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July 26, 2017

The Robots Are Taking Over

6River team

Private: Josh Goldman

For decades, programmable robots have served us in industrial manufacturing and car assembly. Bulky, stationary and limited in capabilities, the robotics sector lacked real robotic brain power.

Fast forward to today, and we see a huge shift in robot sophistication. Today’s robots are smaller, faster, and less expensive. Developments in battery power, compute, and connectivity have made today’s robots smarter and more capable than they’ve been before.

Not surprisingly, robots are now driving the so-called fourth industrial revolution, and this army of machines is ready to work. Business is booming for robotics—investments in the enterprise robotic sector are up an eye-popping 140% over the last two years. The path to a more advanced robot is directly related to the wave of technology improvements we’ve seen over the last two decades, resulting in several key changes in the industry.

Improvements include: smaller and better batteries, lower compute costs, and developments in connectivity. Let’s dig in:

1. Lithium batteries have become cheaper and more accessible. The cost of lithium-ion batteries has fallen 14% per year for the past 15 years.

2. Compute costs have fallen dramatically over the past 20 years as we’re seeing a miniaturization of compute. NVIDIA is helping to lead efforts with their graphic processing chips. Initially developed for the gaming industry, they are now powering many AI and other compute heavy applications.

Computing Cost Performance Over Time

3. Connectivity allows today’s robots to perform as a group instead of in silos. They’re able to share learnings and work in unison. For example, multiple robots can be used to map out a space in a fraction of the time that a single robot could previously. Connectivity has become extremely reliable, dynamic, and cost effective. This translates into a high level of correlation and synergy among robots and interconnection with existing enterprise application platforms by way of high speed/low latency Internet, Wifi, and low power Bluetooth for beaconing and LTE data services.

These three key developments have led to autonomous robots that are able to serve use cases in industries such as healthcare, industrials, logistics, services, and consumer sectors. And while there is general concern that robots will take over jobs, the reality is they are also creating new jobs. It’s expected that over the next decade, robots and automation will create close to 15 million jobs in software, engineering, design, maintenance, support, and training.

The core technologies that power robotics – cloud, machine learning, and hardware – are key themes throughout Norwest’s portfolio. Expertise in hardware has specifically been a differentiator for us. We’ve been privileged to see portfolio companies with hardware and software elements like Mist Systems, Exabeam, and Brite Semiconductor push the boundaries on AI and Machine Learning innovation.

Today we’re excited to add mobile robotics company 6 River Systems to that distinguished list.

6 River Systems is focused on disrupting e-commerce and retail fulfillment. There were three aspects of this investment that stood out to us:

1. Use Case: While we’ve seen many impressive robot inventions, 6 River built a robot that provides a real ROI for customers. Their robot reduces the amount of time employees walk around a warehouse picking orders, making them more efficient. This is especially relevant given the increased pressure to deliver products faster while also lowers the cost per pick creating a compelling business case for a customer.

2. Business Model: 6 River sells robots predominantly on a subscription basis. This allows their customers to move the capex of buying robots to opex for using robots. Customers can also bring in more robots on demand during peak seasons like Christmas when retailers are moving a lot of inventory. This lowers overall costs.

3. Experienced Team: The 6 River team has real-world experience from the most successful robotics company to-date: Kiva Systems (now Amazon Robotics). This provided the insight to the power of robotics which led to fundamentally reimagining the fulfillment process.

6 River’s approach also makes the job of picking orders in a warehouse less physically straining. Through autonomous technology, employees no longer need to push a cart. By building technology that improves the job, 6 River’s robots have been quickly accepted by employees and assimilated into their customers’ warehouses.

At Norwest, we believe a number of market shifts have given robots new life and make it a compelling category for investment. We look forward to seeing how 6 River and others in the space will take advantage of these trends to build successful businesses.