Miso Robotics (May 2020)

Deal Abstract

https://www.seedinvest.com/miso.robotics/series.c

Robotics company selling burger-flipping, french-frying robotic arm with product in the market. Major investor in this company owns a restaurant chain that they are using to give a real customer use case. Recently signed three year contract with PathSpot, a company with Venture for America on the founding team.

In addition, a full-throated shout-out to the team at PathSpot for raising an enormous round!!! Truly an anti-fragile company.

Decision

Absolutely not, though this company is going to do great.

Why Investing/Passing

  1. Great example of a strong company that is already well on its way. It’s less of a good venture deal, more of a real company, e.g. valuation is too large for me to have any novel contribution about its likelihood of success.
  2. Small thing, but the fact that they didn’t have 2019 financials up was sloppy.
  3. Really couldn’t come up with a third reason for passing. I’m a fanboy, but discipline says I should stick to venture deals in the $5MM to $10MM valuation world in work that I have unfair expertise in.

The 6 Calacanis Characteristics (91 161 18)

CheckPass/Fail
1. A startup that is based in SVFail: Pasadena, CA.
2. Has at least 2 founders Pass (4)
3. Has product in the market Pass
4. 6 months of continuous user growth or 6 months of revenue.Pass: (“Miso has doubled revenue (2018-2019)”, 2018 revenue was 54k.)
5. Notable investors?CaliGroup, vertically integrated investor and owner of restaurant group. Unfair advantage.
6. Post-funding, will have 18 months of runway Pass: Targeting $30MM, burn for 2018 was $6.6MM, so that’s 5 years. “Additionally, we have reduced operating losses to approximately $300-$350k per month (4.2MM/yr), and that is before revenue and any gross margin.”

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • For Sure: not sure who else are the brand names in this space, but so much as a robotic arm that restaurants are willing to use is 10x better than labor, absolutely.
  2. The Timing question
    • Good: global pandemic reduces human labor supply and also it’s the age of the machine.
  3. The monopoly question
    • Uncertain: Monopoly of restaurant robotic arms? Or robotic arms for high temperature high movement business needs? Honestly just focusing on rinse-lather-repeating robot arms for restaurants is a $1BN business, so somewhat irrelevant question, but defining what the big opportunity is interesting with this company.
  4. The people question: 
    • Excellent: Team seems smart and competent. MIT, CalTech, CMU, etc. are all known for having strong robotics programs.
  5. The distribution question
    • Excellent: Unfair advantage. As mentioned before, having one of your chief investors also own and nepotism sell your tech to their own restaurants is the type of efficiency capitalism loves and rewards.
  6. The durability question
    • Excellent: They’ve already pumped millions into investing, and with the distribution unfair advantage, this is a business with very, very high barriers to entry.
  7. *What is the hopeful secret?: 
    • The timing is right for cheap programming that can make the robot arm in CaliBurger scale to other restaurants very rapidly.

What has to go right for the startup to return money on investment:

  1. Overcome hurdles of being not just a robotic arm in Ft Myers, FL or Pasadena, CA, but a scalable repeatably deployable business solution in restaurants in locations.
  2. Solve for service! What happens when these arms break? Just like leasing enterprise printers, what is the service model and how does that affect P&L?
  3. Build trust with restaurant owners to invest large amounts of capital and business risk. The team said it themselves: this is a highly intimate aspect of one’s livelihood to trust a robot.

What the Risks Are

  1. Hardware is really hard. OTA updates, service (as previously mentioned,)
  2. Repeatability and speed of expansion. How long did it take for them to program that one arm, and how long can they get the programming and installation of an arm in an idealized final state?
  3. You’re selling to a large industry that has really thin margins. That’s already not a lot of space to start with—from there, where will this company get their upside from large profits?

Financials (References)

  • Total Amount Raised: US $1,935,339
  • Total Investors: 810
  • Total Round Size: US $30,000,000
  • Raise Description:  Series C
  • Minimum Investment:  US $1,493 per investor
  • Security Type:  Preferred Equity
  • Pre-Money valuation :  US $80,000,000

Updates

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7 comments
  1. Jay Park
    Jay Park
    May 21, 2020 at 11:59 am

    Interesting insights, thanks for the post. I completely agree that hardware is hard.

    Reply
    • muhan
      muhan • Post Author •
      May 21, 2020 at 1:19 pm

      Glad you liked it, thank you for the support! To be clear, I think this is going to be a great business, just not a great investment for investors who are investing with my methodology (assemble 50 startups at $5MM-$10MM valuation and hope for a unicorn in 5-10 years.)

      Reply
  2. Moe Hakim
    Moe Hakim
    May 21, 2020 at 3:54 pm

    Great post. Saw your NowRx post from 2018 and it was right on. I like your investing methodology as well. If you vet 50 startups with strict rules, the odds are in your favor to land a unicorn. Speaking of $5-10M valuation, check out event hollow on republic. It’s an online wedding market place where the bride and groom have one place to plan everything wedding related. I love the idea but still doing some homework on it.

    Reply
  3. Moe Hakim
    Moe Hakim
    May 21, 2020 at 5:43 pm

    Great post. Also liked your post from 2018 about NowRx. If you’re looking for $5-10M valuation, maybe you should look at Event Hollow on Republic. It’s basically a wedding planning market place that connects brides and grooms with multiple vendors on the same website and they have one bill to pay and one place to communicate with everyone. Would be curious to see what you think. Cheers!

    Reply
    • muhan
      muhan • Post Author •
      May 21, 2020 at 8:44 pm

      Hey Moe, thank you so much for writing! I actually am looking for a deal memo to do now, so thanks for making the decision easy 🙂

      Reply
  4. Leon
    Leon
    May 22, 2020 at 3:30 pm

    Thanks for the post Muhan. I think their success is contingent on whether they can solve long-standing problems in robot manipulation of non-rigid food items. This is being pursued in robot learning labs in many universities but may not be robust enough for an restaurant setting yet. That may be why similar restaurant automation companies like Creator (burger) and Spyce build enclosed systems to ensure their food is handled repeatably, without the variables arising from human intervention. I think this is the biggest risk revealed from the videos where the robot can only do a burger flip or place a loaded deep fryer basket into oil: an employee still needs to load and unload the fry basket and (probably) individually lay out the burger patties.

    I think the gantry system they appear to be building may come with it’s own installation and adoption challenges while the biggest value add problem they face (and should focus on) is on computer vision. They seem to be a ways off since there are still QR tags (for 3D spatial mapping) taped above each fryer location. Perhaps the gantry system comes with overhead sensors to help with mapping ingredients, but then those could be integrated into the push cart, right? Overall, there seem to be some costly hurdles in place to make the human to robot handoff worthwhile. To build an intuition on whether they can solve these in time to preserve their valuation, I recommend checking out the progress made over time at the research groups from those top robotic schools they mentioned.

    Reply
    • muhan
      muhan • Post Author •
      May 23, 2020 at 12:34 pm

      Wow, thank you for the deeply insightful comment, Leon!! I’m definitely not a robotics expert, but would love to get links for any of the research you’d recommend.

      Thanks again for the insight!!

      Reply
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