In the months of 2021, there was a brief and beautiful moment when I felt my robotics investment might be immune to broader market forces. We all basically and implicitly understood otherwise, but it was a great moment nonetheless.
There was actually a bit of insulation in there. Even though the headwind picked up, there was still enough forward momentum to keep us cruising for a little while. But in the end it all comes down to earth. With about a month to 2023, we can start assessing the damage. Looking at these charts collated by Crunchbase, things look pretty grim.
A couple of topline points:
- 2022 will be the second worst year for robotics investment in the past five years.
- This number has declined fairly steadily over the last five quarters.
According to the first point, 2020 was the lowest. It was also an anomaly, what a global pandemic is. Uncertainty does not breed investment confidence. The full-year numbers are even more surprising given how investor confidence grew earlier in the year. Things really started to slow down in the second quarter. A quick look at the bar chart might suggest that 2021 is an anomaly. yes and no. Yes, in terms of acceleration. No, in the long run. The question is not if these bars will start increasing year by year, but when.
The same things that slowed investment in 2020 sped up investment the following year. Even as operations resumed, job replenishment became increasingly difficult, and companies everywhere were frantically automating. As great as it may be, we are not yet ready to classify automation and robotics as “recession-proof.” But I suspect that those who manage the purse strings fundamentally understand that these downward trends are more a product of the macroenvironment than specific to robotics.
But for some early-stage startups, it’s a cold consolation. Many runways have been significantly shortened this year. Consolation can come anywhere, but often for those who suddenly find themselves unable to close a round that might have felt like a foregone conclusion 12 months ago. We need to take decisive action.
Given the acquisition-or-closure choices some companies will inevitably face, a surge in M&A activity is likely. It’s certainly less money, but few people can turn down a good sale. In some cases, it also leads to product and portfolio enhancements.
Anecdotally, we’re seeing increased investment this year, which seems to be part of the natural cycle of companies waiting until after the holidays to announce. A proper bounce, on the other hand, seems inevitable, but only those with a powerful crystal ball can know exactly when it will return.