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For many years, I was an off-ice official for a local minor league hockey team. This league was the equivalent of A-League if one compared it to the baseball farm system.
Over my years, I would see players come and go. Some would move up quickly or within a few seasons, but the majority of them would eventually realize that they were not going to make a living playing the sport they loved and quit.
Most of my time in the league, I kept the stats sheet. I would log a player’s goals, assists, penalties, and other key bits of data for the position they played on the team. In this role, I knew exactly which players were going to be leaving us soon for nicer ice rinks at the next level and which players were hitting the road to go back home. The stats painted a picture of which players were ready to move on to bigger things and which ones needed to give it up.
Assessing Potential for Success
It is odd now that I find myself in a similar role when it comes to startups, especially those in the robotics space. For the past couple years, I have come across hundreds of startups in the robotics industry. Similar to those minor league hockey players, I have started to recognize which firms are going to move up the proverbial ladder to the bigger things, which ones that may need more time in the minors to develop their tech, and which ones are going to be going home to try other things.
So what are the things on a robotic startup’s “stat sheet” that tells me where they are heading and if they are on a path to joining the big leagues and are ready to work with a Fortune 500 company like FedEx? It all comes down to checking boxes A, B, C, and D:
- Assess Technology and Assign to the Correct Use Case
- Bench of Talented Individuals
- Capital and Cash Flow
These are the most critical success indicators I have seen when it comes to robot startups that are now (or will soon be) finding commercial success. So let us take a deeper dive into each one.
When I find myself sitting across from young CEOs who have been in academics for their whole life and they tell me they created a solution for one of my company’s critical tasks, but they have no experience with that task themselves, I already have one foot out the door.
Assess Technology and Assign to the Correct Use Case
Too often I have been approached by a startup who believed that they have created something that is unique in the industry. The number of startups that have shown me something I have not already encountered I can count on one hand. Most of the time I can pull up a news article in The Robot Report, Robotics Business Review or another trade publication and show them another company with a similar solution.
Assessment and Understanding
The first thing every startup must do is assess the market and determine if they are developing something similar to others in the same market. If they are, then they need to ask themselves what makes them special and any better than other company with a similar solution? If they cannot answer that question, it is time to reassess their technology and business proposition.
The second item many startups fail to do is have a deep understanding of the task they want to solve for a potential customer. If you are claiming you have created a robot that does “Job X,” but you have never done “Job X” yourself, then your credibility is going to drop quickly with a client.
For the record, when I began my career with FedEx over 25 years ago, I offload trucks and containers, inducted packages, and loaded trucks and aircraft back up. Even today, I will sometimes find myself back out in operations to ensure I never forget the tasks our front-line employees do day in and day out.
When I find myself sitting across from young CEOs who have been in academics for their whole life and they tell me they created a solution for one of my company’s critical tasks, but they have no experience with that task themselves, I already have one foot out the door. The second foot follows when they tell me that I need to completely change my operations so their technology can actually work in my facilities.
Of course, it is something completely different for a start-up CEO to say “we think we created a great solution, but we need a subject-matter expert to help us prove this is the right use case for us.” This is a sign of that CEO does not have all the answers. Honesty is highly valued among technology adoption gatekeepers in manufacturing, logistics, retail, and other industries.
Young companies must undergo a Customer Discovery process to learn from their potential clients what the real pain points are and if their technology provides business value. As the saying goes, “Just because you can build a robot for a use case, does not mean you should.” There are other solutions that might be just as good, if not better, than a robotics solution. Just ask Walmart and Bossa Nova Robotics.
It is only after undergoing the industry and customer discovery process can a startup make an informed decision regarding their technology and the appropriate use case. I have witnessed startups actually pivot their plans at this time. Sometimes startups find that their technology is not really needed in an industry like logistics, but is better suited for a completely different industry. This is all a good thing in my opinion, because it proves how much work the startup has done assessing their technology and their target markets.
Companies that are ready to move into the big time have built out a deep bench of highly talented engineers, programmers, and roboticists, but also business talent on the sales, marketing, and customer service side.
Bench of Talented Individuals
This critical items often gets overlooked by startups and initially it is not their fault. Many robot startups kick off with a handful of passionate engineers. This is always a great place to start, but to get to the big league and engage to deal with a Fortune 500 company like FedEx, a startup must build a large bench of talented individuals across numerous disciplines.
If I am in discussions with a firm with less than 25 people, I must fill out a large amount of extra paperwork. Why? Because I must ensure this small company can take on the demands of a company with over 500,000 employees and touches 99% of the world’s economic activity.
Many times I tell startups that “just because you can talk to a company like FedEx, that does not mean you are ready to do business with a company like FedEx.” This is not to say we would not be interested in talking to the start-up about their technology. My FedEx team can provide start-ups with some great insight and help in the Customer Discovery process. However, if your team is not ready to deal with a 24/7/365 around the world operation, then they should not put themselves in that position.
Companies that are ready to move into the big time have built out a deep bench of highly talented engineers, programmers, and roboticists, but also business talent on the sales, marketing, and customer service side. Sometimes this bench growth d does not occur until the next item on this ABCD is addressed. However, it is critical a start-up has a bench of talented individuals with numerous different types of skills in place to deal with a plethora of demands that will come with a big league client.
Wasting time and money early on chasing a single large customer is not the best use of limited start-up resources.
Capital and Cash Flow
Robotic startups are some of the most expensive, capital intensive enterprises on the planet. Unlike startups in the software or mobile app space, iterating on robot designs is an expensive endeavor. Robot firms can burn through cash at an alarming rate as they try to build their hardware and the software to support it. This is why it is not surprising that many robotics success stories are focused on the software side of industry where costs and burn rates can be kept in check, and where hardware development costs are minimized by using off the shelf components.
