Longer lead times and complicated hardware make attracting robotics investors challenging
By Henry Lenard
November 02, 2012
Vetting robotics startups for a good entrepreneurial track record and solid engineering behind the invention are among the strategies used by the investment community when analyzing funding opportunities.
That was among the insights offered by a panel of investment experts at the RoboBusiness Leadership Summit in Pittsburgh.
“We definitely apply a hardware-based filter that looks at who the inventor is and if there is good science and engineering in place,” said David Becker, co-founder and managing director of Meakem Becker Venture Capital.
Robotics startups often have a tougher time attracting funding than their software counterparts because of higher development costs.
“We are also looking for a ballpark estimate of the total amount of capital being sought because of the long lead time it takes to bring a robotics-related product to market,” said Mr. Becker.
The panel was moderated by Richard Lunak, president and CEO of Innovation Works, which has been providing seed funding to regional robotics and technology startups in southwestern Pennsylvania for the past 10 years. That effort has attracted more than $750 million in additional funding beyond government grants.
Mr. Lunak said that angel investors come in “many different colors and flavors”, ranging from individual investors to high-end family funds with deep pockets, and startups need to carefully consider every option available to them.
Eric Close, CEO of RedZone Robotics for nearly a decade before recently stepping down, said that how a startup operates is very important.
“You need to run it like a business from the very beginning. At RedZone, we followed protocols and had regular board meetings,” said Mr. Close, adding that made the transition from angel investors to a professional investor group easier.
“It is also essential that you look for funding from groups that can add value beyond the dollars, such as being able to answer market questions. I can’t stress enough how important it is to find the right investors,” said Aaron Morris, founder and CEO of All Point Systems.
In response to an audience question concerning seeking funding from professional investors, Mr. Becker said there is a “fairly deep” investor pool that will invest in a capital intensive industry like robotics.
“If it is a great idea and a big market, you will be able to find an investor willing to commit to a product with a long-lead time to commercialization,” said Mr. Becker.
Jay Katarincic, managing director of Draper Triangle Ventures, said both parties must also be in agreement from the very beginning.
“Make sure that the day before the money is put in that the investor and entrepreneur have a clear understanding of the total capital commitment,” Mr. Katarincic said. “Ask to yourself: ‘Is it fair’. If the entrepreneur is a little ticked off that they gave too much and the investor is a little ticked off that they paid too much, it probably is a good deal.”