A company that PitchBook classifies as a maker of electrical equipment could certainly also be described as an aerospace & defense business: That would be Airspace, a developer of AI-powered technologies designed to track and disable unwanted drones. The business brought in $20 million in VC funding during 2018, part of a banner year for fundraising among robotics & drones startups in the electrical equipment space:
Some of the other businesses raising cash in the sub-sector help demonstrate the diversity of the larger robotics & drones industry. There’s Spyce, a startup born out of MIT that’s building a fully robotic kitchen; it brought in $21 million at a $61 million valuation last September. Medrobotics, meanwhile, makes (as you might expect from the name) robots used in surgical procedures, a project that drew $20 million in VC at a $570 million valuation back in 2017. And RightHand Robotics brought in $23 million at an $88 million valuation in December to continue its mission of building fulfillment robots used by ecommerce companies to manage supply chains.
B2C electronics
In 2018, at least, the consumer electronics sector was where most of the big money went. Robotics & drone startups in the sub-sector banked VC investments worth nearly $1.37 billion, marking an enormous increase from the year before:
And considering some of the big names that already exist in the space, it seems more likely to be the start of a new trend than a strange one-year spike. The aforementioned Ubtech is one example, with its booming valuation showing VCs have faith that consumers will buy the sorts of robotic home assistants we were promised by a half-century of science fiction.
And while Ubtech’s current $5 billion valuation is currently at the head of the class, it might soon be relatively small potatoes. Reports emerged last year that SZ DJI Technology, a Chinese company that’s perhaps the world’s leader in building quadcopters and other consumer-friendly drone products, was raising cash at a $15 billion valuation, a figure that would make it one of the most valuable VC-backed companies in the world.
The list goes on, and the uses of drones and robots become more creative. Zipline International certainly qualifies, with its aim of using drones to deliver medicine and other medical equipment to remote hospitals and other locations where supplies can be tough to come by; last March, Zipline rounded up an estimated $70 million in VC funding and was valued at around $620 million. China’s Rokid, the maker of a robotic voice assistant, reportedly added $100 million to its coffers last year. And Makeblock, a developer of robots designed to teach programming and other skills to kids, collected an estimated $44 million at a $441 million valuation.
Featured image via aerogondo/iStock/Getty Images Plus
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