[00:00:00] Episode intro

[00:00:00] Audrow Nash: I've been talking to robotics companies both in and out of podcast interviews for about 10 years now. I hear a lot of things from them about working with venture capitalists and the mismatch in expectations that creates friction for founders and people in technology.

In this time, I haven't talked to many venture capitalists, and I have not had any on any podcast I've been involved with.

This interview is with Sanjay Aggarwal, who leads the robotics and automation efforts at the venture firm F-Prime Capital. This was an eyeopening discussion for me because I got to hear the other side of the story and it makes good sense to me.

My hope in doing and sharing this interview is that some current and aspiring robotics entrepreneurs and technologists get a better sense of what VCs want and are looking for, and that they and their companies are better off for it.

I also found our discussion on the macroeconomic conditions affecting the startup and investment community oddly calming, even though it seems like we're in an unprecedented time.

Lastly, we talk about F-Prime's State of Robotics report, which is the second yearly report that they've made on the robotics ecosystem. It looks at robotics investments between 2019 and 2023 and points out patterns and trends from their analysis.

There were interesting results around what VC money is going towards and how that has changed in the last few years. And it was interesting to put robotics in a larger context with respect to other VC investment categories, like enterprise software.

My main takeaway is that the popcorn pops of successful robotics startups are just beginning and that the future looks exciting.

This episode was launched at the same time as the State of Robotics report. The report is freely available online. You can find the link. in the description below.

Without further ado, here's the interview.​

[00:02:13] Introducing Sanjay and F-Prime

[00:02:13] Audrow Nash: Hi Sanjay, would you introduce yourself?

[00:02:16] Sanjay Aggarwal: Yeah, nice to meet you, Audrow, and thanks again for the opportunity. My name is Sanjay Aggarwal. I work with F-Prime Capital, an early stage venture fund based in Boston.

[00:02:26] Audrow Nash: Hell yeah, tell me about F-Prime.

[00:02:29] Sanjay Aggarwal: Yeah, as I said, we're an early stage fund, we invest across, enterprise software, fintech, and then I lead our efforts looking at the robotics and automation space, so we've been active for, actually we have a kind of a multi decade history of making venture investments, and in the current version of the fund. we actually have a tech fund, which I'm part of. We also do a bunch of work in the life sciences space, with, assist, another team, at, at the firm. but quite active, I would say in early stage, typically doing series A, opportunities as a primary focus area of ours.

[00:03:06] Audrow Nash: Gotcha. So seed in A or just A for this kind of

[00:03:10] Sanjay Aggarwal: Mostly A, but we'll do seed and, we'll do earlier and later. yeah, exactly.

[00:03:16] Audrow Nash: Okay, awesome. Now you were saying that you lead the robotics investment part of this. Tell me about, tell me how that works.

[00:03:25] Sanjay Aggarwal: Yeah, over the last few years, there's obviously been a lot of hype around the robotics and automation space, starting really with the AV market a few years ago. and we started poking our head in, into the space and just trying to get, getting up to speed.

And my personal background actually was, earlier in my career, I was actually working as a robotics engineer at a, a company that focused on manufacturing automation, so I had first hand experience with, call it the earlier generation of robotics and automation solutions. So I had a kind of a natural affinity toward the space.

And I led the effort to get ourselves up to speed and started really looking at the AV space and had made a couple of, smallish investments there, but,

[00:04:10] Audrow Nash: AV that's autonomous vehicles,

[00:04:12] Sanjay Aggarwal: sorry, Autonomous Vehicles. Yeah, Autonomous Vehicles, exactly. and we spent a lot of time there. I think as we dug deeper there, we came to the conclusion that we preferred more industrial sort of use cases and have spent most of the more recent history, focused on those sorts of, looking at logistics and construction and agriculture, oriented use cases for robotics.

[00:04:36] Audrow Nash: Awesome. Okay. So I want to come back to this, but tell me how you,

[00:04:40] Sanjay's background

[00:04:40] Audrow Nash: so you mentioned you were working in the robotics space. Tell me how, tell me what your path has been. So how'd you go from being involved in robotics and where'd you go from there?

[00:04:51] Sanjay Aggarwal: Yeah, so you know, as I said, I did a degree in mechanical engineering and majored in control systems. And so robotics was a natural, starting point for my own career. It was, in those days, robotics is not a new concept. Obviously, it's been around for generations. and it was very standardized, repetitive tasks that you could, automate it in more sophisticated ways.

but it was, very, just repetitive tasks, was a focus in those days. and we built, all sorts of systems for, semiconductor wafer handling and optical fiber manufacturing and these sorts of things, in those days. but after a while I decided I just, wanted to get more into the business side of things.

So I went to business school, worked at consulting for a while. eventually ended up, moving to India, to start a company, focused on the mobile messaging space, and spent a few years there, and after

[00:05:49] Audrow Nash: How did you make that decision to do that? It seems like a big leap. I'm curious what you were thinking at the time.

[00:05:55] Sanjay Aggarwal: yeah, it's, I would say that, I guess I always had the itch in some ways, to do something entrepreneurial, and the company I worked for initially out of school was a startup, and The opportunity kind of presented itself with somebody I knew, in India that was starting this business.

and so it was just, took a leap of faith and said, okay, let's, give this a try. just to try something, try something a little bit different than what I had been doing. which turned out to be a fantastic experience and really, rewarding both for me and my team.

personally for sure, and so did that and really got a first hand experience of what it meant to build and run a startup, and so when we exited that business and I came back to Boston, I hooked up with a team and I knew some of the folks that already at F-Prime and then started working on the investment side of things and, hopefully leveraging some of my own experiences from the startup world.

[00:06:53] Audrow Nash: Why did you move over to investment? What did you, so leveraging your experiences from the startup world, but what was the motivation there? What were you, what was the appeal of venture capital as opposed to just like starting another startup or something like this? How did you look at it?

[00:07:10] Sanjay Aggarwal: Yeah, I don't know. I certainly didn't set out to become an investor I would say. It was a little more opportunistic in the sense that I had worked with some of the folks. so much for joining us today, and we hope to see you again soon. Get reacquainted, with the local ecosystem. And I wasn't sure at the time if I was going to continue with investing or, get back into a startup. And I think as I got more and more absorbed, into investing, just enjoyed it, like you, it's a great opportunity to learn, from very amazing entrepreneurs, the, the pace of change and the pace of new ideas is pretty rapid.

And it just, I guess it, I, grew to like it more and more as I spent more time. And as I said, it's it's quite inspiring to, to see what people are building out there. And hopefully I can provide some useful perspective for my own personal experiences as well.

[00:08:12] Audrow Nash: Hell yeah. Yeah. I feel like one of the other things. That I don't know what your perspective on it is, but it seems like a lot of people, if they go do a successful startup, now you have a lot of experience. and especially like you being a strong entrepreneur on your own, you can go and you can help the startups do that, but you can also now your interest is in robotics.

you can also be an expert in that or have relative expertise in that, which is probably very important for good investment decisions like that feels like a big reason or a big benefit of you going into investment as opposed to someone who has no experience in the area making investment decisions or it may not even be technical say

[00:09:01] Sanjay Aggarwal: Yeah. I would say that venture capital used to be very much, founders who became investors, That has changed, and the reason for that is exactly what you described, which is that. Okay, you have, you understand, at least you have experience on what it takes to build a business.

I would say that has changed a little bit over time, that you find more people that are professional investors and that has, is what they've done. but I think the, expertise that you gain is more about business building as opposed to industries per se, right? in the sense that, industries are evolving pretty rapidly, right?

And the, and I always, believe that the people that have the best ideas, for businesses are the entrepreneurs that we're, talking to and meeting and hopefully investing in, where we hopefully come in as having some kind of overarching view of the industry as to where it's going.

But I say the nuanced view, which really makes all the difference, is really coming from the company more than from the investor by and large. And our focus is hopefully to provide them guidance on. how to think about building their business. what are the right metrics to track? How do you hire the right people?

How do focus on the right strategy to scale, things like that, which are a little bit more, generic in a sense, as opposed to very specific to the industry. so we certainly try to build expertise and, we want to build expertise in industries, but, but I would say that, at the end of the day, it's really entrepreneurs that have the most knowledge about the businesses that they're building.

[00:10:32] Audrow Nash: Yeah, very interesting point so tell me so you said that you first Or did, was it you when you got first involved where you were doing autonomous vehicles? Was that your kind of first foray into investing in robotics? Or how long have you been involved?

and,

[00:10:49] Sanjay Aggarwal: Yeah, when I first joined F-Prime, we were not looking at autonomous vehicles, I would say. I think this has been maybe going on four or five years now that we've spent, we've spent looking at, in the, just generally in the robotics and autonomy space. prior to that, I spent time looking at other areas of enterprise software.

So there's a number of companies I'm involved in that, Martech or, this company in the insurance space, so a few different areas, but over time, I gravitated towards this again, given my own personal background, I found it to be particularly exciting and hopefully, something that I have some at least unique expertise and experience in.

[00:11:31] Investing in Autonomous Vehicles then industrial robots

[00:11:31] Audrow Nash: Okay. And tell me about pivoting from autonomous vehicles more towards industrial and manufacturing robotics.

[00:11:43] Sanjay Aggarwal: Yeah, I would say that, I think the more we spent time in the autonomous vehicle space, the more I think we realized that, a couple of different things, and it informed our own investment philosophy in many ways. number one, these are pretty hard problems to solve.

And obviously, that has been borne out, over the last few years is, as companies that have shut down or faced a lot of challenges or just missed, missed projections on when they're going to, release their products, et cetera. So I think, the more we spend time, the more we realize, okay, these are unbounded problems, which makes, which makes predictability of, hitting any kind of commercial milestones quite, quite hard.

and related to that, then it's like the capital that you need starts to become, really unbounded. And I think we were not like, our goal was not to invest, hundreds of millions of dollars in these companies. And there's obviously some firms that, are able to do that and have done that, but that was not our, our strategy, or even our capability at the end of the day.

And so as there was an early wave of lots and lots of startups. I think that quickly started to consolidate across a few market leaders. and, and as that was happening, we realized, okay, we're probably You know, we don't have the capital capability to put that kind of money in, nor is it really strategically where we want to focus, just given the uncertainty about, actually getting to market.

and we leveraged some of those skills and knowledge and actually the work that I had done in my early career was around manufacturing. and so I had a, my own understanding or appreciation for what that took. and so then we thought, okay, why don't we leverage what we've learned about these newer generation of companies and start investigating other areas, and so there's a whole range of, logistics as a notable example that we spent a bunch of time in and we have an investment in a company called RightHand Robotics in that space, but it's a good example of industrial, an industrial robotics, company that, that you know, that we spent a lot of time starting to explore.

