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Formic Technologies Raises $26.5M to Expand Robots-as-a-Service Operations


January 18, 2022

Formic Technologies, which utilizes a Robots-as-a-Service (RaaS) model that lets companies pay an hourly rate for robot usage, has announced raising $26.5 million in a Series A financing round. In addition, the company secured access to more than $100 million of debt capital to fund equipment purchases. Formic said it will use the funding to expand its operation to support the rapid deployment of its RaaS offering for U.S. manufacturers.

The Chicago-based company gives manufacturers access to on-demand automation without requiring upfront capital investments. Formic provides access to technologies from leading robotic vendors, including Universal Robots FANUC, KUKA, and ABB, to let customers pay by the hour for their usage. Formic aims to reduce complexity and cost of automation by owning, programming, installing and maintaining the robots at its own cost – customers do not pay until the system is deployed and fully operational.

“We came to the conclusion that what manufacturers needed was not any specific new technology, but a better way to access the technology that would best meet their needs,” said Saman Farid, co-founder and CEO of Formic Technologies. “Formic offers that access at a fraction of the cost or energy, as we take on the heavy lifting.”

The financing round was led by Lux Capital, with participation from Initialized Capital, Correlation Ventures, Lorimer Ventures, One Planet VC and other strategic investors.

“Formic’s model of on-demand robotics is right-sizing automation for customers across all areas of manufacturing,” said Shahin Farshchi, partner at Lux Capital. “With the current challenges of the labor market and supply chain, the adaptability that Formic brings to the table is addressing a user area that longtime integrators haven’t.”

In an interview with Robotics World, Farid discussed Formic’s goal for expansion and how the RaaS model will help manufacturers achieve their goals for robotics and automation:

Robotics-World: Formic is pretty unique within this industry and its approach to robotics and automation. Why do you think other companies have not adopted this approach for RaaS?

Farid: To give a little bit of context – every factory that we talk to is more or less in the same situation, they are about 30% to 50% understaffed. As a result of that, they work about eight or nine hours a day, maybe 200 days a  year. If you run the math on that, they’re sitting idle about 60% to 70% of the actual workable hours in a year. That’s a major cause of increased cost and pricing. So the desperation is there – factories really need labor and automation. On the technology side of it, traditional automation technology has been around for 10-plus years – it’s not groundbreaking, hot-off-the-presses technology.

But despite the desperate need, there’s a reason that adoption is extremely low. There’s way too much complexity and too much risk that customers need to take before they can adopt automation. So that’s what led us to start Formic. We basically said, “Let’s take that risk off the table.” In order to do that there’s a lot of complexity that we have to manage, but ultimately we’re a hybrid between a financing company and a technology company.

Formic cobot 400pxTraditional automation companies are trying to sell as much equipment as they can, to upsell and then continue to charge for services. Most robotics companies are not set up to also be financing companies – they produce equipment. The only way that their cash flow makes sense is if they get that equipment out the door as fast as possible. So they keep building and selling, building and selling. In order to change that model, it requires a lot of financing complexity.

We have some of the best people in the world who know how to do that, as well as the engineering expertise. We go in and choose the right equipment for that customer’s facility, and then we procure that equipment, program and install the equipment. Once the equipment’s installed, we also have to keep it up and running. That’s a very operationally intensive service and maintenance task that we have to do as well. 

So there’s a lot of different expertise that’s necessary – finance, equipment, and asset management. We haven’t really seen anybody else that brings all those things together. But I think this is the way the industry is going to go, and we hope this becomes the standard way of doing things.

R-W: A lot of this sounds like what a systems integrator does – how do you differentiate Formic from that approach?

Farid: We work with a lot of systems integrators, and we’ll hire them for the projects that we do as needed. The difference between us and a systems integrator ultimately is that we own the equipment and we are responsible for the performance of the equipment.  A systems integrator is more like a consulting firm. You pay them for the hours – it could be engineering or installation hours, but ultimately they’re selling their services.

We don’t do that. We are the asset owners and only charging for the production of our equipment. In one factory, we may have five different integrators working on different projects because there may be an integrator who is an expert at conveying systems, there may be one who’s an expert at welding systems, or one an expert of palletizing systems. We figure out the right mix of equipment and service providers to deliver that, and then we bring them on board.

R-W: Because you own and maintain the equipment, does this mean that the customer is only going to be using these robots for a specific project or a specific task? Do you ever think that you’re going to get the robots back at some point, that these are temporary projects for customers versus permanent sales?

Farid: The way we like to think about it is that we are providing an unlimited, on-demand workforce. It just happens to be in the form of robots. We own the robots and place them as needed in the right places. It could take the form of robot arms, it could take the form of mobile robots and different functions – but ultimately it’s a flexible workforce that’s usable as needed.

There are a lot of customers that plan to use these systems for a long period of time. For them, it’s still much more efficient for them to do it through us than to do it themselves. Because when we buy equipment in bulk for lots of facilities, we can get major discounts. It is less expensive for us to maintain 10 robots across 10 facilities than for any one of our customers to maintain one robot in their own f factory. There’s real economies of scale and scope that come from being this kind of service provider. A factory shouldn’t really care whether it’s a green robot, a yellow robot or a white robot. Their main concern is, “Can I load five boxes per minute onto this pallet or not?” People are concerned about output, and that’s what we’re delivering.

PolarFormic400x275R-W: Is there a typical type of customer that likes this approach – in terms of their size but also about the types of work they’re doing?

Farid: We’re focused on manufacturing, because that’s the segment that has been underserved in terms of automation  – warehouses are generally pretty well automated. In terms of the size of the organization, there’s a wide range. We focus mostly on the small- to medium-size, below 200 to 300 employees is the most common customer for us. But we were surprised that some Fortune 50 companies have reached out to us as well – they have the same issues. They have the budget to deploy automation, but there’s so much complexity involved that they just don’t do it.

In terms of sectors, there’s also a wide range. We have customers that make chocolate chip cookies, we have customers that make metal parts that go into airplanes, and we have customers that make golf clubs. Every manufacturing line has its own specialty processes, but they don’t look that different if you zoom out enough. Everybody has some packaging processes, everybody has some palletizing processes and inspection processes. All of these are things that robots can do really well.

R-W: It seems like there’s a lot of pressure for you to make sure the robots work correctly in order for you to get paid. Is that the biggest challenge for Formic?

Farid: It’s a calculated bet, but we aren’t going into this blind. We have people on our team who are experts at automation, and we feel very confident. If our customers are not sure that it’s going to work, it’s natural for them to be more skeptical. But we do this all day and all night. We choose the right applications, the right partners, integrators and service providers and equipment vendors. Once we place a robot in the factory, we have our own technicians. We have a bunch of tools that we can use to address the issues of uptime, which gives us the confidence to say that we’re only going to get paid when it works.

R-W: Does this model have any challenges in terms of scaling? It feels like you can do this when you’re managing hundreds of robots, but can you get to 10,000 robots in hundreds of different locations as you grow? Do you have a sense of the challenges that might happen at this scale?

Farid: It’s not going to be easy, but it’s something I feel very confident about. We’re bringing on people who have a ton of experience managing assets at scale. We just hired a vice president of deployment, who used to work at a solar-as-a-service company where he managed 50,000 deployments, which required a lot of different vendors, systems, and service providers. We hired another person with 25 years of experience who ran the global service and maintenance operations for a Fortune 50 company. So we have people with deep experience in how to manage assets at scale across a lot of facilities with lots of complexity, and we’re bringing those people on board so we can deliver.

For more information regarding Formic’s technology and services offering, visit the company’s website here.

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