The United States and China have long been at the forefront of robotics financing. However, data from 2022 shows that these innovation hubs could face serious competition as the investment landscape in Europe begins to outpace the biggest robotics players.
The quest for technological supremacy is often seen as a race of two horses between the US and China. Over the years, we have seen this tug-of-war of investment only intensify as both economies vie for supremacy to become an innovation superpower. While robotics has experienced similar dynamics in the past, based on 2022 data, investors are starting to place their bets on an emerging competitor: Europe.
In 2022, almost $8.5 billion in funding will flow to robotics companies around the world – a whopping 42% less than the previous year – in line with the overall global downturn in venture capital investment. But despite the change in the economic situation, with the total investment volume in USD in robotics falling by more than 50% between 2021 and 2022 for both the US and China, Europe has seen a much more modest decline, with only a 5% drop in the same period. Although it is still early days, we are convinced that this is just the beginning of how Europe is finally starting to find its place within the modern robot ecosystem.
Europe emerges as a serious competitor with a strong growth rate
While robotics has experienced similar dynamics in the past, based on 2022 data, investors are starting to place their bets on an emerging competitor: Europe.
Comparing Europe’s growth rate in robotics investment volume to the US and Chinese markets reveals some key trends driving the continent’s recent power play in the robotics market.
With a CAGR of 28% over the period from 2018 to 2022, Europe is already moving ahead compared to global growth rates of 2%. This growth is mainly led by Germany, which has seen a 77% growth spurt in robot space investment volumes.
Neighboring France has seen a 54% increase in investment amounts for robots. Meanwhile, robotics powerhouses China and the US have seen growth declines, with investment in robotics falling 5% and 2% respectively since 2018.
China and the US are experiencing a 60% growth slowdown/late stage financing
To better understand these market shifts, we need to take a deep dive into the funding landscape and explore the state of play through funding rounds.
Splitting our data into grants, early-stage (pre-seed to Series A) and growth/late stage (Series B and beyond), we saw a major slowdown in US and China robotics funding during growth and late-stage investment rounds.
Both the US and China saw a 60% drop in growth/late-stage robot investment volume compared to 2021. Meanwhile, looking at the European market, the total investment volume for growth and late-stage deals was only slightly less than that of 2021.
Surprisingly, China saw a 4% increase in early-stage investment, while Europe and the US followed a similar downward trend – a potential sign of new venture emergence. The trends in the late-stage growth/financing environment, which account for the lion’s share of investment volume, help to understand the relative stability in Europe.
Comparison in investment volume between 2021 and 2022 in different regions. Image: Picus Capital with data from Crunchbase
Beneath the surface in 2022, we saw more European robot firms consistently raising capital – 20 growth rounds/late stage rounds – and fewer outliers driving investment volume. In comparison, European robotics investment in 2021 was more closely watched by outliers in 13 growth/late-stage rounds with an average round size of $108 million USD. Meanwhile, the US and China have seen declines in a number of deals and average and median investment amounts.
Late stage growth/financing is complex. Nevertheless, we think one dynamic influencing the change in the investment volume differential between the US, China and Europe is the shift in priorities for growth and late-stage funds – from growth to profitability. The continued funding of European robot companies at these stages indicates that these companies are more likely to meet growth stage criteria than US companies. We believe this will also be relevant in 2023.
