Why investing in robots makes sense in 2017
As automation and robotisation begin to drive significant productivity improvements across the global economy, we are all becoming increasingly aware of the important role that robots and artificial intelligence will play in our lives in the near future.
The promise of robotisation within many areas potentially suggests that we are at the dawn of a new industrial revolution that will spur on economic growth over future years. Consequently, robotics looks likely to emerge as one of the most active areas of early-stage investing in 2017. Furthermore, to the benefit of investors, the level of risk can now be greatly reduced by taking advantage of the significant tax efficiencies available through the Seed Enterprise Investment Scheme (SEIS) that was first introduced in 2012.
Recent rapid falls in the cost of low-run component production (by use of 3D-printing) and the growing sophistication of cognitive computing packages have created an opportunity for leaner start-ups to cost-efficiently develop their ‘minimum viable product’ and demonstrate initial commercial viability of their robots.
Additionally, Robotics and Autonomous Systems has recently become a focus area for government-backed innovation grants, meaning that investments in this area are being further de-risked.
Until recently the vast majority of robots were sold to automate high-volume manufacturing tasks, however much of the excitement around the new generation of robotics start-ups appears to be focused on applications outside the factory. Robotics increasingly can be applied to a wide variety of activities across a range of business sectors such as logistics; agriculture; construction ; domestic appliances; security; or specialist medical equipment.
There is evidence to suggest that a vibrant scene for robotics innovation is beginning to emerge. British universities are home to some of the best robotics and artificial intelligence labs in the world and, as the pool of national expertise grows, we are now starting to see this spill out into applied commercial activities. Amazon Prime Air recently commenced the first field-tests of its autonomous drone-based parcel delivery service in the UK; Google DeepMind, based in London, continues to pioneer the application of cognitive computing to real-world problems; and Dyson has released its 360 Eye robotic vacuum-cleaner. Alongside headline-grabbing developments within institutions and corporations, we have witnessed an increasing numbers of robotics start-ups. Incubator programmes, such as the one at the Bristol Robotics Laboratory, are now acting as a springboard for exciting young companies like Open Bionics and Reach Robotics.
The recent launch of the British Robotics Seed Fund (www.britbots.com/fund), the first SEIS-qualifying investment fund offering investors an opportunity to participate in a mixed basket of innovative businesses that are exploiting the new generation of robotic technologies, will allow promising businesses to finance their early activities and become well positioned to go on to become world-leaders. There are also now a number of ETF products aimed at providing robotics coverage in the public markets such as ROBO Global (www.roboglobal.com) and Robocap (www.robocapfund.com).
There are a few specific investment themes to look out for in 2017. Three which really stand out are: (1) Frugal robotics; (2) Addressing labour shortages; and (3) Moves towards full autonomy.
Frugal robotics is a trend looking to aggressively reduce the cost of robotics components and platforms so that the amount of upfront capital investment that a user is required to make can be minimised. London-based start-up Automata Technologies, a maker of low-cost robotic arms, won ABB’s global innovation challenge and is heading down this route by charging its customers a sub-£300 monthly fee for an arm, where currently an equivalently-specified alternative would cost more than £25,000.
Addressing labour shortages that have arisen from of a lack of human appetite for particular types of work is an obvious application-area for robotics. For example recently it has become extremely difficult to find agricultural labourers to work on British farms. Without this pool of labour, farmers are having to take a serious look at robotic substitutes. Dogtooth Technologies, the developer of a strawberry-picking robot, is undergoing trials with a number of major fruit-growers with an automated picker. Equally, labour shortages for carers-of-the-elderly are well documented with robotic solutions under development.
Whilst, in the popular imagination, robots are seen to be sophisticated and multi-functional , he current realty is very different. Successful robotics start-ups must address a specific problem-type. Building up to fully autonomous operationis essential to managing technology risk. In December, Just Eat made its first driverless take-away delivery in Greenwich in London using s a small land-based robotic cart developed by Starship Technologies. These carts can controlled by a remotely-based human operator as a pre-cursor to a fully autonomous system.
As the tools and expertise required to build a robotics business proliferate, expect in 2017 to see an explosion of robotic start-ups. With the substantial tax benefits available under SEIS, there are likely to be attractive investment opportunities available and there’s every reason to believe that this new crop of British robots will become important players for the future .
[First printed in Professional Adviser, 25th January 2017]