May 12, 2017
Mary Ann Azevedo is an Austin-based business writer who has written for Venture Capital Journal, San Francisco Business Times, Crain's and Silicon Valley Business Journal.
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Venture capital funding for robotics startups has surged as the price of building robots has fallen dramatically in recent years. What this means for human jobs depends on who you talk to. And if you talk to venture capitalists and the startups they fund, the impact is a positive one.

A March 2017 analysis conducted by PricewaterhouseCoopers suggested that up to 38 percent of jobs in the United States could potentially be at high risk of automation by the early 2030s, higher than the United Kingdom (30 percent), Germany (35 percent) and Japan (21 percent). The risk appears to be highest in sectors such as transportation and storage, manufacturing and wholesale, and retail, according to the PwC report.

The report also found that new automation technologies in areas like AI and robotics will both create “some totally new jobs” in the digital technology area. Also, resulting productivity gains might generate additional wealth and spending capable of supporting additional jobs of existing kinds.

Meanwhile, investors seem to be increasingly drawn to companies in the robotics industry. Venture interest in drones, a subset of robots that could eliminate human jobs in delivery, surveillance, and other areas in particular, appears to have taken off.

The Robots Are Funded

Thirty-nine US robotics companies raised $519 million in the first quarter of 2017, according to a Crunchbase News analysis. This compares to $553 million raised in all of 2014 by 134 companies, implying that deal sizes are getting larger.

Overall, funding in robotics startups skyrocketed by more than five times from $234 million in 2012 to $1.2 billion in 2016.

Narrowing to our favorite robotics-niche, drones, the increase is even greater. A mere eight US drone-related startups brought in $15 million in private funding in 2012. By 2016, $424 million was pumped into 73 drone-related companies.

Venture Capital Remains Optimistic About Sector

Venture capitalists who have invested in robotics and drone companies acknowledge the concern that automation could lead to job loss.

Ashish Aggarwal of Grishin Robotics, a Menlo Park, Calif.-based VC firm focused on robotics and IoT, believes that it depends on the problem that is being solved.

“In most of the cases, we believe that these robots would work in conjunction with humans and improve safety or increase productivity,” he said. “For instance, drones are being used for inspection of critical infrastructure such as power plants. Previously, a human would go into this difficult terrain and conduct this dangerous task. Now, drones are supplementing humans and increasing human safety.”

Founded in 2012, Grishin Robotics has raised $125 million and invested in 17 companies, including connected toymaker littleBits and Sphero, which aims to bridge the gap between the real world and the virtual world with its smartphone-controlled robots.

For Menlo Ventures Partner Mark Siegel, automation is more about displacing than replacing jobs.

“Historically, it (automation) has displaced low-skill jobs and enabled people to retrain and move into other industries,” he told Crunchbase News.

In January, Siegel’s firm invested in Reno, Nevada-based Flirtey in a $16 million series A round that included participation from Qualcomm Ventures, Chris Sacca’s Lowercase Capital, World Innovation Lab, Goodwater Capital, and Y-Combinator.

Flirtey, founded in Australia in 2013, claims it’s the first company to deliver directly to customers’ homes.

Where Startups Stand On Robotics

Flirtey CEO Matthew Sweeny told Crunchbase News he saw huge potential for the technology to transform global logistics and started building the first delivery drones as a hobbyist in his dorm room.

With its latest funding, the company is now focused on building an industry-defining company, Sweeny said, with plans to expand partnerships with its existing customers, Domino’s and 7-Eleven.

As for whether Flirtey is contributing to job loss, Sweeny argues the opposite.

“We are creating new high-paying jobs in the United States and globally,” he said. “We are manufacturing drones on US soil and hiring veterans. We create new employment opportunities in the communities we operate in by hiring locally for skilled positions including engineers, pilots and developers.”

He pointed out that Flirtey has a major humanitarian focus. The company conducted the world’s first FAA-approved drone delivery in history in collaboration with NASA, where it delivered 24 packages of urgent medical supplies in Wise, Virginia. It also partnered with Johns Hopkins on the world’s first ship-to-shore drone delivery to demonstrate the humanitarian potential of drones.

For Siegel, Flirtey is clearly the leader in the sector.

“They have been consistently leading the drone delivery industry in terms of technology, safety, regulations and historic firsts,” he said.

In general, Siegel acknowledges there has been an uptick in robotics and drone investment activity.

Preserving Lives With Robotics

San Antonio-based Xenex is an example of a robotics company that is focused on saving lives. The startup has developed a full spectrum UV Germ-Zapping Robot designed to reduce hospital-acquired infections. It raised $38 million in February from Essex Woodlands, Piper Jaffray, and existing investors. In total, Xenex has raised $94 million. CEO Morris Miller said the latest cash infusion will be used for product development, scientific research and sales force expansion.

He believes there’s not a danger of the company’s robots replacing human jobs.

“UV disinfection is an additive process to a hospital’s cleaning process and does not replace the need for manual cleaning by hospital employees,” Morris said. “The room must be visually clean such trash removed, linens changed and all visible fluids removed before the robot can be put in the room to do its job – which is to disinfect all the high touch surfaces that may have been missed during the manual cleaning process.”

Hospitals using the $100,000 Xenex robot have reported 50 to 100 percent infection rate reductions, according to Morris.

This is what most appealed to investor Essex Woodlands Health Ventures. Founding Managing Director Marty Sutter said he was once himself a patient who had acquired a staph infection after a minor surgery.

“Anything used to prevent HAIs is huge,” Sutter said. “Their cost to the healthcare system is growing and growing, and that’s why Xenex continues to catch the attention of CFOs and hospital administrators.”

Currently, Xenex’s LightStrike robots are in more than 400 hospitals, surgery centers, skilled nursing, and long-term acute care facilities including MD Anderson, the Mayo Clinic, UCLA, Stanford, Orlando Health, Henry Ford and Honor Health systems.

The company says its UV technology (pulsed xenon vs. mercury bulbs) is what makes it different from competitors.

“Devices using mercury take several hours to kill infections,” Sutter said. “Xenex can do the same thing in 15 minutes. Being able to do this very rapidly is critically important. Xenex has taken the best technology to attack these bugs, and developed it in a manner that can be done quickly, efficiently and thoroughly.”

For Aggarwal, investments in the robotics sector will likely only continue to grow.

“Technology advances in various fields such as electrical engineering, mechanical engineering and computer science have come together to drive innovations in the field of robotics,” he said. “Robotics startups have high risk/reward ratio, and it is an emerging area which has the potential to disrupt entire industries, which makes it perfect for VC investments.”

So while robotics and drone companies will ultimately replace human jobs is not yet clear, one thing is: investors are taking notice and pumping money into the growing sector.