East Coast Chauvinism in Robotics: Time to Face Facts, Silicon Valley is Kicking Our Butt

East coast vs. West coast

I have lots of love for Pittsburgh in particular, but it really pisses me off when people on the East Coast repeat a bunch of falsehoods (See #8) about how Boston and Pittsburgh compare to Silicon Valley and the rest of the world.  Many people in Pittsburgh and Boston—including people I call friends and mentors—smugly think that the MIT and CMU centered robotics clusters are leading the world in robotics.  This is demonstrably false.

If leadership in robotics means forming companies, making money, or employing people, then Silicon Valley is crushing everyone—no matter what the Wall Street Journal editorial page says about their business climate.  I’ve previously published an analysis at Robocosmist of the Hizook 2011 VC Funding in Robotics data that shows that the Valley gets 49% of total VC robotics investment worldwide.

I’d now like to add an analysis of U.S. public companies (see bottom of the page).  Basically, the ‘Pittsburgh and Boston are the center of the robotics world’ story is even more ridiculous if you look at where public robotics companies are located.  Silicon Valley is crushing the other clusters in the U.S. at creating value in robotics and in building a robotics workforce in public companies.  (A forthcoming analysis will show that this true worldwide and if you include robotics divisions of public companies not principally engaged in robotics such as Boeing and Textron.)

Workforce and Market Cap of Public Robotics Companies

 

77% of the workforce at public robotics pure plays is in Silicon Valley companies.  An astounding 93% of the market capitalization is headquartered in Silicon Valley and even if you exclude Intuitive Surgical (NASDAQ:ISRG) as an outlier, the Silicon Valley cluster still has twice as much market capitalization as Boston.

The public companies that I deemed to meet the criteria of being principally engaged in robotics, that they had to make and sell a robot, and not have substantial value creating revenues from businesses not related to robotics are listed in the table below.

The one company that I believe might be controversial for being excluded from this list is Cognex (NASDAQ:CGNX).  However, while trying to do decide on whether to include them, I found their list of locations.  They have three locations in California including two in Silicon Valley.  That means that this ‘Boston’ company has more offices in Silicon Valley than in Boston.  I’m not an advanced (or motivated) enough analyst to find out what the exact employee breakdown is, but combined with the fact that they make vision systems and supply components rather than robots, I elected to exclude them. I acknowledge that a similar case could be made about Adept (NASDAQ:ADEP) that just made a New Hampshire acquisition, but I have decided to include them and count them towards Silicon Valley.   I do not believe that either of these decisions, substantively impact my finding that Silicon Valley is the leading cluster when it comes to public company workforce and value creation.

I’m hoping the people who are spreading the misinformation that Silicon Valley has to catch-up to Boston and Pittsburgh will publish corrections.  I believe that this is important, particularly because I want to see Pittsburgh reclaim its early lead in robotics.  So many robotic inventions can trace their heritage back to Pittsburgh, it is a real shame that Pittsburgh has not used this strength to create the kind of robotics business ecosystem that one would hope.

It is impossible for communities to take appropriate action if they do not understand where they stand.  I hope that this new data will inspire the Pittsburgh community to come together and address the challenges of culture, customer access, and capital availability that have been inhibiting the growth of Pittsburgh’s robotic ecosystem before they lose too many more aspiring young entrepreneurs—such as me—to the siren song of California.

 

Company (1) Ticker Employees (2) Market
Cap $M (3)
% of Employees % of Market Cap Robotics Cluster
             
Accuray
NASDAQ:ARAY
  1,100
  463
20%
2%
SV
Adept
NASDAQ:ADEP
  183
43
3%
0%
SV
Aerovironment
NASDAQ:AVAV
  768
 577
14%
2%
SV
Hansen
NASDAQ:HNSN
 174
 135
3%
1%
SV
Intuitive Surgical
NASDAQ:ISRG
  1,924
 21,840
36%
88%
SV
iRobot
NASDAQ:IRBT
  619
 606
12%
2%
BOS
MAKO Surgical
NASDAQ:MAKO
  429
 1,110
8%
4%
Other
Stereotaxis Inc.
NASDAQ:STXS
  171
 13
3%
0%
Other

 

Total

 

  5,368

24,787

100%

100%

 

 

(1) Companies are U.S. public companies that have been identified by Frank Tobe’s or my own research as principally engaged in robotics

(2) Employee Count as of Last 10-K Filing

(3) Market Capitalization as of 6/24/2012

 

 

 

 

Robert Morris is a former Army officer who led the first RQ-7B Shadow (UAV) platoon in Afghanistan.  Subsequently, he consulted to the Navy, primarily on unmanned systems issues, with Deloitte Consulting.  He is currently pursuing graduate studies at Carnegie Mellon University and serving as the chapter president of AUVSI-Pittsburgh.

