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INSIGHTS / THE BIG PICTURE

Catalonia: Spain's fast-rising robotics hub and next opportunity

Spain · Sep 04, 2019 · By Gareth Platt

With the robotics sector on the rise in Catalonia, expect to see more growth ahead, driving opportunities in related segments, especially services

She can crack jokes in 30 languages, regale you with anecdotes and share fun stories with your kids. She’s strong, too, able to carry 30kg on her back. And best of all, you can watch videos embedded in her stomach via an interactive screen. 

Her name is Reem and she’s part of a family of "humanoids for rent" being built by PAL Robotics, a company that has become a figurehead for the emerging robotics scene in Barcelona and the Catalonia region.

Having started out building robots to play chess, PAL has created a fleet of machines for research, industry and leisure. Its other robots include Talos, another humanoid designed for complex tasks in difficult industrial terrain; Tiago, which can perform a variety of everyday chores and challenge a company’s research; and Tiago Base, a modular trunk which scuttles around warehouses to perform logistical work.

PAL is just one of dozens of robotics companies that have been founded in Barcelona and its surrounding region over recent years. According to a study by the Generalitat, Catalonia’s regional parliament, the local sector now comprises 96 private companies, as well as 39 R&D hubs and 39 training centers.

These companies mainly target the industrial manufacturing sector, focusing on the manipulation of goods as well as the loading and unloading of products. However, according to Eurecat, a research body that orchestrated the Generalitat study, there is increasing activity around the development of service robots, such as drones, and "personal use" robots, which range from small educational toys to human-sized assistants such as Reem.

The sector’s growing diversity is reflected by a number of ventures in the security space: two prime examples are eBOTlution, a startup building land mine sweepers to scan fields for explosives, and Aquiles, whose all-terrain vehicles manage “a series of dangerous situations including IEDs, bomb vehicles [and] high-risk chemical, biological and radiological agents.” At the other extreme lie companies such as Faromatics, an agtech specialist whose ChickenBoy robot monitors the living and health conditions of poultry in farms. 

Then there are those startups that serve other robotics companies. One of the most prominent is Beta Robots, an innovation hub whose clients include fellow Catalan company Robmov, developer of the Ear-Flap industrial vehicle, which was voted Project of the Year by Catalonia’s Industrial Engineering College in 2018. Sadako Technologies, meanwhile, is building AI-powered solutions for robots that organize human garbage. The company proudly boasts of being the “eyes and brain” of Max-AI, a sorting machine manufactured in the US, which has been sold across four continents.

Jesus Pablo Gonzalez, International Project Manager, who's responsible for promoting robotics at Eurecat, says: “We’re seeing a growing number of robotics companies emerge, led by talented roboticists, introducing novel solutions to non-traditional robotics sectors. These companies are driving digital transformation by delivering industrial-grade robotic systems to society and it’s an area that will see further growth in the years ahead.”

Perfect ecosystem

Why has Catalonia become such fertile territory for robotics specialists? On one level, it’s simply a reflection of wider trends. The global robotics market is growing at an annual rate of 25%, and it’s no surprise that Catalonia and its capital, Barcelona, are part of the economies leading the charge.

However, Catalonia also enjoys a number of natural advantages. The region’s strong industrial base provides a local market for the robotics companies, and it’s no coincidence that the nuclei of the region’s robotics scene tend to correlate directly with its manufacturing heartlands.

What’s more, Barcelona has long been renowned as a technology hub. As long ago as 2013, the European Space Agency chose the city for its first company incubator in Spain. Now it has the third-highest number of tech startups in Europe and they are consistently ranked among the most innovative in the world. This provides the perfect ecosystem for robotics companies to emerge, as well as a huge pool of talent fresh out of the city’s universities.

Professor Ramon Costa, who specializes in robotics at Catalonia’s Polytechnic University, believes the city’s academic reputation is a major pull factor.  

“There are a lot of higher education institutions here, and they’re learning toward this sector,” he says. The socio-economic situation helps, too. The robotics industry is long established here, so the city is well placed to capitalize on the global boom.”

At present, the sector remains relatively immature where financials are concerned. Of the 52 companies that supplied data to the Generalitat study, 38% had invoiced less than €2m in the previous financial year and 40% had fewer than 10 employees. At the other end of the scale, only six companies are currently invoicing more than €50m. Unsurprisingly, all six were established international companies, and only one of them is headquartered in Catalonia.