And then, within that, there are many different industries that you can target.

[00:13:56] Audrow Nash: How did you start, deciding on which vertical or which, domains to invest in? Logistics, manufacturing, maybe agriculture, these kinds of things, they seem very promising to me, but how, did you select from them as opposed to anything else?

[00:14:17] Sanjay Aggarwal: Yeah, I would say, again, it was a little opportunistic in the sense that in Boston, there's a very good ecosystem of companies focusing on the logistics space. I think that was, has been born a little bit out of, Kiva, having been based in Boston, and then from Kiva, there were various people that kind of spun out and launched companies.

In the logistics space, a little bit was, we're based in Boston. And so there are a lot of local companies that were focused in that area. and so it was a natural starting place, combined with the fact that I think the, the market opportunity and logistics is quite appealing.

if you even look at investment numbers today, it's probably the, one of the biggest categories of robotics investment just because of the sheer demand for, from e commerce and the like, that is driving a lot of robotic solutions and also Amazon, being the, the, the bellwether for what other people are trying to emulate, being very, aggressive in robotics.

So I think that it just was a natural starting place, partly just because we were in Boston and there were a lot of companies, and so we started there and then over time started to, expand into looking at other, other areas as well.

[00:15:29] F-Primes portfolio of robotics companies

[00:15:29] Audrow Nash: Okay. do you wanna, I would love to hear about some of the robotics companies that you are invested in, your portfolio. wanna give me just a short description of each of, or of a few of them?

[00:15:43] Sanjay Aggarwal: Yeah, absolutely. so one of the first investments we made is, was from the time we were looking at the autonomous vehicle space, which is in a LIDAR company. the company is called, it used to be called InnoVuzion. They rebranded as Ceyond. really interesting company. the founder had been, working on, LiDAR systems at a variety of companies and had his own perspective on what the, what the enabling technology should be, what the right technology strategy should be for, for LiDAR, because one of the challenges in LiDAR is that there are many different approaches that people are taking, from the spinning LiDAR, which was the early days of Velodyne to other people trying to do solid state and, other approaches.

yeah. And that was one of the first investments we made. one of the reasons that we made the investment actually was that, they had already been in a sense vetted by NIO Auto in China. they had looked at the market and identified, they thought this was the company that they would partner with, ultimately.

It took a little while for that partnership to, to take off, today, although it's not super well known in the, US although they are based in California. They're actually standard on every single NIO car that, is sold in China. So they've literally produced, hundreds of thousands of, LiDAR today, and have done really well.

But, like the LiDAR market, as you, if the LiDAR market is, a pretty challenging market. There've been, there were a lot of companies that, that were launched. not, many of them have promises of OEM contracts, et cetera. Others never got there. but, It takes a lot of money to actually build an automotive grade sensor. these guys, partly because of their NIO partnership have, been able to successfully get to that point. again, as I said, as we got deeper into the market, we were really excited about our investment there.

but over time just realized the capital needs for companies like that were such that we. Then we started focusing on logistics in the first place. we ended up investing in RightHand Robotics here in Boston. they make, piece picking for, for e commerce. And so if you look, if in the logistics space, there are a bunch of different people making different kinds of robotic arm solutions for different use cases.

Some are doing parcel handling, for example, others are doing, piece-picking, even within piece-picking, there are different companies, focused on, let's say, food or clothing or just, general e commerce goods. so RightHand is focused on the, last, so they, for example, recently announced a partnership with Staples, where they're going to

[00:18:24] Audrow Nash: Oh, cool.

[00:18:25] Sanjay Aggarwal: the

[00:18:25] Audrow Nash: Good for them.

[00:18:26] Sanjay Aggarwal: Yeah, really, impressive accomplishment, by them, and anyway, that was a good example of a company that, really impressive technical founders, it's taken them a while to really perfect the solution, just given, again, it's a pretty hard problem to solve, you, because it's a problem you can't solve at the 80 percent or 90 percent level, you got to solve it at like the 99 percent level,

[00:18:50] Audrow Nash: or nine, a few nines.

[00:18:52] Sanjay Aggarwal: Yeah, so getting to that last bit takes a little

[00:18:55] Audrow Nash: Way longer. Yeah.

[00:18:57] Sanjay Aggarwal: but yeah, they're a company that we've invested in the logistics space.

[00:19:04] Audrow Nash: Hell yeah. I really like them. One of my, when back in the Robohub days, I think I interviewed them quickly. and we hung out a lot at ICRA, the robotics conference and there were a lot of fun people. I really like them as a company and hope to catch up in the near future.

[00:19:20] Sanjay Aggarwal: Yeah, they had the most amazing office. If you ever went to Boston, they used to, they used to occupy an abandoned UPS facility,

[00:19:29] Audrow Nash: Ah,

[00:19:30] Sanjay Aggarwal: It was quite, quite the cool office that they had.

[00:19:34] Audrow Nash: Hell yeah.

[00:19:35] Sanjay Aggarwal: Yeah, then we have a couple of other investments. One's a company called Burrow in the agriculture space.

So they make a small autonomous vehicle to help move. Goods in either outdoor or indoor agricultural environments. And then the last company is a company called Taleo, which is a hybrid, remote operation, an autonomy solution focused on construction and mining use cases.

[00:19:59] Audrow Nash: Yeah, both very exciting. Burrow, it looks really cool. I'm very excited about the agriculture space. Actually, the mining space is very interesting too. I, those seem like very good tasks for robots to me, just, to helping out there. And Burrow, it's, funny, it's like donkey, right? Doesn't, and so

[00:20:18] Sanjay Aggarwal: Yeah, I'm sure that was the, the tongue in cheek kind of inspiration for the name. but yeah, there's been a, there's been a fair number of companies focused on agriculture, and we spent a lot of time, meeting many of those companies. Many of them are focused on harvesting itself, So actually, picking crops,

[00:20:36] Audrow Nash: Oh, that's super hard. Okay.

[00:20:38] Sanjay Aggarwal: but I, yeah, I think we concluded that's just hard, It was hard enough in RightHand Robotics case in an indoor environment.

You could get an outdoor environment,

[00:20:46] Audrow Nash: Sun and dust.

[00:20:47] Sanjay Aggarwal: And it's up and down a row, like really hard.

I think several companies have started to crack it, but, it's taken a little bit of time. But I think we like the kind of the simplicity of what Burrow was building. And it was also, I think, in some ways, I feel like it was a It's emblematic of the new crop of robotics founders that we see today, which is that, Charlie, the founder of, of, Burrow was actually a farmer growing up, so he deeply understood, the, needs and could really identify with, with the potential customers.

And so he is very pragmatic and trying to build a solution that, that work, that could be quickly deployed, that, delivered value, very, in a very short period of time. and I think that, that kind of ethos was really what enabled them to, to get to market pretty quickly with a solution that's quite effective and was quite unique in the market at the time.

now there's starting to be some similar players out there, but. but they've done really well. they literally have hundreds of devices out in the field, today.

[00:21:52] Audrow Nash: Mhmm. Yeah, that's so cool. when you say, the thing that struck my ears was, new crop of founders. What do you feel like they're doing differently?

[00:22:03] Sanjay Aggarwal: I think there's, I think there are two or, there are a couple of things that we see. so it, used to be that, prototypical robotics founder was, they came out of a PhD program, had done robotics, had, were very technically talented, but they were a technology looking for a problem, in a sense. and. and I think that, that proved to be difficult in some ways, right? in the sense that it just takes a while to navigate yourself to, yeah, what is the right problem? how do you, because now you have to not only identify the problem, but also understand the industry, understand how do you sell to that industry?

There are many kind of dimensions of what you have to solve. And, I think the stereotype is that, you're almost too in love with the technology, as opposed to solving a problem. And obviously, that's not true in all cases, but, oftentimes, I think, maybe there's a risk of a solution being over engineered for a problem that you're trying to solve.

I think there are two things that we see differently today. number one, you see a lot of, of people like Charlie, at Burrow who, they're, they, they, have a deep, they start from an understanding of the industry. that's their story.

And the technology is a means to an end as opposed to the, end in and of itself.

And very pragmatic in terms of, let's, build something that works, without trying to solve everything. and I think that has proven to be in some ways, maybe they don't build the most, technically amazing problem, solution, which is, not to say it's not great.

technically strong, but they're not trying, they're not so in love with the technology that they want to make something that's, that's incredible. They want to, they're actually just in love with the problem, and they're trying to solve the problem. so that's one dimension.

And I think the second dimension, which is a, kind of a, actually a more, an example of Taleo, which is that, there's a bunch of founders that sort of cut their teeth on in the autonomous vehicle industry. so they spent time there under, like understood number one, how do you productionize, code for this, productionized solutions in these industries.

And so that, gives the, much faster cycle times, but also again, are just more pragmatic, because they, they did see the challenges of the autonomous vehicle industry. and so I think they, tend to just. Attack the problems in a more pragmatic way without trying to solve everything.

I think, again, very much informed by, the challenges of launching a, autonomous vehicle for passenger roads.

[00:24:39] Audrow Nash: Definitely. I see it like, robotics is really hard but it's becoming easier and so now you're starting to see people that can come in with a little bit less technical knowledge or no technical knowledge and maybe get a good co founder that has that technical knowledge and then they can actually start to provide value especially if they stick to deeply pragmatic solutions that often have tons of value, Just because they weren't being done, or they can free up some hands to do some other work, or anything like this.

[00:25:15] Sanjay Aggarwal: Yeah. Yeah. And again, I think it, like it has to be born from a deep understanding of, of the industry that you're serving, right? Like only then can you envision, okay, what would be a solution that would be helpful here? And to your point, yeah, you don't, you can hire and you can find co founders or engineers that can help you solve the problem, but it's got to start with an understanding of the problem itself.

[00:25:38] Audrow Nash: Yeah. It's interesting to me going from autonomous vehicles, just like autonomous cars on the street to like Burrow, which is very practical and a much easier problem. It's I feel like it's, a nice thing for the robotics industry because we're going from something that's really flashy and seems very big.

and when we solve it, it'll be just amazing. but very hard. And then Burrow, which is. Very cool, very practical, probably has strong ROI for the customers and, probably has less risk for like less technical risk as a company, than autonomous vehicles. So I like this trajectory in robotics.