Comments

A couple points of self-criticism and amplification:

-There is not a guarantee that pure play public robotics companies are in any way representative of the ecosystems that produce them.  It is certianly possible that The Valley is way better at producing public companies than other areas, or other areas have incentives to stay private.

-The reason to look at public, pure play, robotics companies is that they have SEC data available.  Divisions' data for large public companies are difficult to tease out and private companies almost never provide public data.  As an example, the only way that you would know from their SEC filings that Boeing acquired Insitu is that Insitu appears on their list of subsidiaries.  However, this deal, reportedly around $400M was apparently deemed immaterial and was consolidated with several other acquisitions in their 10-K.

-The one way I might be juicing the robotics numbers for the Valley is adding Aerovironment.  They used to claim Silicon Valley heritage and culture prominently in their marketing materials so I included them, however I'm aware they are not in the valley.  Here are the summary numbers with Aerovironment counted towards 'Rest of U.S.'

%'s of Workforce with Aerovironment in "Other':  

SV  63% BOS 12%    PGH  0%   Other 25%

 

% of Market Cap with Aerovironment in 'Other':

 

SV 91%   BOS  2% PGH 0% Other 7%

 

 

—Robert Morris

This is such a misleading post that I don't even really know where to begin.

Claiming that public companies are a good metric for the distribution of the overall robotics ecosystem in the nation is pure folly. The overwhelming majority of robotics companies on the Eastern seaboard (in both Pittsburgh and Boston) are privately held - with the exception of ReThink/Heartland, Kiva, and a few notable others, almost no Boston robotics companies were VC backed. Of course they won't stack up to Silicon Valley when you're comparing public companies.

Please read this Robotics Roadmap put out by the Massachusetts Technological Leadership Council in 2009 to gain some perspective: http://masstechleaders.org/roboreportfinal.pdf

As of 3 years ago, Massachusetts employed 2,500 roboticists, and had an annual growth rate of 47%. Assuming that employees grew by even half that rate over the past 3 years, that would mean Massachusetts holds close to 5,000 current robotics employees currently. If you extrapolate that annual growth rate 3 years (and I think there's ample evidence to think that's accurate, given recent news about local Boston companies), it would also mean annual sales of $3.4B. In addition to that set of facts, you're also missing import recent announcements such as the sale of Kiva Robotics to Amazon for $775M, or the Series C funding round of ReThink/Heartland Robotics.

As to your point about the Pittsburgh cluster needing more help, I think the most telling factoids are that the Pittsburgh ecosystem is only fed by CMU (and in some tiny way by UPenn) and that, put simply, nobody wants to live in Pittsburgh - the population's been decreasing by around 10% a decade since 1960 (http://en.wikipedia.org/wiki/Pittsburgh). A large cluster just can't be sustained by that small of a university ecosystem and social environment - it's a permanent uphill battle.

Boston, on the other hand, is fed by 10+ universities with 13+ robotics graduate programs, is twice as large, and has been growing for the past 30  years. See the roadmap I linked to earlier for more information.

So, in conclusion, given the dearth of non-public entity information, I believe this article is misleading at best. Sorry.

—Gui Cavalcanti

I think Gui brings up some good points, though I wouldn't go so far as to say that the post is misleading.  Evaluating the robotics landscape is exceedingly difficult and should be evaluated in a multi-dimensional space: public, private, jobs, revenue, startups, venture capital funding, community, etc.