So what does a startup do when it comes to capital and cash flow? In addition to using as much free stuff as possible when it comes to building their application (thank you ROS), it is also wise to work with a small-to-medium enterprises that cannot only help them prove out their technology, but hopefully pay them for it.
Capital and cash flow are often the biggest obstacles to a startup. This is where many startups with a great solution have perished through no fault of their own. There is no working capital silver bullet for many startups. Resourcefulness is the winning path here.
Wasting time and money early on chasing a single large customer is not the best use of limited start-up resources. Yes, a big customer can get that cash flow going, but it is highly unlikely early on a big client will take the risk on you.
As stated earlier, when I am in talks with a small firm of less than 25 employees, there is extra paperwork to fill out. One of the forms deals with ensuring the firm is financial healthy to work long term with FedEx. This is another reason FedEx stresses to startup firms that they must build up their operations prior to engaging with a large customer, because they will ask financial questions.
I have witnessed robotic firms completely bootstrap themselves. So it is possible to do that. For some firms, they will secure the Venture Capital funding that will allow them to grow their bench of employees and further enhance their technology.
A reliable funding source and mature technology are required for start-ups to get into the big time. However, having a cash flow from sales to customers is a sure fire way to keep moving up the ladder to the major league. Why? Because that gives larger customers some very important validation that your tech works. That leads to the next key stat to build.
Deployments also give the larger firm a chance to speak with start-up clients, as well as determine how the client company views the solution and the start-up itself.
Nothing proves that a robot startup is ready for the big time more than having numerous deployments under their belt. The more deployments a company has, the more likely a large firm will to do business with them. The company has proven that not only their tech works, but they have been operating in the “real world” working with “real” customers and providing them solutions of value.
Deployments also give the larger firm a chance to speak with start-up clients, as well as determine how the client company views the solution and the start-up itself. Smart startup CEOs will actually make their clients available to prospective customers, and in that way accelerate the technology adoption process.
Deployments also indicate that the firm has some sort of positive cash. Now this cash flow may not be enough to sustain the firm long term, but it does indicate the start of a revenue stream for them, even a small one.
Deployment Magic Number
So what is the magic number for a Fortune 500 when it comes to deployments? 10? 30? 50? Each Fortune 500 company will be different. It really depends on the firm and the technology they are selling.
It also depends if the startup has really nailed down the earlier items on this list. A team that has a top notch solution and has applied it to the ideal use case will provided more leeway on the deployment number. Conversely, if a firm that has a solution similar to a dozen others, but has the vast majority of the deployments in the market, they will get more attention by a large firm. One just needs to look at Universal Robots domination of the Collaborative Robot space. When you think Collaborative Robot which company pops in your head first? Same with many executives.
So what is the takeaway from all of this? What is the best way to sum up this ABCD approach? It really comes down to this:
- Ask many questions regarding your technology and the market – Make sure you understand everything that you need to know about the problem you think you want to solve for your customer. Reach out to the Subject Matter Experts in the industries that you are targeting. Do not be afraid to admit your idea/tech will not work as you originally thought. Adapt and move on to where you do think it will work.
- Build up a top notch team – Before even thinking of talking to a large customer, ask yourself are you ready to support them ever hour they are open. If you are not capable of supporting the 24/7/365 operations of a large customer, then you are not ready for that customer. Get the talent that will allow you to land and then KEEP those big clients.
- Cash on hand and cash coming in – This can be a difficult one for many startup founders, because they want to land a big client like a FedEx to not only get cash flow, but also get VCs to jump on board. However, a Fortune 500 company is not going to take the risk on a firm that is “living paycheck to paycheck” especially if it is their company keeping the smaller firm alive. Get those small wins with small and medium size enterprises.
- Deliver and deploy your product to as many small and medium sized customers as you can, as soon as you can – This not only proves that your technology is valuable to numerous clients, you are also showing you are not dependent on a single client for your revenue stream. This one may take the longest to get to, but if you focus on getting those small wins in the minor leagues of small and medium enterprises you are growing your image in the eyes of the major players.
Each startup is going to have their own path to winning that first big time client. A few may have a killer technology that allows them to not need the deployments or a lot of capital on hand to get there. These are the unicorns of the startup world and have that once in a generation idea/tech. The vast majority of robot startups however will take a very measured approach and be open to building gradually to the big time. It is very true that the slow and steady approach wins more than forcing your way to the top and then finding you are not at all ready.
Editors Note: The editors of this RBR Opinion piece was recently interviewed for the Robot Report Podcast by hosts Steve Crowe and Eugene Demaitre. During the session, Prather described FedEx’s SenseAware ID and robot arms, technology opportunities for robotics startups at FedEx, and the RIA Interoperability Task Force and its efforts to develop standards for autonomous mobile robots (AMRs). He also touched on FedEx’s preparations for distribution of a COVID-19 vaccine, the importance of workforce development programs such as eKAMI, the end of Walmart’s contract with Bossa Nova Robotics and the possible sale of Boston Dynamics by SoftBank.
About the Author
With nearly 25 years at FedEx, Aaron Prather has developed and deployed numerous technology applications across the FedEx enterprise. In his current role as Senior Advisor, Technology Planning & Research, Prather leads efforts to find and deploy new technologies into FedEx operations, including robotics and automation. He sits on the company’s Operations Technology Council which coordinates efforts across all of the FedEx companies.
Outside of FedEx, Aaron participates in developing robot standards at the RIA and UL. Through the FedEx Institute of Technology at the University of Memphis, he works with universities and colleges in the development of educational programs for the next generation of technologists in logistics. Prather received an MBA from Christian Brothers University, and holds a BS from University of Memphis in Geographic Information Science and Cartography.
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