It’s not a secret that the tech industry is going through a challenging time when it comes to venture capital. The food tech sector is no exception, and, according to Vebu Labs managing partner Buck Jordan, food robotics has been hit especially hard.
“It’s tough for robotic companies,” said Jordan during the venture capital landscape session at this week’s Food Robotics Outlook 2023 event from The Spoon. According to Jordan, the overarching reason is that food robotics startups have an especially long journey to get to that first dollar of revenue.
“The challenge is that robotics is a really expensive sport. It takes two or three years to get to a commercializable major product.”
Arthur Chow, an investor at S2G Ventures, agrees.
“With valuations, the hammer has come down hard on the anvil there in the last couple of months,” said Chow. “These are really capital-intensive businesses. So you’re just looking at a math equation around valuation; how many rounds you have to raise in the future and how much you will get diluted. And then ultimately, an exit value, which there haven’t been a lot of exits.”
The reason for these long journeys to revenue is that, often, the founders of these companies have such big visions for their robotic systems.
“We all start these food robotics companies with like, ‘let’s automate everything, the biggest thing,'” said Jordan, previously a founder of Miso Robotics, the company behind the Flippy restaurant robot. “We devise these like huge, aggressive, big projects, and they’re incredibly valuable, but the capital curve to get there is so steep.”
One potential remedy to these long gestation times is taking a portion of that bigger idea and offering something useful – and quicker to market – than a hugely complicated system that takes years to perfect.
“I suspect that some robotics companies who are a little more responsible, or a little more revenue-oriented, are going to start paring down their objectives,” said Jordan.
Jordan pointed to Creator, a maker of fully roboticized restaurants, as an example of a company he believes has valuable technology that could be ‘parted out’ to the market and be successful.
Both Jordan and Chow believe that there will be a number of food robotic startups that could get acquired over the next year as well-funded companies look to roll up interesting IP. But beware, says Jordan.
“There’s an opportunity because you can buy this IP for pretty affordable prices, but you need to have a team and expertise in house to do that. And so, woe be to the pure financial investor who starts rolling these things up without having a team on board to do that.”
In the end, both investors still see an opportunity for food robotics, but believe the key will for startups to not only show a path to revenue, but clearly illustrate how they can enable new lines of revenue over time.
“It’s sort of that gradual build we’re talking about,” said Chow. “We start with one use case in revenue and it makes money there, but then you do need to, over time, build and continue to think about the utilization of the robot and an ROI.”
You can watch the full session below.
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