Why Robotics Represents A $24 Trillion Opportunity For Investors

Dennis Ledenkof, CEO and founder at Robosculptor.

Every year, Ark Invest releases a report titled “Big Ideas” that observes promising technologies that can shape the world in the near future. In the 2024 edition, Ark noted several key technologies to watch out for, including robotics. According to the report, robotics represents a global revenue opportunity worth $24 trillion. But what specific sectors are most appealing to investors, and what challenges do companies face in securing funding?

Challenging Landscape

Robotics is becoming an attractive field for investors. According to a report by the global venture capital firm F-Prime Capital, $90 billion worth of funding has gone into the robotics industry since 2019. This number represents roughly 10% of overall investments in tech. In 2023 alone, investors put $12.9 billion into robotic companies, with the average monthly investment being about $1.07 billion.

That was not always the case. Historically, investors hesitated to venture into the realm of robotics. In my opinion, one of the primary roadblocks was the high cost of research, development, prototyping and manufacturing, as well as longer development cycles compared to software-based ventures.

Investing in robotics is also a long-term endeavor. No one wants to undergo laser eye surgery with a robotic minimum viable product (MVP) or travel in a self-driving car with questionable safety features. Hence, creating a safe product, releasing it to the market and consequently generating profit and returns for investors takes time. We can see this from companies like Artas, the developer of a robot for hair transplantation that received FDA approval over a decade ago. Moreover, due to the high costs, some solutions are hard to replicate quickly. Therefore, companies may not grow at the pace that investors would expect.

Major Shift

The shift in investors’ minds does not come as a surprise now. It is attributed to several factors. Among them are labor shortages and high labor costs. These factors have led to high demand from businesses for cheaper alternatives to human specialists. Various robotic equipment can partly replace traditional labor and therefore reduce monthly costs for companies.

In fact, a record 517,385 new industrial robots were installed globally in 2021, marking a 31% year-on-year increase and a 32% rise from the pre-pandemic year of 2019. The trend continued in 2022, with a record 44,196 robot units sold in North America, up 11% year on year.

Another contributing factor behind venture capitalists’ enthusiasm for investments in robotics is the decrease in the average cost of robots. It fell from over $68,000 in 2005 to $27,000 in 2017, with a further decline expected to $10,800 in 2025. This technology becomes more affordable for massive installations.

Perspective Sectors

According to F-Prime Capital, there are three main categories that bring profit to investors. These are autonomous vehicles for public roads, enabling systems (which are hardware and software components that others can use to build complete solutions) and vertical robotics. The latter represents a subsegment that includes robots for various industries, including logistics, medical, defense and security, manufacturing, agriculture, and construction.

In the transportation sector, autonomous vehicles and drones can significantly cut down the costs of deliveries and transportation by replacing human couriers and drivers. For instance, robotic rollers used by FedEx, Walmart and other companies could cost as little as $0.06 per mile, 20 times lower than the cost of human delivery, according to Ark Invest. One of the major players in self-driving delivery vehicles is Nuro. Its vision attracted over $2 billion in funding and key partnerships with major retailers such as Kroger and Domino’s.

In my opinion, there is a big promise in the medical field, too. Robotics have been used to assist surgeons for years, as well as to create exoskeletons for those who have suffered serious injuries. And now, they can also help with mental health issues. The demand for treatment is rising, with 23% of adults experiencing a mental health condition in the U.S. alone in 2022.

However, psychologists can’t keep up with the growing demand for mental healthcare. In the U.S., over half (56%) have no openings for new patients. Among those who maintain waitlists, the average wait times were three months or longer, and nearly 40% said that their waitlists had grown in the past year. According to research by the University of Cambridge, robots may help address this growing gap. There are currently no robots like this available. However, the Norwegian-founded humanoid robotics company 1X Technologies has recently raised $100 million in funding to develop its second-generation android, NEO. These robots could potentially provide companionship to people, among other things, and the firm is interested in further exploring fields like psychology.

I believe that there is significant potential for exploration in the field of robotics. With the implementation of AI, we can anticipate the development of human-like androids that could assist us with our daily tasks, work responsibilities and even our mental well-being. The broad capabilities of these robots will make this field increasingly interesting for investors in the near future.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?