- Our robotic future is here, robots to do pick and pack, sort recycling, cut metal, keep us secure, or even grow our food. At the same time, we have a giant labor shortage for manufacturing, which means over $454 billion per year lost in economic output by 2028. And that means lost jobs and factories shut. Why don't US manufacturers automate? Well, it turns out the answer is kind of simple. It's risky for them to implement robots, but a new company helps those companies take that risk.
And it's called Formic. This startup helps manufacturers by taking the finance and systems integration risk. And the result is US manufacturing wins. Our jobs stay here. It's a new type of FinTech we like to call outcomes as a service. Today, we're sitting down with the founder of Formic, Saman Farid.
Let's get into it. (upbeat music) Saman, thank you so much for coming on the channel. The stuff that you have gotten to see over the years is really, really cool.
So thank you for coming to join us today. - Thanks so much for having me. I'm excited to be here. - I guess, to start, one of the things that really stood out to me was the type of crazy robotic automation that's out there. What really sort of spoke to you and your time previously? - I've been obsessed with robotics since I was a kid, but I've also spent about 10 years investing in robotics and I've seen so many cool new technologies. People may be familiar with what AI is enabling in computer vision and deep learning.
And there's so many applications of that in pretty much every field. There's companies like AMP Robotics that are sorting recycling and trash using robots. There's companies like Iron Ox and Abundant that are using this in agriculture, either for greenhouses or for apple picking. And then there's a lot of cool stuff in the manufacturing world too like McKenna Labs is doing new types of metal fabrication. There's companies like Veil that are using computer vision to enable people to work around these big scary industrial robots.
I just named a few, but there's probably hundreds of companies like this, where they're applying this new technology in computer vision and machine intelligence and new sensors to solving real problems in industry. And a lot of that is also being enabled by the smartphone revolution, which brought down the cost of all these components because of all of these sensors that are in your phone, the cost of cameras is coming down. So now we're able to build robots that are cheaper than ever that are smarter than ever, that are able to see and feel the world and are able to make decisions. And so we're really living in this kind of new paradigm and it's really exciting.
- Yeah, we're sort of at the dawn of kind of the Jetsons, the cartoon that we grew up with this idea of real robots doing real things in the real world, but at the same time, one of the things that's kind of crazy to think about is that if you look at your day-to-day life, how much of these innovations actually penetrated our daily life or even more importantly, sort of the lives of manufacturers of the actual factories out there. It sounds like we're really only scratching the surface of it. Walk me through that. And why? It's sort of astonishing, as technologists, we like to think about the world as someone comes up with something great and then instantly, it sort of gets deployed to a billion people overnight.
But the true reality of it is clearly not that. - There's so much more to it than that as I'm sure you've seen in so many companies. I think startups often start with this idea that if you build it, then people will start using it. And I think we've seen over and over again in the world of robotics that's not the case. It takes a lot of blood, sweat, and tears to get a robot running. They're not so adaptable that you can just plop them down somewhere and all of a sudden, they start functioning.
But when it comes to robotics in particular, there's a lot of custom engineering that needs to happen, there's a lot of programming that you need to do for the robot. There's also a lot of service and maintenance of those components. When something wears out, when a joint wears out, somebody has to come in and replace that every once in a while. And you need to monitor all of that in real time. There's so much that goes around it. And then on top of that, there's also the financial side of it.
For a lot of people who could use robots, it's not feasible to put up $100,000 or $200,000, or sometimes even more to get a robot up and running. There's a lot that needs to be done to make these things more accessible to the everyday person. And in the manufacturing world, that's even more true. I don't know how much this audience is familiar with the issues of manufacturing, but if you look around you, everything around you is built in a factory. from your iPhone to your couch, to the carpet behind me, And all of these are built by people.
And unfortunately, most factories in the world are just severely short-staffed right now. They are desperate to hire people to come in and work. But honestly, nobody wants these jobs. These roles are sitting empty for three to six months at a time.
We were talking to a factory just a few weeks ago that makes metal parts for aircraft. And he has 20 open positions. He's paying high wages for people to come and work. The plant is running 24 hours a day, seven days a week. And he just can't fill his positions.
So he has all this equipment that's just sitting there idle because he can't fill up his workforce. And so that's the kind of thing that we're trying to solve with Formic. - Yeah, that makes sense. There's really two types of risks that every manufacturer has to think about. One is technical risk.
Literally, how do I make sure that the robot is properly integrated with the stuff that I actually have? And that's a real risk. It might not work. The first time you try and do something, it often doesn't work and it requires a lot of brain power, a lot of engineering to actually make a practical solution. It's not just take a bunch of off the shelf things.
And then it sounds like on the other hand, that technical risk results in financial risk. You might spend a million dollars or multiple million dollars into a project and not know that on the other side, you're going to get that money back. And I think that that's a powerful thing for Formic to come into all of those scenarios and say, "We're going to help you with both the tech risk "and the financial risk. "And we're going to give you an outcome "that makes money for you." - Exactly.
