VCs Talk About Food Automation Funding Space
It’s no secret that the tech industry is going through a challenging time when it comes to venture capital. The food tech sector is no exception, and, according to Vebu Labs managing partner Buck Jordan, food robots have taken a hit.
“It’s tough for robotics companies,” Jordan said during a business architecture outlook session at this week’s Food Robotics Outlook 2023 event from Spoon. According to Jordan, the main reason is that food robot startups have a long way to go to get to that first dollar of revenue.
“The challenge is that robotics is a very expensive game. It takes two or three years to get to a large marketable product.”
Arthur Chow, an investor at S2G Ventures, agrees.
“Relatively speaking, the hammer has come down hard on the anvil there in the last few months,” Chow said. “These are businesses that need a lot of capital. So you’re looking at the math in terms of valuation; how many rounds you have to raise in the future and how much you’re going to be shorted. And then finally, the amount of exits, which there haven’t been many exits.”
The reason for this long journey to money is that, usually, the founders of these companies have such big ideas for their robotics programs.
“We all start these food robot companies saying, ‘let’s automate everything, it’s the biggest thing,'” said Jordan, formerly the founder of Miso Robotics, the company behind the Flippy restaurant robot. “We’re designing it as big, aggressive, big, and very important projects, but the money curve to get there is very steep.”
One potential solution to these long gestation periods is to take part of that big idea and deliver something useful – and quick to sell – rather than a more complex plan that takes years to perfect.
“I suspect that some robotics companies that are less responsible, or more focused on money, will start to diversify their goals,” Jordan said.
Jordan pointed to Mdali, a maker of fully robotic restaurants, as an example of a company that he believes has key technology that can be ‘differentiated’ from the market and succeed.
Both Jordan and Chow believe there will be a number of food robot startups to emerge in the next year as well-funded companies look to snap up interesting IP. But be careful, said Jordan.
“There’s an opportunity because you can buy this IP at affordable prices, but you need to have the team and the expertise in-house to do that. And then, woe betide the innocent investors who start putting these things in without having a team on board to do it.”
Ultimately, both investors still see an opportunity for food robots, but believe the key is for startups to not only show a path to revenue, but clearly demonstrate how they can enable new lines of revenue over time.
“This kind of gradual construction is what we are talking about,” said Chow. “We start with one use case and it makes money there, but then you need to, over time, build and keep thinking about the use of the robot and the ROI.”
You can watch the full session below.
