Company Name: Modular Robotics
Founder: Eric Schweikardt, CEO and design director, and Mark Gross, research director
Principals: Jon Hiller, director of engineering; Matthew Capron, director of production; Christie Veitch, education director; Scott Shambo, director of supply chain; Laure Levin, director of sales; Stu Barwick, director of marketing
Products: Cubelets, MOSS
What it is: Robotic construction kits for kids
Market niche: Educational robots, toys
Funding: $1.5 million from a National Science Foundation SBIR grant, $361,293 on Kickstarter, and $3 million from the Foundry Group
Industry partnerships: None
For many companies, the toy market is an opportunity to quickly get revenue-generating product out into the market, without having to clear the high hurdles associated with industrial, military, or commercial purchasing. It can also help companies work out the bugs in their technology, sourcing, or manufacturing processes before launching products where reliability and performance are critical to customers. Or, it can offer opportunities to get playful about how technology works, products are designed, or even how they’re manufactured.
When I began writing this column, neither my editors nor I were interested in toy companies; we intended to on focus startups with robots that are performing household tasks, transforming manufacturing or logistics, or any range of other commercial applications.
But even if companies aren’t interested in testing a product out in the toy space, there’s plenty to be learned from the changing sector. The last few years have seen a resurgence of the robotic toy industry, driven by the plummeting cost of chips and sensors, the explosion of crowdfunding campaigns, and a growing base of tech-savvy consumers. These are trends that are also affecting the broader robotics business, and companies can learn a lot about how to leverage these trends from the experience of Boulder, Colo.-based Modular Robotics.
Modular offers two hands-on robotic construction kits for kids. The basic idea of both of its products — Cubelets and MOSS — is modularity: users can pick and choose from a variety of parts that can be combined in a number of ways to make small robots.
Using them requires no technical background (they’re aimed at ages 4+ and 8+, respectively), they stick together with magnets, and controlling them is done through simple mobile applications.
But what Modular has to offer isn’t as interesting as where the company has come from.
Funding that fits
Modular grew out of Schweikardt’s Ph.D. research, and its early source of funding was government grants. Federal small business grants helped push the idea from academic project to commercial opportunity, with backing from a funding source that cared about growing the product — not about a return on investment. That kind of supportive funding relationship informed the company’s long-term approach to capital.
When Modular Robotics was ready to grow its business and needed funds for expansion, Schweikardt says he focused on finding the right investor for his goals: a local investor in Colorado that could see the value of his product.
He approached the Foundry Group and focused his efforts on building that relationship rather than on shopping his pitch around to multiple venture capital firms. Why put all your eggs in one basket?
“When you go to prom, do you ask the person you want to go with, or do you ask everyone?” he said.
(Modular Robotics later applied that relationship-focused fundraising strategy to the development of its second product, Moss, raising more than three times its target through a Kickstarter campaign. )
MOSS Kickstarter Launch
Made in Colorado
As Schweikardt and his partners started to grow their operation, they began to look at fundraising and manufacturing opportunities. “It’s taken for granted that you’re going to manufacture in China,” said Schweikardt.
In 2009, he participated in a hardware startup tour of China, along with 10 other small companies with prototype projects they were interested in developing.
“After that tour, I always sort of thought, ‘Great, we’ll spin up with a big contract manufacturer when we’re ready to do volume,” he said. After all, it’s what everyone else was doing.
When the time came, Schweikardt and the director of supply chain, Scott Shambo, went back to China and began touring factories, getting quotes and planning for growth. But on the plane ride home, he started to rethink the decision — and in the end, they decided to start manufacturing in Boulder.
“It’s probably still cheaper to have China make our stuff now, but is that going to be true in five years?” he asked. Labor rates are increasing, and he noticed that most of the Tier 1 factories were filled not with workers but with machinery.
“Why don’t we just roboticize our own stuff in Boulder, where we can decide in the morning to make 3,000 of these, 2,000 of these, and five of these, instead of committing to a container size months in advance?” he said.
Schweikardt and his team built out an incredibly detailed financial model of what it would cost to take both approaches and got the buy-in of their investors and the rest of the team.
In late 2012, they started scaling up a manufacturing facility — at first, they were small and scrappy, using electric skillets and crock pots from Target to make their boards.
Over time, they grew and added a 12-foot reflow oven, and they were able to acquire a used pick-and-place machine for just $14,000.
“There are whole warehouses of manufacturing equipment in Detroit that aren’t being used,” Schweikardt noted.
Modular Robotics’ DIY workforce
Modular Robotics has taken a similarly scrappy approach to its staffing. Many robotics firms I’ve spoken with in the past say they’ve had serious trouble finding the talent they need to make their products and grow their operation.
Schweikardt and his team looked at the labor market in Boulder and hired 20 hourly assembly workers to join their team.
At the outset, workers earned $8 per hour, but the wage structure uses gratification techniques to reward workers for time on the job and work that’s well-done. As workers earn “experience points,” they level up, with hourly wage increases and promotions associated with those level increases.
“We’re trying to build that as a nice way to encourage assembly work and factory work as a way that can lead to advanced work,” Schweikardt said. “These aren’t your typical dead-end factory jobs.”
The Boulder labor pool also has a steady flow of recent graduates from area universities, and Modular taps a lot of recent graduates for engineering positions.
As a result, Modular Robotics and its employees have grown together. Many of the employees in leadership positions have graduated up from the assembly floor, Schweikardt noted. “It suits our scrappy approach — we have a whole company of hardware hackers who can get it going,” he said.