I think that's what we're thinking of Formic as. It's really this kind of wrapper that takes all of the complexity around automation and we wrap it all into a nice bundle. And we take care of all the complexity and all of the risks.
So the way that we do that is we've lined up 100 million dollar debt facility that allows us to go and buy equipment that we need and we can pay for all the custom engineering that needs to happen. And we place these robots in factories. And we take care of everything related to getting that robot to work. Upfront that includes a lot of scoping so we bring in our kind of LIDAR scanners and we scan the work cell. We get all the dimensions.
We program all that into the robot. And then we also on an ongoing basis, we're monitoring the health of that robot. We do error resolving. So if the robot runs into something that it doesn't know how to solve, we have technicians who can remotely log in and fix that problem.
We're watching for any service and maintenance that needs to happen on that robot. And so from the factory owners perspective, really, it's a set it and forget it. We like to make the joke with owners. We walk through the facility with them and they'll point at things that they want automated. And then we take care of everything else. It's extremely safe, super, super reliable.
And like you said, the financial risk to the factories is really resolved because not only do they no longer have to worry whether if I buy this $200,000 piece of equipment, will it work or not? The other benefit is that the little amount of money that they do have that they can put to work, there's so many other ways that they can put it to work. Maybe they prefer to build another facility and grow, or maybe they prefer to spend more money on marketing. And now suddenly that's possible because we front the cost for all of the equipment. - I'm really excited about what you're doing because anyone who watches this channel knows that I talk a lot about how the world is absolutely full of capital, but starting my career when I was 18 years old, getting a college degree, I sort of had no idea that that was the case.
And so one of the things that really astonished me was as you go into society, you realize there's an astonishing amount of capital, but it's not being deployed to things that can become more capital. And this is a very pure form of that. Literally, money comes in, you add engineering to it, and then what comes out is yield, almost a very pure form of yield, which is whatever we were doing before, we're doing it better, cheaper, and faster through technology and the application of capital. - It's yield for our capital sources, but also, it's yield for the factories that we work with because almost every day, we talk to factories who are turning down business because they can't afford to hire labor to do the job.
If they can start automating, those factories can start producing more and they can also drop the cost of all the product that comes out. And that's also fighting against inflation. And that's another huge benefit to kind of the average consumer, but also to the factory owner. There was a time where all of humanity was spending all of their time on subsistence farming. Everybody spent all of their day just figuring out how to feed themselves. And it wasn't until we had the agricultural revolution that some people focused on farming and everybody else was able to start doing more creative pursuits.
They start to build governments, and study engineering and science, and do art. And all of a sudden, we had this huge boom in the way that humanity functioned. And I think we're again at that kind of a turning point today where there's still hundreds of millions of people who work in these highly repetitive jobs. With automation, all of a sudden, we'll be able to see a huge release of potential for humanity again.
We'll see people move away from just doing the repetitive work to actually being able to do more creative work. And if we can really see that released, we're going to be facing a whole new revolution in the advancement of our civilization. - I love that vision. And one of the things that we talk about at Initialized quite often is, we don't want human beings to be robots. We want them to be cyborgs.
How do we use technology to actually improve the station of human life actually, rather than have a job where you go and have to sort of do a rote manual thing a thousand times every day? That person probably should be able to do something else, whether it is writing code or basically making new things for other people, instead of doing the same thing over and over again. I think that's the cyborg aspect of it. How do we extend what human beings are capable of doing? And there is an interesting through line, all the way through to perhaps what Elon Musk is pointing to, which is how do we become an interplanetary species? I think that robotics is pretty clearly a very large piece of that. And it is through the application of math, science, and technology. So it's powerful stuff. It's not always exactly simple, but I'm excited that you get to work on this.
- Absolutely. Yeah. There's so many cool examples that come to mind, one of them is this company called Shaper Tools. They build this really cool handheld woodcutting machine. It uses computer vision to do extreme precision cuts. So you can take anybody off the street who's never done woodworking in their life, and now all of a sudden, they're at the same skill level as a woodworker with 10 or 20 years of experience. And I think that's just magical, but we're really close to seeing that happen.
And I think part of Formic's mission is to really push that forward. - I guess taking a step back, I'd love to hear more about your journey into tech. How did you get started way back in the day? - My parents will have many good stories for you. I pretty much ripped apart every piece of electronics in our house.
I had a good friend who knew how to build computers. And so one day he invited me to his house and I helped him build a computer for his mom. And then I was like, "This is amazing." So actually, at 14 years old, I started my first company where we were building computers for people and then we started building networking equipment for small offices.
And that was just so much fun for me, both the aspect of having a business at that age, and it was just so fun to be able to build things that people really needed. Studied engineering. And then I went and worked for a couple of big companies like Deloitte Consulting, and Verizon, and Microsoft. I craved being back in the world of a startup. And so after a few more bounces back and forth, I ended up starting another company related to E-commerce with a good friend of mine. We were buying products and we built our E-commerce site.