Each of these dimensions is important.  It's probably insufficient to look at one of them as the "crowning achievement."  It's also increasingly difficult to determine which companies should be considered.  For example:

-- Stratasys (NASDAQ:SSYS) makes 3D printers.  In my book, that's a pure robotics play.  3D printers have as many degrees-of-freedom as any robot vacuum cleaner, and they might (quickly!) become the next ubiquitous home robot.

-- There are dozens of automation / robotics integrators (both public and private) that service the manufacturing industry in the Great Lakes region.  It's unfair to not include them too.  A good example is Parker Automation.  These guys have been building industrial robot systems for a long time.  

 

Furthermore, I'm a firm believer that the most successful robotics companies do not bill themselves as such.  Intuitive, Hansen, and Mako are all purveyors of medical devices and surgical tools.  Kiva is a warehouse management system that happens to employ robots for added efficiency and automation (their competitive advantage).    IMHO, very few "robotics companies" are purely about "building robots" -- and even then, the companies are usually just building subsystems (eg. "arms"). 

I guess: It all goes back to the definition of "robot."  Good luck getting anyone (let alone roboticists) to agree on that!

—Travis Deyle

Gui,

I'm glad that you've taken an interest in the actual data here.  I think that data has been sorely lacking in perceptions of what is happening in robotics.  So I'd like to address the numbers you cite and the limits of the very excellent report that Mass TLC puts out--especially as I'm working to have Silicon Valley Robotics and Pittsburgh AUVSI collect matching data sets.  

Most robotics companies in Pittsburgh or in Silicon Valley are not venture backed and almost all are private--this is not unique to Boston.  I chose public companies to do the comparison because they all publish data that is audited.  Further public companies tend to serve as anchors, creating pools of talent and wealth around them that can create other companies.  As to the general conclusion that Silicon Valley is further ahead than we on the East Coast have been giving them credit for and is probably in the lead in commercializing robotics--I believe it still holds.  Even if public companies are just the part of the iceberg above water, Silicon Valley has as much above the water as the other clusters have in total.  

Workforce:  Mass TLC claims more than 2500 people working in the robotics industry in the Massachussets robotics sector, but just the public pure plays in the valley have more people than that.  That doesn't count the private companies like Willow Garage, Ekso Bionics, Restoration Robotics, Liquid Robotics or divisions of diversified public companies such as FMC's Schilling Robotics and Google's driverless car divisions.  

Growth rate:  I have no doubt that Boston robotics is growing at a good rate.  The 47% average growth rate is impressive, but remember this is a self-reported rate, with a 25% resp0nse rate so selection bias is going to be huge.  I wouldn't use it to do any math about the growth of the community.  My understanding of this figure is that it is not weighted for the size of the company and there is no mechanism to deal with the failure rate of small early stage companies, because failures don't report.  It will be interesting to see what the actual growth rate of the community is when Mass TLC comes out with the next version of the survey which I understand they are working on now.

In defense of Pittsburgh: I'd like to see more data behind the aspersions you are casting on Pittsburgh.  First on the population, while it is true that people have been leaving the city, the Pittsburgh suburbs have been growing over the periods that you are talking about.  Many of these same people now live in the suburbs and still work in the city (and receive tax advantages for doing it).  CMU is certainly the 'mothership' for robotics in Pittsburgh, but to name a few in the area Pitt (especially in medical), Robert Morris, California University, Penn State's EOC, and Grove City College all have robotics programs.  

Nobody is claiming that there is anywhere on the planet that is as academically blessed as Boston, but Pittsburgh still has the largest (and arguably best) robotics research institute in the world with supporting institutions to create a workforce from the technician to the doctorate researcher level.  I don't think that this is what has been inhibiting the growth of Pittsburgh's robotic ecosystem.  

Addressing the factors that actually create growth:  capital, culture, workforce, applicable innovation, access to customers, and distribution channels is going to be a big challenge for our community.  It is doubly hard to do when we have no data and faulty perceptions.  I believe that public companies are approximately representative of the clusters they come from and that Silicon Valley has a lot more to teach us than most of my East Coast robotics experience had led me to believe.  I wanted to be sure to share that startling conclusion with the rest of the community.

I look forward to many years of friendly rivalry between the clusters and all the other places in the U.S. and throughout the world that aspire to lead the global robotics community.

—Robert Morris

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