[00:26:28] Sanjay Aggarwal: Yeah, it's it's the irony of robotics, I would say, which

[00:26:32] Audrow Nash: Tell me about it.

[00:26:36] Sanjay Aggarwal: as, a, consumer, as just your layman, so to speak, what are, oh, yeah, people making humanoid robotics, or people making autonomous vehicles, where, you you, never have to drive again.

And those are fantastic visions. I

[00:26:51] Audrow Nash: Oh yeah, all

[00:26:52] Sanjay Aggarwal: I, I find it, like it's hard to imagine that those things

[00:26:55] A new type of robotics founder

[00:26:55] Sanjay Aggarwal: won't exist eventually, but but there's so much technical uncertainty that it a little bit, it's not clear how it fits into the venture capital market, right?

it's one thing

[00:27:10] Audrow Nash: because it's unbounded in a sense. Is that why or what

[00:27:13] Sanjay Aggarwal: Yeah, from a VC's perspective, like they're looking for,

[00:27:17] Audrow Nash: Return on investment.

[00:27:19] Sanjay Aggarwal: yeah, they're looking for returns, which is driven by, the standard kind of, framework, I guess is like you're hitting commercial milestones at each point, at various points along the trajectory of a business.

Now, if it's, if you have to raise a hundred million dollars to get, to any kind of material commercial proof point, okay, that's, that is not the typical venture capital. you have this kind of big vision around, okay, yeah, there's all these cool technology that you could build, but, it may just be so challenging that you don't, like, how do you marry that with the ability to actually hit some kind of, proof, like market proof points in some way.

bounded time with a bounded amount of capital, right? And so I think the pragmatism of what, what you see a lot of today in robotics is driven by that, which is, hey, it may not seem the, visions that people have about what robotics are, but they're actually solving very, very real and very practical problems.

[00:28:21] Humanoids

[00:28:21] Audrow Nash: Now, you brought it up with the humanoids. What do you think of a lot of the interest in humanoids? In humanoids in general?

[00:28:31] Sanjay Aggarwal: yeah, again, I've met a couple of the companies and, it's pretty, it's quite amazing,

[00:28:37] Audrow Nash: Oh, definitely.

[00:28:38] Sanjay Aggarwal: building, And I was very favorably impressed, with what, with what I heard and what I saw. again, I think the, question is to, there, there's always investors that are ready to make investments in these kind of big, home run type of opportunities.

and you've seen, I think Figure, for example, announced an investment from OpenAI, for example. or Tesla, investing in, in their robot. and like with Tesla, okay, like it's different. Like I think their, math of, okay, is this a worthwhile investment? It's a little bit different than an investor because

[00:29:18] Audrow Nash: Oh.

[00:29:19] Sanjay Aggarwal: they're their own captive customer, for example, right?

they don't have an unlimited amount of capital, but they have, their, goal of ROI, so to speak, is not, necessarily, as, they can think in a much longer term way, perhaps, than, your typical investor can. And so when I look at humanoids, I think the question that I have is that it's hard not to imagine that they will exist at some point in the future.

what's less clear to me is will they exist, in any material way, in material way, just meaning, in terms of practical applications that are in the market, solving real problems. And, In five years, 10 years or 50 years, right? And so as an investor, it becomes, it's a, sort of a hard place to invest in, I believe, unless your, time horizon is, it's much longer or much more flexible, to do that.

And so again, like you, you see these videos that people release and they're pretty amazing, right? like hard to imagine like what people have created, but, but the, but making those systems do real world things, I think is still a little bit of a ways off and you starting to hear some Agility, for example, had, announced like some initial pilot at Amazon warehouses, for example.

And it may be closer than I think, in some cases, but, I think again, like my guess is that those near term use cases will be narrowly defined, very, not, the vision that one imagines of a humanoid, but actually pretty, fairly, constrained, use cases to be able to, to achieve, some, again, some kind of commercial milestone.

[00:31:02] Audrow Nash: yeah. Yeah. I talked to Melonee, about their humanoid from Agility and it sounds like they have pretty good market fit with that. there's a, they, provide ROI in a reasonable timeframe, but you're probably right that it is narrow in terms of, actual application, and like it won't be just doing everything in your house super soon.

[00:31:26] Sanjay Aggarwal: Yeah, just as an example, like they don't have an artic they don't have a hand, in Agility's case, right? I mean they, yeah, they don't have, they're not trying to articulate finger, fingers, and so that's one way that they've, significantly simplify the problem, right? I think what they are doing is they have a very specific use case that they do, which by itself is not easy, right?

But again, like they're pursuing one use case, they're not trying to do, a hundred use cases, right? And I think again, like the, path to rollout is probably going to be look like more like that than again, what one might, envision in their mind. but yeah, I think it's an interesting and exciting space, one, it's very hard to predict how it's going to play out.

all

[00:32:10] Audrow Nash: heard, so I host spaces and we talked about humanoids many times, but one of the interesting ideas was the reason, because a lot of investors have really piled on for humanoids in my, from my perspective, maybe that's wrong,

but from that appearance, a perspective of someone else was that the reason is because with humanoids, with the promise that they can go do general tasks,

[00:32:41] Sanjay Aggarwal: Yep.

[00:32:42] Audrow Nash: there is a potential for a much bigger return on investment for this kind of thing.

Like their, point was that most robotics companies have pretty narrow markets and therefore you don't see a hundred times return. You see a 10 times or 10 times return. 20 times return, especially if you invest a bit later in the company, but with this, the market is enormous because it could just do all like manual tasks in a sense.

what do you think of that perspective? And I guess it probably comes down to timeline, but what's your, what are your thoughts?

[00:33:17] Sanjay Aggarwal: Yeah, I think timeline and capital, right? yeah, the concept, yeah, what you said is, hard to debate. the question is how much money does it take and how much time does it take to achieve it, right? Because if you just wanted to move in, again, I'm no expert on Agility, generally what I understand is they're moving totes from kind of point A to point B, right?

[00:33:39] Audrow Nash: Yeah. That's

[00:33:40] Sanjay Aggarwal: I am sure that you can build a robotic arm solution or some other solution to do that specific task, probably in a, equally efficient, probably less capital intensive way, but it would be a single use solution.

[00:33:53] Audrow Nash: Yeah.

[00:33:54] Sanjay Aggarwal: And so as you try to build generalizability into many different tasks, yeah, that's great.

But again, does it take, how long does it take and how much time does it get to get there? And do you just run out of steam before you get there? And again, in some ways, like that's the, that's what happened to the autonomous vehicle space, which is that. like some of these companies have raised billions of dollars literally, right?

You know with the same print premise, which is that okay. Yeah, if you can build a generalized autonomous vehicle Like okay, there's this massive TAM, but you know at some

[00:34:26] Audrow Nash: What's TAM?

[00:34:27] Sanjay Aggarwal: like just a addressable market, you know is is massive but But you know now you look at it and okay, it's been you know people miss their deadline, over and over again, like you're all the negative press with Cruz and Waymo and so forth.

And it's okay, you wonder, people may just run out of patience, right? And people and the money may run out, and so you never get there. And so I think that's the potential risk with humanoids. I don't, I don't know if that's what will happen, there, but, again, like if you can build it, fantastic.

But, do you, can you actually get to the finish line is question mark in my mind.

[00:35:04] F-Prime's State of Robotics report

[00:35:04] Audrow Nash: Gotcha. Now, you have, segwaying a little bit, you have worked, or, F-Prime has worked on a State of Robotics report. would you tell me a bit about that?

[00:35:17] Sanjay Aggarwal: Yeah, absolutely. I would say that as we started spending more and more time on the industry, I think one of the, things that we realized is that it's not a well covered industry, right? the data that exists for robotics as an industry, Is, is spotty at best. so it's hard to know what's actually happening and, as an investor, or even as a, as an entrepreneur, for example, like it's helpful to understand, okay, how many, how much money is being raised into this space?

What are the hot sectors? what are, who are the investors, all sorts of, these kinds of dynamics to help inform your own thinking, about how to, approach the market. and as we started digging in more and more, we realized that part of the problem is that.

the industry itself is not well defined. what is robotics actually? And so we undertook a task, starting last year to really do a bottoms up, analysis. literally we went through thousands of deals to figure out like, what is robotics, what's not robotics, and then create our own taxonomy in a sense, around different categories.

And then use that as the basis for then actually creating a little bit more. comprehensive and accurate, view of the market. And with that, we published the first one about a year ago. We're working on the second, the second report now. and we, we created a taxonomy and really, created what we call three different categories.

one is AV, autonomous vehicles. really focused on passenger, or I'm sorry, on public road use cases. So things like what cruise is doing, but there's also trucking, for example, on, on public roads, the second is a term that we coined called vertical robotics, which is, just, really industrial robots that are focused on very specific vertical use cases, so something like RightHand on, logistics or Burrow focused on agriculture, but they're really trying to solve a very particular use case. and the third is what we call enabling systems. So these are people building new sensors or new, testing, software tools for testing, or a lot of people are building, development platforms for robotics. So they're not, building an end to end system, but they are building tooling and systems that help, hopefully, enable, The next generation of robotics companies to, to, be more productive, to do things more efficiently, et cetera.

so anyway, it was a really interesting process. I think we learned a lot. hopefully the, the investor community and entrepreneur community found it, found it useful. And, and again, we'll, keep publishing, our analysis just to help, help everyone understand, like what's really happening, in the market.

[00:38:00] Audrow Nash: and what are you finding? what have been some of the larger takeaways from the report?

[00:38:06] Sanjay Aggarwal: yeah, I would say, one is, the market's pretty decent size, if you look at the last, call it five years, there's been almost a hundred billion dollars, invested in, the broadly defined robotics categories, as I described,

[00:38:20] Audrow Nash: how much at each? Because I'm curious if most of that gets eaten up by autonomous vehicles or

[00:38:25] Sanjay Aggarwal: so that's, that was one of the big trends that's happened. that was in some ways, that was the spark, if you will, for the excitement in the category. so if you look back, four or five years ago, I think it was like 70, 80 percent of the funds were going into autonomous vehicles.

