VC funding in robots FEATURE
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Both deal flow and the number of dollars invested in robotics companies hit a new high.

With the exception of the fourth quarter, funding to robotics companies surged in 2015, as investors poured money into a variety of startups within the sector. *

Just by how much robotics funding was up in 2015 depends on whom you talk to.

' Venture capital investments in robotics companies soared by 115 percent in 2015 'Venture capital investments in robotics companies soared by 115 percent in 2015 , and annual deal activity also reached a new high of more than 80 deals, according to a recent report by CB Insights.

Hizook, a site on robotics news for academics and professionals, estimates robotics companies raised $922.7M in VC funding – 170 percent more than in 2014.

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Travis Deyle, who earned a PhD in healthcare robotics and recently co-founded a startup called Cobalt Robotics, conducted the research for Hizook.

“Honestly, I've been surprised that robotics VC funding was so low for so many years. In general, I think VCs are coming around to hardware.... and robotics has been long neglected,” Deyle said. “Many robotics companies are still fundamentally software, they just also have this big competitive moat that is embodied in a hardware component. For people who know both hardware and software, this is a huge advantage.”

Within robotics, Deyle believes autonomous cars got the lion’s share of funding.

“Between the classic auto manufacturers and tech companies, we've seen many billions (of dollars) poured into that industry,” he noted. “It will have a real catalyzing effect over the next few years as certain components, such as sensors, become commodities for other robots.”

Robots in healthcare

One of the largest deals of the year was a $150 million growth equity round raised by Auris Surgical Robotics during the third quarter. In April, Hansen Medical acquired the Redwood City, Calif.-based company – which develops robots to control catheters – for $80 million.

San Antonio-based Xenex raised $25 million early in the year. The company created a full spectrum UV Germ-Zapping robot designed primarily to reduce hospital-acquired infections (HAIs). The Xenex mission is to eliminate harmful bacteria, viruses and spores that can cause HAIs in the patient environment. Its goal is to become the new standard method for disinfection in healthcare facilities worldwide.

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Xenex CEO Morris Miller  says the robot stands out from other similar devices because multiple outcome studies - published in eight different peer-reviewed journals - have shown reductions of 53 percent to 100 percent of infections acquired in hospitals. Xenex also claims its robot is the only pulsed xenon UV device of its kind while dozens of other companies manufacture mercury UV devices.

Since Xenex launched in 2010, more than 300 hospital systems nationwide have purchased its robots, including the University of Texas MD Cancer Center, the Mayo Clinic and Stanford Hospital. The robots cost about $100,000 each.

When it comes to funding, Xenex has raised about $50 million to date.

Michael Brown, a general partner with Battery Ventures, was drawn to Xenex and its innovative technology.

His firm has invested about $14 million to $15 million in the company in multiple funding rounds.

Brown’s father served as chairman of the board at St. David’s South Austin Medical Center so he was aware of the challenge of hospital-acquired infections.

Related link: New drone advocacy group launches with Cisco and CNN as members

When he heard about Xenex’s robot, Brown cold-called CEO Miller and “fell in love” with what the company was doing.

“We knew right away that this is a game-changing technology and something we wanted to be involved in,” Brown said.

In general, Brown believes robotics companies like Xenex, with good technologies and strong management teams, will ultimately be the most successful.

It’s Morris’s hope that Xenex’s robot will become commonplace in hospitals.

“Bill Gates predicted a computer on every desktop, and we think every hospital is one day going to have multiple Xenex devices,” he said.

Drones dominated

Besides Auris and Xenex, a wide variety of robotics companies raised money last year.  Drone-related startups were among the biggest funding recipients.

DJI, considered one of the leaders in the drone space, raised $75 million in 2015. The company was predicting a whopping $1 billion in sales in 2015. 3D Robotics, another big player in the drone space, raised a total of $64 million in 2015.

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Aeryon Labs, another drone company, raised $60 million in 2015.

Looking ahead, Deyle predicts that agricultural robots will take off in the next few years.

He also expects that 2016 “will likely be the year of the social robots – with at least a dozen new market entrants.”

“It will be interesting to see if they can get over the ‘just another toy’ hump and become real, lasting products,” Deyle said.

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While investment was up for the year as a whole, 2015 ended on a sour note, as funding to robotics companies crashed by almost 74 percent to $62 million in the fourth quarter compared to the previous quarter, according to CB Insights. However, in the first 3 months of 2016, funding to robotics startups did rebound slightly to $91 million, although deal activity was still down.  

 

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About Mary Ann Azevedo

Mary Ann Azevedo is an award-winning journalist based in Austin, Texas.