Robotics Startup Investments FEATURE
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Venture capital firms are rushing to invest in robotics startups—and the pace just keeps accelerating.

At Wonder Workshop, the venture money has been pouring in.

In 2013, a year after starting up, the San Mateo, CA, company raised $1.5 million in pre-orders for its product, which helps kids learn how to code by programming Dot and Dash, two toy robots. With that successful campaign as proof of consumer interest, the startup’s three founders talked to a handful of VC firms and, in just three weeks, raised $8 million from such  outfits as Madrona Venture Group and Charles River Ventures. Recently, their investors agreed to do a follow-on round of $6.9 million.

“We attracted VC money very quickly,” says co-founder and CEO Vikas Gupta. “There’s a lot of interest in our product--and in robotics in general.”

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That is an understatement. If VC financing of specific sectors tends to come in waves, these days, the money flowing into robotics startups promises to become a veritable tsunami. VC funding increased 36% from 2013 to 2014, to a total of $341.3 million, according to robotics expert Travis Deyle. What’s more, growth this year seems to be accelerating even faster.

“Robotics funding is exploding,” Deyle says.

These investors are flocking to a new breed of robots, which, using sensors and wireless technology, is able to do anything from detect the presence of intruders to speak.

“It used to be robotics was primarily used to move heavy stuff around in warehouses and other industrial applications,” says Frank Tobe, owner of The Robot Report. “Now it’s being applied to almost any purpose.”

Dot and Dash, for example can be programmed to perform such feats as turning around if they encounter a wall or exclaiming “Oh no” when placed upside down. While unmanned aerial vehicles (UAVs), or drones, and medical devices are hot, so are many other areas. What’s more, there‘s also a growing number of new funds focused on robot startups.

Drones, Medical Devices and Other Markets

Certainly, drone startups are receiving a considerable portion of VC money. In 2014, according to Deyle, at least six such companies raised funding. Two examples: Airware, which builds a control system for commercial UAVs, raised $25 million from VCs, plus an undisclosed amount from a strategic partner, and Skycatch, which has  a drone data capturing platform, attracted $13.2 million, plus a $3.2 million convertible note.

“We think the opportunity in the drone space is one of the most significant investment opportunities of this decade,” says Eric Norlin, general partner with SK Ventures.

The firm has invested in several UAV startups recently.

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Robotics startups aimed at medical markets are also attracting investment. Take Medrobotics. The Raynham, Mass., company makes a robotic mechanism that somewhat resembles an endoscope and allows surgeons to see inside their patients digitally, thereby avoiding extremely invasive procedures. Over the past five years, it has raised $100 million. Much of that money has come from super-angel funds which have invested “pretty much $15 million to $25 million a year since 2009,” says President and CEO Samuel Straface.

But investors are funding a wide variety of other applications, as well. There are, for example, toys like Sphero, a smart phone-controlled robot ball, which also is the new BB-8 droid in the forthcoming Star Wars: The Force Awakens. Recently, it raised $45 million in its latest round, an investment led by Mercato Partners, with Disney and Foundry Group also participating.

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Gamma 2 Robotics in Denver sells a robotic security guard that can be programmed to traverse an area and detect anything unusual. It just closed a $3.5 million round, allowing the company to build a management team and move from a 700-square foot warehouse to a 14,000 square foot facility. Like Wonder Works, according to CEO Lew Pincus, the funding process was speedy.

“It has been much faster due to competition to invest in new technology,” Pincus says.

 Robot fever also is leading to new funds targeting the area. Qualcomm and TechStars, for example, recently announced the first 10 startups in their Qualcomm Robotics Accelerator, powered by TechStars, a four-month program in San Diego that will invest $120,000 per team. And in May, Palo Alto-based VC firm Accel Partners and DJI, a Chinese drone maker, formed a new $10 million investment fund to invest in UAVs and other robotics companies. Called Skyfund, it’s aimed at what Miles Clements, a principal with Accel Partners, calls “the drone eco-system.”  That includes, for example, applications for specific industries and systems that help drones fly autonomously and safely.  (Accel also recently invested $75 million in DJI). “We hope to plant a flag in the category of drones and modern robotics,” says Clements.  

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About Anne Field

Anne Field has covered entrepreneurship and small business for the New York Times and Bloomberg BusinessWeek.