And this is when, the Cruises of the world were raising billion, billion dollar rounds, there was quite a lot of money going in, but over the last few years, like the autonomous vehicle market is starting to, really retrench it, certainly from an investment perspective.

I think it peaked at something like. 10 billion ish a year. last year it was close to two, right? So really, strong pullback.

[00:39:04] Audrow Nash: That is

[00:39:06] Sanjay Aggarwal: and then in its place, this vertical robotics, categories I described has really started to take over and is now the majority of investment, is from vertical robotics.

again, logistics, and there's a lot going in defense and medical robotics. so that's, been the, shifting mix of where the investor dollars are going. and then there's a, just the macro headwind,

[00:39:29] Macro forces for declining investment cash

[00:39:29] Sanjay Aggarwal: I would say, in the venture community in general, which is like investment dollars are obviously, declining, pretty rapidly, certainly off of the highs from 2021.

Yeah.

[00:39:52] Audrow Nash: baby boomers are retiring. So over half of them are retired now and they were at their peak earnings. just before. And then once they retired they transitioned their wealth into safer things, bonds and t-bills and those sorts of things, and not risky funds so then the capitol goes away. How do you look at that macro trend, or what do you think is driving it and what do you think the future of it will be?

[00:40:18] Sanjay Aggarwal: Yeah, that might be, if that's true, I might describe that as a second or third order effect. I think what, the reality today is they're like funds and people raise massive amounts of funds. So there's a ton of so called dry powder, meaning that, funds that were raised that have not yet been deployed, into investment.

So there's no shortage of cap, sorry, there's no shortage of capital, today. I think what happened was that, there, there's a market euphoria, literally,

[00:40:50] Audrow Nash: As a bubble, basically.

[00:40:51] Sanjay Aggarwal: Yeah, like late 2020, late, 2021. and so what happened is like the dollars went through the roof and along with it, valuations really,

[00:41:02] Audrow Nash: Soared.

[00:41:04] Sanjay Aggarwal: and some of the traditional fundamentals that people, investors were looking for around again, market traction, et cetera. we're put aside to some extent, as people, we're chasing, the hot deal, so to speak. and now as the, public markets corrected, like then the private markets tend to, correct as well.

And what you see generally in the invest, in the venture markets is that when you look at very early stage deals like Seed and Series A, they've actually been pretty robust. Actually, they haven't really changed that much over the last couple of years because at those stages, people aren't looking for, revenue tart, revenue figures or whatever.

Like they're investing in a concept, a team, a market, et cetera. and, combined with the fact that there is tons of capital out there to be deployed. And so that part of the market has been relatively less affected and maybe even not affected, in a sense. but as you get into

[00:42:02] Audrow Nash: You said seed and A typically.

[00:42:05] Sanjay Aggarwal: yeah.

so those funds, yeah, like the amount of money that's gone into those stages have been flat,

[00:42:11] Audrow Nash: Is that in, in robotics you're saying, or in startups in general or.

[00:42:15] Sanjay Aggarwal: it's definitely true robotics and in general, in the broader market, I don't have the exact numbers, but,

[00:42:20] Audrow Nash: Yeah. Just your feeling is interesting.

[00:42:22] Sanjay Aggarwal: Yeah, but as you get into later stages, like B, C, D and beyond, that's where you start to have.

Challenges, which is that, maybe the company was overvalued, in a previous round or at least overvalued relative to current valuation metrics. And so now, there's a disconnect between what the investor is ready to pay and what the founder is wanting to raise at.

And so it just creates fiction, in terms of, raising rounds, maybe the metrics never, were what they should have been. And they didn't really improve the metrics over the last couple of years. And it just becomes hard for companies to raise money at all. and so there's been a real slowdown in those kind of later, mid to late stage rounds, as I think kind of price discovery has been an ongoing process.

again, just meaning how much the investor wants to pay versus how much the founder, wants to raise at. And, and then also people were raising, because of those dynamics, people were raising extension rounds, essentially, which is, the existing investors put in a few million dollars more so I can extend my runway before I have to raise again.

So that just created a delay, effectively, in when rounds were being raised.

[00:43:34] Audrow Nash: Interesting. I've heard one of the things related to what you're saying that I've heard about and not sure again if it's true, but a lot of companies in this kind of peak 2021 Era, they raised at ridiculous evaluations. And so what they would have to do to get another round of investment is often do a down round.

So they would have to accept a smaller valuation than they got at the previous round. And no one likes that bad for all the previous investors and looks bad for the company.

[00:44:08] Sanjay Aggarwal: So that, yeah, that's a perfect example. it just slows. eventually the company needs money,

[00:44:14] Audrow Nash: yep.

[00:44:15] Sanjay Aggarwal: and in 2021, they raised, people raised very large rounds. And so the runway that they had was maybe long, typically it would be like 18, 24 months. Maybe they had 36 months of runway or 48 months of runway, especially as they started to cost.

Just because the round sizes were so big, so they were able to kick the can down the road, so to speak. But eventually, either you get the profitability or you have to raise, and then the reality of I might have to raise a down round, it's unavoidable at that point.

I think that's where we're working, the market is working its way through all of that.

[00:44:49] Audrow Nash: Interesting.

[00:44:50] Sanjay Aggarwal: I wouldn't be surprised, like late 2024, like you'll see more of that happening or a company will just go out of business, which, you see

[00:44:58] Audrow Nash: That

[00:44:58] Sanjay Aggarwal: in a while, more and more of that, today as well,

[00:45:01] Audrow Nash: Yeah, it feels like a lot of companies are being squeezed maybe because of this. It's like too much fertilizer or something. It grows too fast. It's not, then it needs more and then it can't get as much. So then it dies, this kind of thing. What do you think? so I actually, it sounds like you're saying that this is a necessary correction in a sense in the markets or in the valuations because they were in a bubble effectively.

And so that, that bubble has to be. Worked out in a sense, and then after things will return to normal, we're assuming, or what, kind of thing

[00:45:40] Sanjay Aggarwal: Yeah, I'm not sure what normal will be, but there'll be some, there'll be a new normal, but yeah, unlike in public markets where there's like a real time pricing that's happening, like public private markets aren't subject to that, right? And they just, have a way of taking more time to, for that process to play out.

But it's happening. this is why people are, layoffs because people are trying to cut the burn, to extend the runway, to get to better metrics. it's a, hopefully a healthy thing for the market as a whole, as companies build more sustainable business models. But, it can certainly be a painful process at the same

[00:46:20] Audrow Nash: for individuals and maybe companies. Yeah, for sure. what are you, the one thing that's interesting, and I don't know if it's related, but I'm curious to think, see if you do think it's related. it's been.

[00:46:32] Why are companies not IPO'ing lately?

[00:46:32] Audrow Nash: Many, I've been hearing that most companies are like, it's very hard to IPO now. it seems like companies are not iPO ing, is that shaped by similar forces because maybe their valuation is lower and they don't want to do the down round or something with the evaluation at the IPO or I don't know exactly how it works, but any thoughts on why IPOs may not be happening as frequently

[00:47:04] Sanjay Aggarwal: Yeah, I think there's definitely a dynamic you described, which is that, okay, the valuation that you might get at the IPO may not be appealing, certainly relative to your, the last round or what your expectations were. So I think there's that part of it. I think that the other part of it is the market itself, right?

Is the market ready to invest in these companies? And so you know, and I think there's a huge, one of the things that F-Prime does actually is spends a lot of time in the FinTech space. So we just published a FinTech report also, and and there's like a huge backlog of coming, like you take Stripe as the poster child of the FinTech, era, there's, they've been, rumored to want to go public for quite a long time, but they haven't yet, partly because the market, they probably could go public at any time, but, they probably have certain expectations about, what valuation they, they want.

And, so part of it is the market itself, like how, much appetite is there from the market side to support, to support these companies and to, give them, attractive valuation. So I think it's, it seems like it's starting a little bit. there's been a few recently, if I remember, but, but yeah, I think that I think, as a VC, like your exit, path ideally is either M& A or IPO.

And so if the IPO markets are slow, like that affects obviously how you think about, your, exits and your timelines and, and how much you can exit for. And M& A has also been quite slowed as a lot of the large corporate buyers are, have similarly slowed their,

[00:48:35] Audrow Nash: They're, subject to the same forces too.

[00:48:37] Sanjay Aggarwal: Yeah, exactly. Their own stock might be down, their, they have investor pressure to reduce cost, the regulatory challenges. There are all sorts of kind of headwinds, I would say, in the exit market more broadly, which is very market driven, I would say.

[00:48:51] High interest rates and how that effects the VC business model

[00:48:51] Audrow Nash: How do you think, and we'll go back into robotics, but I'm curious about all your market, or economy point of view. I'm curious about your economics takes. oh, how do you think the high interest rates are affecting things? like what do you, to me, it makes it so people are investing in more Things that are lower risk and more likely to do better than like I've heard a lot of things described as like zero interest phenomenons because cash was so cheap that like just throw it at anything and now it's like you need something valuable and I feel like it's actually doing well for robotics but I like I feel like this has been like robotics has been doing okay but I'm curious about your thoughts on this and on the interest rates and how it's been affecting things.

[00:49:43] Sanjay Aggarwal: Yeah, I think at a simplistic level, like you said, the money used to be, free, so to speak. there was no cost to, even if you want to borrow money, the interest rates on borrowing were quite low, if you're taking, equity money, etc.

[00:49:57] Audrow Nash: Or negative interest rates in some silly places occasionally,

[00:50:01] Sanjay Aggarwal: Yeah, exactly. But, yeah, I think the, the simplistic way that it affects things is people, that people are looking for a faster path to profitability, right? Where you're not burning money, but you're actually making money, right? And so I think it just drives the behavior that, at least certainly investors are expecting is, more capital efficient businesses.

lower burn, some, maybe being able to on your last round, get to, get to profitability if you had to. but just, a less focus on growth at all costs, so to speak, and more focus on kind of capital efficient growth, and hopefully hitting some level of, profitability of, in the, and depending on which stage, obviously, but, in the, foreseeable future.

[00:50:48] Audrow Nash: Yeah. And growth at all costs to me implies looking for a bigger multiple. So they're looking for a hundred or a thousand times on their investment or something like this. Whereas more profitable probably implies a profitable, like lower risk would make it so that maybe it's a lower Return. So do you think that, the venture capital model is going to be changing or maybe the average goes higher because all of the ones do not unicorns, but all of the companies become not unicorns, but become 10x to 20x instead of most of them failing and some of them being 200x or something like that.