The prospects are enticing, however. Over one in three Catalan robotics companies is already trading internationally, and several are making serious inroads. PAL's annual sales currently stand between €3m and 4m a year, while Faromatics has closed a distribution deal providing access to 174 countries. Then there's Rob Surgical, a spin-off from Catalonia’s Polytechnic University, whose robots are pending approval by the US Food and Drug Administration. The startup is tapping a fast-growing market forecast to reach $24bn by 2025. 

Despite its potential, the sector has remained largely untapped by investors though. Sadako has received around €3m in funding to date, while Faromatics has received a runway of €1.3m from angel and strategic investors. And they remain the exception, rather than the rule. PAL, for example, hasn’t taken any outside investment since the company started out, when it was commissioned by an Emirati company to build the chess-playing robots.   

Local investors cautious

This relative lack of investor backing might seem surprising given that local funds have been active in other high-tech sectors. For example, the Catalan biomedical sector received €106m in 2018 and 80% of shareholders are based locally. However, the trend reflects the long-held reputation of Spanish investors for caution, prioritizing the protection of investment over the prospect of growth. Many commentators have suggested the robotics industry is a dangerous bubble, and the failure of high-profile projects such as Jibo and Kuri has done little to dampen those fears.

Beta Robots is another startup that has been practically self-funding to date. Its CEO Andreu Corominas says that “the development of products in the robotics field requires medium and long-term investment [of at least two years]. But in robotics, right now, the short term doesn’t exist. On top of that, the risk is elevated because societal expectations of what robotics can achieve are over-inflated."

Noting that a large part of the country's capital is directed toward mature and stable sectors like tourism, construction and even football, robotics startups hence have even greater difficulty finding investors, particularly "the type of investors that the sector needs,” he adds.

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This view is echoed by Angel Morales, director of Bankia’s centre for excellence for artificial intelligence. “If you look at other branches of technology, the customer acquisition cost is much lower than it is in robotics and the time to market is much shorter. There’ve been a lot of robots which have received a lot of press coverage but faded away because they couldn’t make a gap in the market," he says.

“It’s true that Spanish investors tend to be a bit more cautious than they are in other countries and maybe there’s a feeling that robotics isn’t quite mature enough to invest in.” 

Still, there are plenty of alternative sources of financing for robotics companies to draw on. One notable source is Mobile World Capital, a digital transformation agency based in Barcelona which is collaborating with the pan-European accelerator RobotUnion to finance technology startups. The Catalan Generalitat also provides two separate subsidies for early stage companies. The first covers companies with a technology readiness level of 1 to 2 – in other words, companies involved in pre-prototyping and concept test design. The second covers TRLs of 3 to 7 and helps startups to build their prototypes and transfer research results.

Sadako’s list of investment providers shows what’s possible if a company can demonstrate a disruptive idea with a clear pathway to realization. It has so far received funding from private-sector investors such as Caixa Capital Risc, the investment arm Caixa Bank, and Asimov Ventures. The startup has also tapped a range of public entities including the government-backed Enisa program, regional funds ICF and IVF, and the EU's EIT InnoEnergy. A further €1.2m has been provided by the EU through an SME Instrument phase two grant.

Future is bright

But with many of Sadako’s peers still at an early stage, where does Catalonia’s robotics industry go from here? According to Professor Costa, the current dominance of industry and manufacturing will continue, with a twist.

“It’s a sector on the rise. The industrial sector is well established now and we’re going to see more of this, as companies look to automate their repetitive tasks. [But] there’ll be other focus areas including medical, which is very incipient and you’re seeing a lot of resources invested.  

“Then there’s all the stuff around automated vehicles, whether you call them robots or driverless cars – this is another sector that will continue rising. At what pace? Well that will depend on the amount of money invested.”

Gonzalez at Eurecat agrees that the local sector will continue to diversify and give rise to a new generation of companies, which will be based on exploiting the advances made by their predecessors and bringing them to the people.

“Look at the drone market,” he says. “It’s exploded in recent recent years. You don’t just have people building drones anymore – you have service providers, working with the drone manufacturers and connecting them up with the end users.

“We’ll witness this model repeated in the robotics sector. The end users aren’t experts, they need an intermediary to bring the robots to them. We’ll start to see companies, for example, delivering medical robots to old people and helping these people use them. It’s going to be a hugely exciting time.” 

Edited by Bernice Tang

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