Rent-a-Robot: Silicon Valley’s new answer to labor shortages in smaller US factories

Silicon Valley has a new argument for persuading small businesses to automate: rent a robot.

Better technology and the need to pay higher salaries to humans has produced an increase in robot sales for large companies across America. But few of these automatons are morphing into smaller factories that are concerned about high start-up costs and lacking robot engineering talent.

So venture capitalists are supporting a new financial model: lease robots, install and maintain them, charge factories by the hour or month, reduce risk and start-up costs.

Saman Farid, a former venture capitalist who has invested in robots for over a decade and has seen the challenges of putting robots in factories, created rent-a-robot Formic Technologies with support from Lux Capital and Initialized Capital, one of the first investors in self-targeting technology startup cruise.

Garry Tan, partner at Initialized Capital, sees a confluence of cheaper and better robotic computer vision and artificial intelligence technology, low interest rates and the threat of US-China tensions in supply chains fueling interest in robot subscriptions .

“It’s at the center of three of the biggest megatrends that are driving all of society right now,” said Tan.

Technicians and small business owners don’t always get along, a dilemma that prompted an industry group, the Association for Manufacturing Technology, to open an office in San Francisco a few years ago to bring the two together.

The leasing model places much of the financial burden on robot startups, which carry the risk of a manufacturer losing a contract or changing a product. Smaller factories often have short runs of more personalized products that aren’t worth a robot. And Silicon Valley Robotics, an industry group that supports robot startups, says that in the past, funding was a challenge.

Still, some high-profile investors are on board.

Tiger Global, the biggest tech startup financier this year, backed three robot firms that offer a seven-month subscription.

Melvin the robot

Bob Albert, whose family owns Polar Hardware Manufacturing, a 105-year-old metal stamping plant in Chicago, bought the Formic pitch for less than $10 (about Rs. 740) an hour for a robot, in comparison with over $20 (about Rs. 1,480) an hour for your average human worker. He watched this month a robotic arm take a metal bar from a can, spin it, and place it in an older machine that bent it into a 42-inch (107 cm) handle.

“If the robot works really well, we’re going to use it a lot,” said Albert, who was pleased with the initial results. “And if it doesn’t work, none of us do very well. We have less skin in the game and they have some skin in the game.”

Westec Plastics, a family-owned plastic molding factory in Livermore, Calif., had its first robot in January 2020 and now has three – named Melvin, Nancy and Kim – from Rapid Robotics, which charges $3,750 (about Rs. 2, 7 lakhs) per month per robot in the first year and $2,100 (about Rs. 1.5 lakhs) in the second year.

“Melvin works 24 hours a day, all three shifts, and this has replaced three full operators,” said President Tammy Barras, adding that she is saving about $60,000 (about Rs. 44.5 lakhs) in cost of ownership. labor per year with a single robot. “We had to increase our salaries quite significantly this year because of what is happening in the world. And luckily, Melvin didn’t raise his pay rate. He doesn’t ask for a raise. ”

Barras, who has 102 employees, says robots cannot replace humans today, as they can only perform simple, repetitive tasks like taking a round plastic cylinder and stamping the company logo on the correct side.

Jordan Kretchmer, co-founder and CEO of Rapid Robotics, said he encounters some skepticism. “A lot of times we go in and there’s a cemetery of robots they bought in the past,” he said. But he added, “Robots can be easy and work when they’re in the hands of the right people.”

© Thomson Reuters 2021

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