What are your thoughts around maybe a changing venture capital model or I don't know.

[00:51:35] Sanjay Aggarwal: Yeah, I don't know. Yeah, I probably don't have a super informed perspective on that per se, but, yeah, at the end of the day, I, I think in the, last few years, you saw some really significant exits, through very high valuation multiples, And so that drove some really great returns, I think for a lot of investors, but that was.

Abnormal, right? That was not the way I would say invest, exits worked historically. there was a huge run up, a bubble, whatever you want to call it, so that, so I don't, I think we're going back to what was normal as opposed to what was abnormal perhaps a couple of, years ago.

So I don't, I'm not sure that, it's, the companies are any more or less risky, per se, but, rather, kind of valuation multiples are back to what they used to be, a few years ago, or getting closer to what they used to be a few years ago. And and correlated to that was companies didn't raise so much money, to get there, right?

doesn't mean you can't still get a great return, but I think it's, you just do it in a more capital efficient way, rather than raising 100 million, you raise 50 million, or whatever it is, to achieve a, an interesting outcome.

[00:52:54] Audrow Nash: Yeah. Interesting. Do you think that this will adjust the timeline at all? So if you grow at any cost, this means to me, maybe you scale quicker, but if you take 50 million, maybe you have to scale a little slower and a little more efficiently, and it probably takes longer. I have always heard that, VC.

Venture capitalists want it's like a seven year timeline for funds or something when they, invest and then they expect, and I'm sure it depends on the stage, but they expect that there is a merger and acquisition or an IPO or someone buys it or whatever it might be. do you think the timeline is going to start changing?

Is it going to go longer or does it stay this? I don't know. It just. Seems like something has to give and I don't know. I don't, or it seems like there's a tradeoff in some way, but I don't, and I'm not sure I fully understand. What do you think?

[00:53:51] Sanjay Aggarwal: But again, I would say that, that, that was always the norm, right? I think we're going back to what the market used to be, as opposed to this kind of abnormal period in the middle. and so I don't think it changes the model. I think it just, people have to, reset their expectations because if your expectation is based on what happened in, in the last, like four or five years ago, then that may not, that may have.

That's probably not the right expectation and historically was not the right expectation either. But I think the exit timeline ultimately is almost more a function of kind of market dynamics which kind of, which and the market is cyclical in a sense, right? so if M& A's are plentiful then yeah, your timeline to exit is

[00:54:34] Audrow Nash: Maybe shorter.

[00:54:35] Sanjay Aggarwal: potentially faster, But if the market, the M& A market dries up in the way that it has the last couple of years then, then you're going to have to wait longer, so I don't, so it's, it is correlated to what you're describing in terms of how fast you're growing, but I think it's probably even more driven by the exit, the health of the exit market, whether it's M& A or IPO, and if the IPO market's closed, it's closed, like there's nothing much you can do about it, no matter how fast or slow you're growing.

[00:55:01] Audrow Nash: Yeah, for sure.

[00:55:02] Challenges in raising B & C investment rounds

[00:55:02] Audrow Nash: What do you, so one thing that I've heard, which I thought was very interesting is that, so you guys, F-Prime, are investing in seed and series a typically, and it strikes me that there is quite a lot of investment firms that are investing in robotics companies at series A and seed levels.

And it seems like when you go BC, it gets a bit harder and maybe you go to I don't know, Sequoia or some of these really large ones for these later rounds.

How do you, think about this and what do you think around the idea of Series B and beyond being very hard for robotics companies?

[00:55:42] Sanjay Aggarwal: Yeah, I, yeah, I would say that it's definitely the hardest stage to invest, to raise money in as a robotics company. you see that historically and you see it particularly in the last,

[00:55:53] Audrow Nash: You're saying B and C?

[00:55:55] Sanjay Aggarwal: yeah, absolutely. Because, and I think there's, again, as I said, and the seed in Series A, to a large extent, like you're excited about the company, the use case, the team, you're betting on the future in a sense, right?

and more and more investors getting involved in those stages as well, because, as you think about the, just the general tailwinds, around the industry, whether it's AI or labor shortages or these kinds of things, like robotics seems like a great place to address and kind of capitalize on some of those tailwinds.

and so you see more and more of. more and more companies making early stage investments where again, you're betting on the future, the future, what's possible in the future, than anything. and then as you get to later stages, as you get to a D or E round, by that time you have, again, a different set of investors that are just investing based on the performance of the business, like how, what's the revenue, what's the metrics, all those kinds of things.

And so it's, analyzed to some extent, just like any other, a category of, of, company would, invest in. You even see private equity firms, starting to get involved, in, at those stages. And again, they're underwritten, the investment is analyzed in the same way that you might analyze any other investment.

In the middle is the hard part, where you started to get some traction, you have some metrics, but not that many metrics, oftentimes you have a big, if you're doing well, you have a big, Backlog of contracts, but they haven't been deployed yet, or, you have some new product that's coming out, that's going to, you started with a very niche product, with a very small TAM, you have a new product that's coming out, that's going to expand the TAM, so you haven't quite, you starting to hit some kind of interesting commercial milestones, but you haven't figured out the whole story yet.

and I think that's where the market is really getting squeezed today, which is that. many investors, will come back and say, okay, great, we love the story, but come back when you've proven it, effectively, right? And so I think that the need for commercial proof points, not just, hey, you're, talented team and you have a great technology and you have a great product, but I actually need to see real commercial traction, adoption, et cetera.

I think those are that's the, Those kind of B and to some extent C rounds is where you're just on the cusp of getting those typically. and if you don't have them, then okay, you may not be able to raise at all. And you've actually seen some shutdowns of companies, in those situations.

and, but if you, and if, but if you have them, then again, like you're in this, sort of situation where, Investor likes what you're doing, but they want to see more, they want to see more traction. And then what inevitably has happened in the market is then companies will raise their Series A extension, so they'll go back to the, Series A investors and say, hey, things are looking good, but we need 12 more months of runway to, to get to more commercial proof points, will you support us to get there?

and so I think you're, seeing a lot of that nowadays. And again, like the, challenge is really how do you get enough kind of commercial speed and, those, the validation that people can start to see the path of how do you get from, a few deployments to tens to hundreds of deployments, over time.

[00:59:23] Audrow Nash: Yeah. Very interesting. Yeah, that B C does seem like a big squeeze.

[00:59:29] Sanjay Aggarwal: And we see, companies all the time that, that are, we did see companies that, they're trying to raise a B and they still have just pilot revenue, for example, right? that's a very challenging place to be. And, some of those companies have ended up just shutting down, because they couldn't, there wasn't enough investor support, to give them the runway to actually get to production deployments.

whereas three or four years ago, you could probably raise on that story. Hey, we have a great technology. We're in pilots with these great, great customers. will you invest? now I think the bar on, performance is much higher.

[01:00:07] Audrow Nash: Yeah, very interesting. So do you think, how do you imagine this going over time? One, one way that I could see it is so like you guys at F-Prime companies like Alley Corp, any, other like series A and seed investors do well off of theirs, their robotics companies, maybe in five years time. And then You guys grow into a B and C funding and help make that squeeze a little bit easier or is it necessary to have that squeeze or like I guess what's the evolution that you imagine seeing of funding in the B and C space?

[01:00:51] Sanjay Aggarwal: Yeah, I think it'll probably be a little bit less of what you described, and I, said that only because just given the size of our fund, we focus on a specific year. There are other like very large, they raised a billion dollars for their fund and they are explicitly like multi stage funds, right?

So you have a number of those, that will do. Seed, and Series A and Series B. And so a little bit of that dynamic may exist in what, with those types of funds, but they're not, there are, there's some, but they're, and there's a lot of capital in those funds. But, but that's not, the majority of the capital out there.

yeah, like with those funds, except they're investing in robotics, maybe they start, they dip their toe in the seed and Series A, if it goes well, they start, getting more involved in later stages. But I think the real, I think the real driver of excitement at the B&C is when you start to see more exits, essentially one more

[01:01:45] Audrow Nash: Oh, okay.

[01:01:47] Sanjay Aggarwal: all flows downhill, right?

if you, if people see, Oh, wow, that was a great outcome. people made a ton of money on that company, and there's not one or two, but there's 10 and 20 examples, then people can start to say, Oh, okay, this is what Success looks like, and, if we rewind the clock, this is what that company that just sold for a billion dollars looked like at the series B, this new company that we're looking at, seems to exhibit some of the same characteristics, right?

And so I think it will, it'll come more from that. angle, which is you have successful companies that have exits. they make a bunch of money for the founders and the investors, and then that kind of paves the way for more and more such companies because people see what success looks like essentially, and what it looks like at each stage of an investment.

[01:02:36] Audrow Nash: Interesting. Yeah, I interviewed Bluewhite, one thing that they were saying, which I found very interesting, is that they feel like they have a personal responsibility as a robotics company.

I believe they just got their It was either B or C funding

[01:02:53] Sanjay Aggarwal: yeah,

[01:02:53] Audrow Nash: and they have a personal responsibility to keep going and do well because it ushers in more great robotics companies. It makes it easier for them to get funding.

[01:03:05] Sanjay Aggarwal: yeah, one of the, one of my beliefs as to why logistics is such a hot area, in the world of robotics, logistics is amongst the hottest areas, is because there have been successful exits, Kiva was bought for a few hundred million dollars, Six River Systems was bought for a few hundred million dollars, like there have been exits, and People can see that, yeah, there is a path to an exit, in those businesses and successful exits.

If you look at medical robotics, there've been a, a number of very large outcomes, of medical robotics companies. So there's, again, people can see that there's a path, if you look at agriculture, for example, it's still early days. there've been a couple of acquisitions by, John Deere made a couple of acquisitions.

but there were, mid sized 250, 300 million dollar type of acquisitions, which are, which were great, in many ways, but, they weren't, they weren't like the home run type of investment for the investors necessarily. So they were good enough to get people interested, but probably not good enough to people to really pile into the category just yet,

[01:04:08] Audrow Nash: Oh,

[01:04:09] Sanjay Aggarwal: Again, like the path to success has not been proven completely.

