International investors rely on German robotics

Munich, Dusseldorf International investments have recently collapsed, but German robotics start-ups remain popular. Last year, 617 million dollars flowed into German companies. Although that is a good five percent less than in the previous year, the German technology industry is in a good position in comparison.

Globally, the sum of financing collapsed by 42 percent to around 8.5 billion dollars. In the USA, only half as much money was invested in robotics, in Great Britain the minus was 81 percent, as an analysis by the venture cap company Picus shows.

There are good reasons for the different development: due to the shortage of workers and problems in the supply chain, robots are in greater demand in Germany. According to a survey by the start-up Fruitcore, almost half of German medium-sized companies are planning to purchase a robot. 14 percent already use one.

In addition, the offer and know-how in German universities, institutes and companies is large. There are numerous spin-offs, especially in Bavaria, Berlin and in the Stuttgart and Karlsruhe region. Start-ups such as Agile Robots, Franka Emika, Wandelbots or Fruitcore are making a name for themselves in the industry.

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The dynamic development arouses the interest of investors such as Robin Godenrath, founding partner and managing director of Picus, who manages a portfolio worth around one billion euros. “Robotics is a new area for us that we want to expand. We looked at the scene intensively for two to three years in order to make the first investments.”

Around 570,000 installed robots

Fruitcore Robotics, for example, is one of the robotics specialists who have recently been able to raise larger financing rounds. The start-up, which aims to provide medium-sized companies with inexpensive robots, raised around 23 million euros from venture capitalists such as UVC Partners and Capricorn.

A similar target group has Robco, which has developed a kind of Lego kit for robotics. Led by Sequoia Capital, investors recently put 13 million euros in fresh capital into the company.

>> Read about this: Growth through Horst: Fruitcore wants to supply medium-sized companies with inexpensive robots

However, the negotiations about financing rounds have become “significantly more difficult and lengthy”, says Helmut Schmid, board member of the German Robotics Association (DRV). The investors take a much closer look at the customer pipeline, orders won and the business indicators.

Strategic Investors

Not only venture capital funds invest in the industry. The takeover of start-ups by strategic investors is now more common, says Susanne Bieller, Secretary General of the International Industry Association (IFR). “That can be a good way for both sides.” The established corporations could acquire new technologies, the start-ups could benefit from the sales and development capacities. For example, ABB took over the specialist for mobile transport robots Asti Mobile. Jungheinrich, in turn, bought the intralogistics specialist Arculus.

Overall, the financing situation for robotics companies is good, says Bieller. The industry has overcome the short corona slack and has returned to the growth course. That makes them attractive to investors.
In 2021, deliveries increased by 31 percent to a record 517,385 newly installed robots. For the past year, the world association IFR expects another record of almost 570,000 units sold. The final figures are not yet available.

Better no money from China

According to Bieller from the IFR, European companies often have offers from China, but do not feel comfortable with them. There is a risk that the late financing rounds will no longer succeed with Chinese participation. “Either the start-ups don’t manage to get really big, or they are taken over by foreign investors and migrate.”

Jens Riegger, CEO of Fruitcore, confirms the reservations. “We have received various takeover bids from Chinese corporations, but we have rejected them. We want to maintain our independence and keep control of our beloved project.”

>> Also read: Seven problems of mankind, seven possible solutions – You should pay attention to these technologies

The waiver has its price, says Bieller. Funding is harder to come by, especially “if you value the money coming from Europe.” Firms in the US and China would have an easier time getting a high valuation thanks to domestic lenders as large amounts of money are invested.

Alex Rohregger, robotics expert at Picus, quantifies the difference: “If a robotics start-up in Germany, for example, with sales of 300,000 euros is valued at 20 million euros, in the USA it often comes to 30 million dollars with sales of 20,000 dollars.”

According to Plaf Gehrels from DRV, this is a competitive disadvantage when it comes to conquering the market quickly. The question arises as to “what we can do from a European perspective against American and Chinese investors and their venture capital”.

According to Gehrels, the activities of the RAG Foundation could serve as a model. This forms a European robotics network that unites hardware and software specialists as well as integrators under one roof.

Trend towards software and rental models

Bieller sees a trend towards software-driven business models among start-ups. “There is already so much good hardware that you don’t have to reinvent the wheel every time.” Some young companies use grippers or robots from established manufacturers, for example, and develop applications to use them in service or for inspections, for example. Developments in the software sector can be implemented faster and more cost-effectively and it is easier to find financiers.

>> Also read: Artificial muscles and neurons – How robots should learn to feel

Godenrath from Picus confirms this. “The start-ups do not necessarily have to build robots, but can also develop software for setting up the robots. Users of this software then no longer even need to be able to program. A lot is currently changing in terms of user-friendliness. Digital and more accessible services are also emerging for robot applications, for example for ordering, maintenance or problem solving.”

Rental models – also known as “Robotics-as-a-Service” – can also become a business for the young companies. “If a robot is required for inspections at regular intervals, but is not needed in the meantime, a rental model can make sense,” says Bieller from the IFR. Especially for medium-sized companies who shy away from the initial investment, such models can be an entry into robotics.

Robots are entering new industries

Even previous niche offers are becoming more and more interesting for investors. “Particularly in the construction, agricultural, logistics and service robotics segments there are practical fields with great growth opportunities,” says Olaf Gehrels, Deputy Chairman of the German Robotics Association. This is where the need for action is greatest and automation is still at a low level. “Without question, we will see further development of new start-ups here.”

The world association IFR reported growth of 37 percent to 121,000 installed robots in the professional service segment for 2021. In the hotel and catering industry, the number of deliveries almost doubled, albeit at a relatively low level of 20,000 units.

More: “There is now massive investment”: Why more and more companies are using robots.

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