And we ended up selling that business. From that point, it was just kind of, I couldn't help keep doing more and more. So I started another company after that, which was a total failure. Lost a bunch of money, but really learned a lot. And then I started another company and then I went into venture capital and I've been investing.
I started my own venture capital fund for a few years in an incubator, and we were focused on AI and robotics and machine learning. And yeah, each step of that journey brought me closer and closer to forming. I put together a lot of the skills that I needed and I met a lot of the people that have helped me along the way in this journey. The biggest takeaway for me was that that path was completely non-linear. If I had listened to the advice of "successful people" and tried to go to the best school that I could, I probably would have been working a nine to five corporate job today. - Perfect, did you grow up in China, at least partially or? So you actually speak fluent Mandarin.
- Yeah, I was in Beijing, Chaoyang. So I lived in Beijing from when I was six years old until I was 18. I went to public school in China, and I got to really experience China go through this massive transformation. When we moved to Beijing, we had power outages regularly, a lot of the roads were dirt roads. And by the time I left for college, Beijing had totally transformed into this mega metropolis.
It looks like something out of the future a lot of the time. And seeing that transformation, I think, really gave me this vision that the world really can change in just a few years. We want to see that happen again and again kind of everywhere. - I'm going to go off script a little bit just because this is a personal interest area of mine. You started at a venture firm and you worked very closely with Baidu Ventures, which very much on the forefront of AI and robotics.
I guess I'm curious. It's hard to talk around robotics and frankly technology without also talking about China and US tech. What's your perspective on where you think the stuff is going to go? I think that Formic is incredibly pro US because this is a very pure form of helping American businesses really modernize and access both tech and capital in a way that actually is really necessary for the United States to continue to prosper. - For those who may not be aware, Baidu is like the Google of China. So I ran their global investing practice for the last few years. And coming at it from that perspective, my opinion is that cooperation is always, always, always better than competition.
I think both in the US and in China and in every single country in the world, there are people who are extremely hardworking, extremely creative, extremely dedicated to improving their lives and the lives of other people. - I think one of the things that was remarkable to me visiting China, haven't been in many years, but spending time with startups in that area sort of 10, 20 years ago, there was this idea that China needed to actually sort of copycat the US, and I think in a lot of ways, China has leapfrogged the United States in a lot of different areas. It's sort of astonishing the amount of both capital and brainpower that has sort of concentrated not just on AI and robotics, but across the whole tech ecosystem. Their markets are actually multiple larger.
And it's like it's several times larger than the United States market. The interesting thing about the word competition is that the Latin root is actually competere, which means to strive together. Once you know humans can do something, it's sort of a race. That's part of the fun part about being a VC or being at the forefront of tech period actually is this recognition that the second human beings are capable of doing X, then it's actually a race, who's going to be the one who actually brings it to billions of people.
- There's so many examples of companies that have started at the same time, doing something very similar and only one or two of them ended up surviving. And I think a lot of that has to do with timing. And like you said, being able to be laser focused on the goal and charge kind of aggressively forward.
- What do you wish you knew when you just first started when you were 18 or 22, just coming into tech? - Do the things that you want to do. Don't worry too much about kind of what society says is right, or not worth wasting time on, but then another layer on top of that is you also have to act. I think we have to kind of build and try and experiment and not be afraid of failure because we live in a world today where the cost of failure is not that high. I think society provides a lot of room for smart people who have done things and failed to continue to survive down another path.
So try it out, and if it doesn't work, that's fine. You can always go get another job or something. - Yeah, especially for people who are highly technical, the only risk actually ends up being not taking enough risk. So in terms of Formic, 100 million dollar debt facility, we funded you at Initialized so you got some good investors. It sounds like the two things that might be most useful for Formic are one, you're hiring. And then two, if you are a manufacturer or know manufacturers who could use Formic, get in touch.
- Absolutely. Yeah. We're always looking for talent. If there's people who are interested in project finance or people were interested in robotics engineering or service and maintenance, we have a lot of roles that we're looking to bring people on for. And then on the other side, yeah, any factories, any manufacturing facilities, whether it's food and beverage, or metal machining, or packaging, we run the gamut and the types of automation that we can do. So we would love to come and see if there's anything you can point at that we can automate.
- That sounds great. Thank you so much for hanging out. I'm sure this won't be the last time because you are operating in something that is really sort of foundational to just civilization period.
It's literally, how do we increase our tool use to move forward society? But we sort of have these unstoppable forces of quite a lot of capital and then quite a lot of problems to solve. And so Formic, I think, we're just getting started and I'm really proud to get a chance to work with you here. - Likewise. I've learned so much from you already and the Initialized team has been such a support. So so happy for the journey that we're on and the trust that you guys have placed in us and our team. We're excited to execute.
- Awesome. (soft music)
2021-08-29