[01:04:15] Audrow Nash: and there hasn't been like huge wins, even though there's been some pretty good wins. that's been a thing that I've been hearing too, where you're seeing robotics exits that are like hundreds of millions of dollars, not a billion or more for

[01:04:31] Why we're in the early days in robotics

[01:04:31] Sanjay Aggarwal: Yeah. and even that, and we were actually just running the numbers. there have been 25 robotics exits greater than. 250 million dollars,

[01:04:41] Audrow Nash: It's awesome.

[01:04:42] Sanjay Aggarwal: 25 may seem like a lot, but it's actually a drop in the bucket in the world of venture capital. If you looked at enterprise software, the 25 might be a thousand, for example, right?

And I don't know what the number is, it's very small in relation to what, the broader, venture backed community, has produced and so all it means is it's still early days. there are a bunch of companies out there that haven't exited yet. but I think if you start to see successful exits, in the category more generally as well as in specific, verticals, I think that will spur more investment.

And it just becomes a virtuous cycle, essentially.

[01:05:23] Audrow Nash: Yeah. It's very interesting. Do you have any, idea? I, would love to see, The, distribution of the exits. I wonder if that's in the report, but if I, you could see like this many at this much and,

[01:05:38] Sanjay Aggarwal: Yeah, we actually, when the report comes out, you'll see it there.

[01:05:41] Audrow Nash: I'd love to see

[01:05:42] Sanjay Aggarwal: we had some version of it in last year's report, but yeah, we did something a little bit more detailed, this time around. and yeah, it's, it's, good, but not yet great.

[01:05:52] Audrow Nash: It's still early. Yeah.

[01:05:54] Sanjay Aggarwal: still early days, because most of these companies, they were funded in the last three, four, five years, right?

And back to your point of it may take you seven, ten years to get to an exit, right? Like we aren't, we haven't gone through a full cycle, for the most part, to really know what the, outcome of those early, the investments that were made three, four years ago, we haven't gotten to a full cycle to see how do those turn out just yet.

[01:06:19] Audrow Nash: what do you think? So we're in early days. what do you imagine the timeline is? For this. So like the one cycle, is it a few cycles from your perspective? And I know this is a wild speculation, but I'd love to still hear your thoughts. What do you imagine is the timeline for robotics companies? Like, how does it look over the next five years, 10 years, 15, 20, or whatever you think would be significant

[01:06:50] Sanjay Aggarwal: Yeah, so we're obviously bullish and we spend a lot of time and I personally spend a lot of time in the category. So where I'm bullish, I'm hopeful that it will, turn out better than not. And as I said, there are a number of companies that are starting to reach some interesting scale, across many different sectors.

If in logistics, you have companies like, there's a company called GreyOrange, which is, doing well, there's a company called Locus Robotics, which is doing well, and there's a others that have actually, have really significant commercial traction in the hundreds of millions of dollars kind of revenue, right?

So you can certainly envision those companies out there. having an IPO, let's say, if not an M& A outcome, that is, not in the hundreds of millions, but is actually in the billions of dollars, type of, type of exit. and that, that could be within the next, couple of years, frankly, right?

And maybe sooner, depending on the state of the markets. in defense, you have companies like Anduril, right? like they've raised, they've raised insane amounts of money. they were, I think, last valued at eight billion dollars. if they have a successful exit, I think that will really spur a lot of excitement.

And there's already a lot of money going into defense related, robotics companies. I think it, again, it creates that virtuous cycle in some of these use cases. Others, like agriculture, as I said, like I think the the companies tend to be three, four, five years old, So I think we have another, five years to go before you start to see, what the result of those investments are, those early stage investments.

So I think different stages are at different places. Like AV came and went, if you will, right? I think some of the early excitement in AV was because, okay, Cruise got acquired and Neutonomy got acquired and there were really big outcomes and I think that, caused, in some ways caused investors to pile in.

and unfortunately it hasn't, it may not pan out ultimately, but, but as you go into other sectors like logistics, there've already been some initial exits. There are other companies that are poised to exit soon, literally in the matter of, a year or two. and then there's others, like agriculture, where the companies are still really young and it may take another, five, six years to get there.

But I think if If these things play out the way I hope, like I think it will, again, create this virtuous cycle around people see that, okay, yeah, you can have big exits, you can make a ton of money, as an investor in these categories, as a founder, you can see that, hey, there's a great opportunity here, it'll just spur more activity.

[01:09:23] Will labor shortages affect robotics investments?

[01:09:23] Audrow Nash: So a thing that I think is very interesting is that when talking to a lot of robotics companies, one thing that is highlighted very often is the labor shortages and that's a big motivation for them. And if you look in, I don't know, manufacturing logistics, like there are massive, labor shortages, and they're only increasing, I believe.

[01:09:44] Sanjay Aggarwal: Yeah.

[01:09:45] Audrow Nash: do you, how do you think that will affect investment and timeline for these different robotics companies? Or do you think it's a big factor too? Or how, how do you think about it I suppose?

[01:10:02] Sanjay Aggarwal: Yeah, realistically, like that's a pretty standard part of, your, most robotics companies pitch as to why, why now, in a sense. but I think what we've realized is that's not alone to drive adoption, right? in the sense that like the solution has to really be foolproof in a way, right?

Because it can't be, it works. 75 percent of the time it doesn't work 25 percent because then they just won't use it at all,

a sense. And so I think it's a, it's a necessary, but not sufficient, driver of adoption ultimately. Like I think that because of that, it causes customers to,

[01:10:41] Audrow Nash: Look for things.

[01:10:42] Sanjay Aggarwal: look for solutions, try solutions.

If the solution doesn't, yeah, if the solution doesn't fit seamlessly into your workflow, if it doesn't work, almost all the time so that there's very few exceptions, if there's not a good, if the company is not supporting, the, solution properly, I think all those things necessarily have to be in place to drive adoption.

Because again, it's a new piece of equipment that's sitting there, oftentimes like in manufacturing, it's It's all or none. Like you have a robot that's doing the whole system, right? There is no alternative, in many of the newer generations of robotics, it's a mix, there's, they're sprinkled in with humans.

And so if it doesn't work, the person like take Burrow, for example, if the, if Burrow's system doesn't work, there's also people driving around and will, walking around in wheelbarrows, right? They'll just like. Say, okay, let me, put this aside and let me go back to the old way of doing things.

And it doesn't matter what the labor shortages are. Like they got to get the job done. so I think the, again, the labor shortage are a good, impetus, like you really got to, and this is where again, go back to just entrepreneurs understanding use cases around, how do you actually build a system that works and that fits seamlessly into a workflow so that it works all the time, not some of the time, because some of the time is as good as never.

[01:12:00] How reliable should systems be? + Human-in-the-loop

[01:12:00] Audrow Nash: Yeah. When, when does some of the time become enough? is it 99%? Is it 95%? Is it 99. 99%? Or, and I guess it probably depends on the application, but

[01:12:15] Sanjay Aggarwal: I think it depends on your approach in some way. So I'll, give you two, examples. so we're investors in a company called Taleo, like their explicit strategy.

[01:12:23] Audrow Nash: That's the mining one. that correct?

[01:12:25] Sanjay Aggarwal: Yes, yeah, exactly. They basically have a. they, work on any piece of large construction or mining equipment. I think of an excavator, massive multi ton, hundred thousand, multi hundred thousand dollar piece of equipment.

And their strategy is, is what they call supervised autonomy. So it's basically a human in the loop approach where,

[01:12:45] Audrow Nash: It's a smart approach. Yeah.

[01:12:46] Sanjay Aggarwal: So they retrofit the machine with a kit that enables you to operate the machine remotely, essentially. and so what happens there is that, you can automate part of the task.

So the task that they typically do is where, what they call is, let's say you're digging some dirt and then they have a process they call tramming, which is like you move the dirt from point A to point B and then you dump the dirt somewhere else. And this is done repeatedly over time.

Now for them, you can either do it completely remotely, and the human is there doing it, or, over time, you can, or if you choose, you can automate the tramming part of it. Now, in that case, if the automation doesn't work for some reason, maybe there's some obstacle, who knows what the reason might be, the human is there anyway, right?

Again, 50 percent is probably not good enough, but it doesn't have to be 99 percent on the autonomy part, because there's a human, there's necessarily a human in the loop in the process. So it's more kind of robust to potential failures, and if you take, but on the flip side, if you take Burrow, for example, if their system, Isn't able to autonomous like it, if it's not able to autonomously traverse the path that they're supposed to traverse, then it, it's as good as dead, right?

there's, no utility to the solution at that point in time. That has to be much, much more, robust. but even for them, what they do is okay, like it's a low speed applications, so worst comes to worst, like they may stop because they found something that they didn't expect, and the operator can just start it up again, and it'll just go on its way.

But if the system completely fails, okay, the motor went out, and it's just, it's, inoperable, like that's a problem, right? that, that is not, that is not acceptable.

[01:14:28] Audrow Nash: Yeah. Now I, that makes a lot of sense, but it makes me question, Why not just always have a human in the loop for this kind of thing? Like in the Burrow case, if it becomes dead because it has something unexpected, why not just always have a, what would be the disadvantage of, I guess it's more expensive, but why not just have most robotics companies bake in a human that can intervene if it does something funny?

[01:14:57] Sanjay Aggarwal: I think you're seeing that more and more, and again, particularly in the industrial setting, right? I think this is where, passenger vehicle use cases, it was hard, right? And I think people did create, certain ways to, have a human intervene if there's an obstacle that they didn't understand or whatever.

But I think the stakes are very high, in those kinds of cases. And the fault tolerance, even if you have a, a human remote operator is just so low, that it becomes hard to execute. I think in an industrial setting, it's very different, And I think this is why, at least we see more and more companies with some version of a human in the loop, that can intervene because.

the, if the system stops for a couple of minutes, that's not catastrophic. in a, it's a very, it's a constrained environment. there's, if it stops for a few minutes, it's not the end of the world. it's, it's hopefully not a safety consideration and things like that.

So again, people have different approaches from Taleo, which is like an, The human is always in the loop, by design, versus, Burrow, where the human is in the loop on an exception basis. and I think you see, lots and lots of these kinds of approaches, which is, again, why I think the industrial use cases have just proven to be, more, more attractive.

[01:16:14] Audrow Nash: yeah, I think so too. And it's interesting because even if say you are 50 percent efficient with a human operator, so it's failing to operate autonomously 50 percent of the time. Now one person is manning two robots and then you can use that as a way to get into the market and then you have data and more experience and you can start automating and keep improving that ratio.

