A few weeks ago I wrote an article about investing into hype industries.

At the time, ChatGPT had just come out, and investors were going all-in on AI tools.

A number of Small Bets readers wrote in to tell me about another industry they were excited about: robotics.

Well, I know nothing about investing in robotics. But I know someone who does.

EJ Lawless is the head of Performance Marketing at Indeed. He’s also a Vertical Lead for Angel Squad… meaning he finds deals in a specific industry and presents those deals to Angel Squad members for potential investments.

His vertical: robotics and AI.

I had the chance to pick EJ’s brain about investing in robotics and AI as a newbie.

Below I break down his insights into four categories:

1) what to look for in the team
2) two big risks to look out for
3) comparing different geographies
4) predictions for the future

Ready? Let’s dive in.

Part 1: What to look for in a robotics / AI team

The thing that differentiates robotics and AI companies from more typical startups (like fintech, for example) is that the technology is so cool.

Not to say that SaaS isn't cool… but seeing a demo of a self-loading dishwasher hits a little differently than seeing a demo of a CRM platform.

The problem with cool tech is that it might not actually solve a big problem. It might just be really, really cool.

When you’re looking at robotics / AI companies, look for founders that have experience with the problem they’re looking to solve.

Like great founders across other industries, founder of robotics companies are most likely to succeed if they can empathize with their customers' pain points.

It’s critical to distinguish between a team that’s truly obsessed with finding a solution to a problem… or if they just want to build something neat.

Part 2: Two big risks to watch out for

🔥 If you’re outside of the robotics space but want to invest in the industry, this section is for you.

According to EJ, robotics companies come with 2 major risk factors:

#1: the tech → can it be built?
#2: the market → will people buy it?

When assessing the technology risk, EJ suggests asking these questions:

• is there a prototype built?
• can you show me proof of concept?
• is there anything in operation today that can show me the founder can build this?

When assessing the market risk, try these questions:

• how are customers solving this problem today?
• what alternatives might they use instead of your product?
• what budget do they have to spend on a solution?
• do you have any signed contracts or purchase orders?

If you can’t get insights into the technology risks or market risks, it’s probably not a bet worth making.

Part 3: How geography comes into play

We’ve talked before about how different geos can influence a startup's success.

This is especially true for robotics.

One thing to consider is regulatory policies.

Some regions don’t have the policies in place to allow potential customers to implement robotics within their orgs.

Other places, like East Asia, have cultures where using robotics is encouraged and even commonplace.

Another factor: the customers. A startup needs customers who are willing to buy their product (duh). And this comes down to cost savings and payback period.

In an area like California, where the minimum wage is $15.50/hour, it might make sense for a corporation to invest heavily in robotics.

The cost savings could be high enough, and the payback period short enough, to make the case for a company to implement a robotic solution.

But in a region like Latin America, where the cost for laborers is much lower, the payback period for a company investing in robotics is much longer.

Part 4: What does the future hold?

EJ predicts that the robotics industry will accelerate in the next few years.

Why?

Well for starters, some geographies are seeing their population decline, so there's a smaller workforce available. Robotics could be a feasible solution in those areas.

In areas where the labor force is still going strong, the cost of that labor is increasing. So more and more companies might opt to invest in robotics to keep their costs down.

At the same time, advances in robotics and AI mean that investors AND founders are more willing to explore "hard" technology.

Bonus: Want more?

If you want to learn more about this space, EJ recommends starting out with some of these resources:

• "The Robot Report" podcast
• "Automate It" podcast
• The Silicon Valley Robotics Association
• Carnegie Mellon Robotics Academy

You can also email him here.

Or better yet: come to Camp Hustle and meet EJ in person...