Now it's 75%. Now you have one person watching four robots with perfect math and it keeps going,

[01:16:47] Sanjay Aggarwal: Yeah, And I think that's, and frankly, that's very much informed our own view of to invest, people that are trying to do a hundred percent end to end automation, I think there are many interesting solutions, but again, like the bar for performance is really high and it just ends up, oftentimes, just being hard to execute, versus if you get these kind of, if you figure out the right solution that has a little bit more fault tolerance, you can have a human intervene.

I think that just, gives, makes the path to commercialization just that much easier.

[01:17:18] Audrow Nash: Gotcha. Yeah, I agree.

[01:17:20] Common pitfalls to avoid for your robotics company

So speaking of that what are some lessons we can learn, and try to avoid in doing a good robotics company?

[01:17:30] Sanjay Aggarwal: The thing that I find most often is that, when you're, there's a lot of customer excitement for these solutions, right? which is great. like that's a good place to start a business, obviously, but in the course of customer excitement, the customer starts envisioning all sorts of other things that you could, like, why can't you do this and this, right?

And so I think the, danger can be that, okay, you start chasing too many different shiny objects, in a sense, right? So I'll give you a simple example. Burrow, as I, said, is a good example, like they, they make an autonomous vehicle, some of their customers said, why can't you pick crops as well, right? Why don't you put an arm on top of the system and pick crops, right? Sounds, sounds like a logical thing from a customer perspective. Obviously, if you're the

[01:18:23] Audrow Nash: Yeah, you already have robots

[01:18:24] Sanjay Aggarwal: It's already out there. Like, why don't you just pick a compute? Why do I need people to pick? Why don't you pick?

but again, like the challenge with that's like a very fundamentally different technology, right? Like an autonomous vehicle is very different than a picking robot. and so I think there's a lot of temptation, for robotics companies to say, Oh, okay, the customer really wants me to do this other thing. Why don't I do that too? and in doing that, I think you can get a little bit derailed, with, not, again, you got to. You got to be clever about constraining the problem in a way that's useful, there's a large enough market, but isn't going to take you down a bunch of different tangents on technology that you need to build that maybe, is, just too orthogonal to what you're, currently building. So I think that's what, I see most often, from companies, which is, Hey, like you're just trying to do too much, in the effort to satisfy customer demand, expand the market, things like that. that's by far the most common. and then the second again is like almost over engineering,

[01:19:29] Audrow Nash: Oh, definitely.

[01:19:30] Sanjay Aggarwal: right. you can, there's always ways to make the system better, right?

better sensors, more sophisticated hardware, whatever it is, what, the right, what's good enough, is, a tough, is a tough call to make. And

being smart about that, because again, like capital is not unlimited. And so you gotta be, you gotta make the right choices around, doing something that's going to work well enough without making it perfect. so I think these are, probably the two most common, examples.

[01:20:06] Audrow Nash: Yeah, I see those too. And it's interesting because, especially for the first one where companies are trying to find product market fit and the customer is telling them, we would like this, we would like this. And so it's oh, I want to go find the good market fit, but it's like a complete diversion from what they're working on.

[01:20:25] Sanjay Aggarwal: Yeah. Yeah, absolutely.

[01:20:27] How to make your company VERY attractive to investors

[01:20:27] Audrow Nash: Being that you are an investor, what kinds of things can a company do to make themselves very attractive to investors?

[01:20:40] Sanjay Aggarwal: again, it depends on the stage, obviously, is your

[01:20:43] Audrow Nash: So maybe seed and A.

[01:20:44] Sanjay Aggarwal: again, like having, deep domain knowledge, having, a strong technical team, all of those are prerequisites, understanding you know, one of the reasons why logistics today is a little bit challenging is that, there are a lot of solutions doing similar ish things.

and so finding a unique use case or market segment that you're going after, that is not, super competitive, these are just like the standard things that you would look for at any early stage company. going back to the question of, okay, what makes for an attractive, B round or C round, what I always feel like is the important is that like it's very hard to pitch an investor on a bunch of contracts, that have not been executed,

right? Because inevitably, yeah, it's not to say that the contracts aren't real. I think the problem is that, are they going to get executed? Are they going to get they'd be renewed.

Three months or six months or not even that. I'm just saying that, they've, signed up to deploy a bunch of systems, but is it going to take three months?

Are they going to take six months? They're going to take, like it's unpredictable oftentimes, because there are all sorts of things that happen, like you're integrating into real world systems. And they may have other priorities. They may have to upgrade their infrastructure.

They may have to change out, maybe there's some integration with this other thing. So there are a lot of dependencies that you as the company cannot control and I think it's super important, not, the contracts are important, but it's super important to have, number one deployments, live deployments that are in production meaning used every day, not Once in a while, but I actually used day in and day out,

[01:22:26] Audrow Nash: Yeah.

[01:22:29] Sanjay Aggarwal: which, which have high utilization, which is not, yeah, we did it.

We, we tried it out for a couple of days

[01:22:34] Audrow Nash: It worked once.

[01:22:35] Sanjay Aggarwal: And yeah, and we, it's off on the side because, oh, we have this problem or whatever. I think that's not convincing. So really focusing on, not a hundred customers, but even just one customer or two customers that are like deeply engaged, using the system day in and day out.

Ideally went from one system to two systems to 10 systems or whatever the appropriate numbers are, but are like demonstrated a willingness to really go all in on the product. for, most of these companies, it's, really a land and expand where you start with an initial deployment, and they the customer tests it, figures out it's at work or not.

very much. And if they're excited, they start buying more. and so until you can prove that, I think it doesn't, it doesn't matter how cool your technology is, that's the ultimate proof, that at least I as an investor look for when looking at businesses.

[01:23:27] Audrow Nash: It makes good sense. I would imagine more investors do that too. You want to see some buy in. You want to see that it's working. These kinds of things.

[01:23:34] Sanjay Aggarwal: Yeah.

[01:23:36] Biggest challenges in robotics

[01:23:36] Audrow Nash: what, from your perspective, are some of the biggest challenges in robotics? . .

[01:23:44] Sanjay Aggarwal: there are, a few. one is obviously these are like real physical systems, so a lot can go wrong, and with that, like the cycle times are just longer inherently, right? there's usually a piece of hardware and a piece of software and yeah, you can iterate on the software pretty quickly, there may be, hardware issues, right?

You need to change, the sensor isn't quite working, or the motor that you picked isn't quite working, or the, the arm, is, out of tolerance, or whatever it is, right? So there are all these kind of physical limitations that increase cycle times, so I think that's, one thing that you have to be, recognize and also figure out how to navigate, to, maintain, because, startups are all about, fast iteration.

That's what, that's the mantra of, startups and how do you do that in a hardware oriented robotics company, is, a bit of a different challenge, but still needs to be, achieved in some way. and related to that then is just the amount of capital that may be required, right?

That, changing hardware, making, you need a much broader. Set of people. it's not just a bunch of software engineers. You probably need people that understand how to build like the infrastructure part of the software who understand perception systems, who understand autonomy, then you need mechanical engineers, system integral, system integration people.

So there are a lot of different disciplines that you need to hire, combined with longer cycle time just means that capital, your capital requirements might be more than a classical software company. And so how do you navigate that, capital requirement, not only in the early days, but even as you scale, because funding all of it, with equity alone can become potentially quite expensive.

and so are there, especially as you're starting getting into production, and you have your supply chain up and running, can you find other. Opportunities, maybe, some kind of debt sort of funding mechanisms to offset some of the capital needs that you have to scale up.

[01:25:42] Audrow Nash: Interesting. Yeah, makes sense.

[01:25:44] Opportunities for new robotics companies

[01:25:44] Audrow Nash: What do you think are some of the biggest opportunities for new robotics companies? Like where, if you were an entrepreneur, where would you be looking to start a company?

[01:25:55] Sanjay Aggarwal: Yeah, and this is again, like a little bit informed by what we've been looking at, which is that, areas like logistics. they're obviously there, there have been the, in some ways, the, the most popular area of robotics, but I, I say today, like if you're an early stage founder, It's pretty hard to find a net new use case that nobody has thought of, because, like there's versions of almost everything, right?

So I, there's always something new, but it's, the bar is pretty high to find something that's different and better than what already exists in the market, but if you're looking at, and that's, certainly true in logistics, or, some of these other kind of popular areas, but if you're going if you're going into agriculture, for example, it's still really early days, there's a lot of stuff that can potentially be automated.

there have been companies trying to do harvesting. but, there's other stuff, whether it's weeding robots, or people spraying pesticides, or Burrow does, just moving crops around the field. I think it's still really early days. those companies are, still pretty nascent in terms of what they're trying to do now.

And I am, I imagine there's tons of additional use cases that haven't even been, envisioned yet. So I think, to me, part of it is, finding industries that are probably underserved, from a technology perspective, today. agriculture being a good one, construction being another one, where it's still pretty early days.

There are a lot of companies trying to do different food oriented robotics, around, how do you automate food preparation, for example, or food assembly, things like that, that are pretty, still, I think, pretty greenfield opportunities. So I think that's, part of it, in my view is like, I think that for early stage entrepreneurs, there's probably, it's probably, It's just, they're just less competitive, shall we say.

And, and, that's to me is always a good place to start if you can find the right, the right use case.

[01:27:53] Audrow Nash: Yeah.

[01:27:53] How would you start a new robotics company?

[01:27:53] Audrow Nash: Now this, may be too big and broad of a question, but okay, you pick a domain, and you are an early stage, like basically it's you and maybe you have a another person who wants to start a company with you. how would you go about starting a robotics company? Like, how, what would you think would be the, what would be an efficient path to get growing and everything?

[01:28:24] Sanjay Aggarwal: yeah, I think finding the right team is probably a good place to start, and I think having somebody with, the combination of technical expertise and domain expertise are, the magic combination here, where you have somebody that does understand the market and can go and talk to potential customers and validate ideas and things like that, along with a technical co founder who can, build the initial, or at least lead the creation of the initial prototypes. again, like these are, in general, are systems that, that just require more resources. It's not, necessarily one person who can, sit and code up the prototype.

But, that being said, there's a lot more off the shelf stuff that you can buy. off the shelf robotic arms, off the shelf, small, small vehicles. things like that you can at least build, initial prototypes on top of. and but I think the starting point is definitely to Figure out, what, what problem you're trying to solve, right?

And having somebody on the team who comes with, a deep understanding, of the industry and then can go and, go deep and, talk to potential customers and validate ideas before getting too far, in terms of, building stuff, because you can waste a lot of time building stuff that nobody wants.

I think it's, that can be a very expensive proposition.

[01:29:50] Audrow Nash: And then how do you I suppose some people or some small teams may need to seek funding early just to start working on something. but when, do you think companies should go for a seed round or a series A funding? Like how do you know you're ready for either of those rounds?

[01:30:15] Sanjay Aggarwal: I think today for series A at least, like you need to have, initial customers, right? I think it's very hard if you don't have a. It doesn't have to be the final machine or device, but you need to have a device that's probably gone through a couple of iterations, is good enough for people to deploy, ideally in some initial production use cases, and, start to use and validate that it works, that it delivers ROI, and the customer is excited about it.

I think these are, there's no revenue target or whatever, but yeah, you want, At least one. And I, at least a couple customers who have used it, who are using it, happy to use it, every day. and are getting value, demonstratable value. I think that's the bar for a se, a series A at least.

and seed, I think seed can be all over the map, right? there, there are plenty of seed investors that will invest in just a business plan. here's a, here's a PowerPoint presentation with a, with our idea. Our idea, that's typically. for more kind of proven entrepreneurs, so to speak, like maybe you've already built a business before, or you are an early employee at Kiva, and so you have, some credibility, around what you're trying to build, everything to, okay, yeah, we've built the initial prototype, we've done some proof of concept to demonstrate viability.

things like that, can, may, be required, and there are a bunch of, there are all sorts of labels for, friends and family rounds and pre seed rounds, so there are all sorts of labels, but, I think it's very, situational, if you will, depending on, your own kind of credibility as an entrepreneur, the team that you've built, the use case that you're going after, and, frankly, just finding an investor with whom all of those things resonate.

[01:32:12] How to pick a good investor for your series A?

[01:32:12] Audrow Nash: Yeah, definitely. And then for the person or the group starting a company, what should they look for in an investor? Do you just want anyone who will give you money, but I'm sure you want some expertise.

[01:32:24] Sanjay Aggarwal: That's probably a good starting point to get somebody who's gonna give you money. But,

[01:32:29] Audrow Nash: Definitely. ha

[01:32:30] Sanjay Aggarwal: yeah, I think there are, there are definitely more and more, investors that are active in robotics. So I, always tell people that the, you can go and try to meet every investor out there, right?

But I think the most productive path, at the end of the day is going to be, number one, investors that have done deals in this space before, right? So they're not, just hey, I'm going to take a flyer on my first robotics company. but rather, oh yeah, we've done two or three, we understand, what this looks like, right?

Because it has its own somewhat unique dynamic in terms of, the path. And as I said, oftentimes for a Series A, there's like the Series A extension, and maybe there's multiple Series A extensions, right? So you want Ideally, a Series A investor who has the ability to do that and willingness to put more money on in before a proper Series B, right?

So that may be a slightly larger fund. but, so I think, getting investors that have experience in the category that understand, what it means, what, does this look like? who's able and willing to support the company through, potentially a couple of different rounds before they raise their next major round.

if they have, experience in related spaces, I think it can always be helpful. obviously you don't want an investor who's invested in a competitor, but. Now, they've done a couple of deals in logistics, and I have a logistics startup, so they understand and they can be helpful, actually, is like the, even better, they can help you think about how to do go to market, because they have other companies that have sold into the logistics space.

And so they can be, helpful for how you think about your own, go to market strategy, for example. So, I think these are like the basic, Starting point. And as I said, I think there's just more and more such investors out there. So at least the opportunity set is, getting wider, which is, great.

and then it's just a matter of, again, just finding the right, the right party, which you, who's excited about your vision.

[01:34:35] Audrow Nash: Hell yeah. Awesome. Let's see.

[01:34:39] Audrow Nash: going back to the State of Robotics report, was there anything in it that you found that was particularly surprising?

[01:34:48] Sanjay Aggarwal: yeah, and I think when we did it last year, I think this, again, this kind of, shift from AV to vertical robotics was, I think we intuitively thought it, but it was it was, surprising how rapidly the shift was happening, in some ways. so I think that, reinforced our own view and gave some, further impetus for us to say, Hey, yeah, this is probably the right place to be focusing our efforts.

I think the second thing was that the exit markets were still really early. there were, probably fewer exits than I might've imagined, in a sense. and again, I think it comes back to. we're still in the very early days of this market. it's only a few years old in some ways, at least from a venture capital perspective.

and the, just the, number of exits was, is small, and hopefully it'll grow, go bigger, but it was probably a little bit smaller than I, that I quite anticipated. again, I think that is changing and will change, pretty rapidly. But, I think that was, that was a little surprising.

And then, the third thing was again, this, kind of, what I call like the squeeze in the series B and C rounds, which is, there are a lot of, there is a lot of excitement in the early stage, even like Y Combinator, is like the, the bellwether of all early stage investing, as robotics is one of their core focus areas this time, right?

there's obviously a lot of early stage excitement, but, the difficulties of raising the series B and C was probably more pronounced than I fully appreciated. But again, I think it's just, it just puts a focus on, getting to the right metrics, getting to the right proof points, in a way that probably didn't exist, that wasn't as critical a few years ago.

[01:36:40] Audrow Nash: Did you see any evolution between the last year one, the last year's report and this year's report? was there any, vectors of how things are changing?

[01:36:50] Sanjay Aggarwal: 2021 was just an anomaly in general. And so I think everything was looking great then. 2023 was more of the same of 2022, but just smaller, a lot smaller, right? if you look at the market overall, I think even I think 2022 itself was off like 30, 40%, was off, Yet another, 40 50 percent off 2020.

It's pretty marked how, much it's fallen, although a lot of that's been just driven by the kind of the drop in autonomous vehicle investing. If you look at, this vertical robotics, as we call it, that's, that has definitely shrank, but not as much as the rest of the market.

[01:37:31] Audrow Nash: Gotcha. What do you expect? if you look out another year, do you expect that trend to continue? Do you expect it to pick back up a little bit? Any thoughts there?

[01:37:39] Sanjay Aggarwal: I'm hopeful that 2023 will be the kind of the bottoming of the market, in a way. things will start to pick up again. again, I think, entrepreneurs have, heard, from the market as to what they need to focus on. And so I think they'll just be way more focused on delivering.

these are all super talented people. and I think they will, adjust their own strategies to deliver on, some of the expectations that people have. And so they'll just be better equipped to, to raise money as well. and, and as I said, like the early stage activity is hopefully a precursor for later stage activity, right?

just the sheer number of companies that are raising like those, they won't all be successful, but, A lot of them will be successful. And there's been a lot of money that's gone into those companies in the last two, three years. So those, as those companies mature, I imagine there'll be a lot of, high quality companies coming out, ready to raise their B and C and so forth.

so again, we're optimistic, again, I think that the, last year in some ways was a wake up call for, founders in terms of what is it, what do they really should focus on, from a business building perspective. and, I, would think and hope that, 2024 and beyond will, things will start to pick up again.

[01:38:59] Audrow Nash: Gotcha. and what do you make of the Y Combinator? where they're focusing on robotics, I think that's very exciting, but what are your thoughts on it?

[01:39:11] Sanjay Aggarwal: yeah, I feel and I, I'm no expert on Y Combinator, but my general sense is that they've, Over the last few years, they started, in the early days, it was all about, kind of consumer software and then enterprise software, I think, they've always been.

a, hopefully like a step ahead of what the next trends are in the market. And so you've definitely seen, a lot more focus, for Y Combinator on emerging segments of venture, not the traditional, what's your next consumer app or what's your next, piece of enterprise software.

that's always there and, it always will be there, but. You see them talking a lot more about, climate related startups or, robotics in this example, or, they were probably early to the crypto craze, like all of that kind of stuff. I think they were there, not that they didn't, may not get it right all the time, but I think they're just a leading indicator of what, what investors, are going to be or are excited about, in the go forward times.

Cause again, Investment is all ideally about betting on the future, not on the past, right? And so you want to find kind of the next, the next big thing, so to speak. as opposed to just replicating what was successful in the, and not always just replicating what was successful in the past.

[01:40:27] Audrow Nash: Definitely.

[01:40:28] Future of robotics

[01:40:28] Audrow Nash: And then, wrapping up, what do you imagine for the future? Like, where do you think robotics is going to be in 10 years, say?

[01:40:39] Sanjay Aggarwal: really hard to predict. I think that, technology is changing pretty rapidly. and so I think just the capability of what these systems can do, is I think it's hard to envision exactly, what that's going to look like. I, think, as you, yeah, I just think that the, range of use cases will start to expand significantly.

I think today, to some extent, like the use cases are constrained by what the technology today enables, right? I think as the technology, expands in terms of, because it's all about like modern robotics is all about dealing with unstructured environments fundamentally, right?

Historically, the robotics that existed for the last 50 years was around highly structured environments doing highly structured things. It wasn't about. Perceiving the environment. It was about, move this, this, motor from, point A to point B, And that, and just do that over and over again.

And that's what it was very structured, very predefined. Now it's all about unstructured environments. Like how do you navigate, in the real world? And I think that ability is going to continue to expand, right? Like the ability to perceive the world and kind of deal with uncertainty, is obviously the core of what, modern AI is, enabling, us to do.

And so I think that just opens the, the range of use cases in a much, increasingly broader, bigger way. So I think there would be two things. one is like these companies that have been funded today, not all of them, but a lot of them will become really successful, like they will start to be out there.

You'll start to see them. maybe not on their sidewalk, but certainly if you go to a factory, or you go to a farm, or you go to a construction site, I think that, they'll be much more ubiquitous, than what today. And then number two, I think you'll start to see, all sorts of, use cases that you could never have imagined that a robot could do, because they have been enabled by, much more sophisticated, perception capabilities.

[01:42:35] Audrow Nash: Awesome. All right, Sanjay. Thank you. great speaking to you and hearing your perspective.

[01:42:42] Sanjay Aggarwal: Yeah, thank you very much for the time. It was, a fun chat.

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[01:42:45] Audrow Nash: You made it!

What do you think? Are you as bullish on robotics as Sanjay? Isn't it surprising that there have only been 25 or so robotics exits above 250 million? What do you think the timeline is for a 10 times increase in this number? I bet it'll be faster than we think.

If you want to check out the State of Robotics report, the link will be in the description.

See you next time.