Deal focus: Gaussian serves China’s aged

China’s birth rate has fallen for four consecutive years, reaching a 58-year low in 2020. Venture capital investors are looking for solutions and ways to monetize this transition towards an aging population.

“A lot of people will become elderly in the next 10 years because birth rates peaked in 1962-1972,” says Jui Tan, a managing partner at BlueRun Ventures. “The supply of labor in two pillar sectors – services and manufacturing – will come under great pressure, and labor costs will rise sharply. Automation and robotics are the inevitable solutions.”

Some industries are already feeling the pressure. For example, it is estimated China currently has around 4.5 million sanitation workers, with demand rising around 5% each year. However, due to the heavy workload, relatively low compensation, and lack of career development opportunities, recruitment is challenging.

Mindful of this trend, BlueRun led a Series A for cleaning robot maker Gaussian Robotics in 2018. It re-upped in every subsequent round, including the recent RMB1.2 billion ($188 million) Series C, led by SoftBank Vision Fund 2 and Capital Today China Group.

“Sanitation is characterized by inelastic demand and high-frequency deployment. Moreover, the technical barriers to entry for robots in commercial cleaning are higher than in restaurant delivery or household services. This is because robots must cover a larger and more complex environment, complete with traffic flow,” says Tan.

Established in 2013, Gaussian initially provided core technology and hardware for other cleaning robot manufacturers. Its key area of competence was simultaneous localization and mapping (SLAM). The company carved out a more than 70% share, before starting to make its own robots.

At the time of the Series A, Gaussian had one sample robot. Since then, its products have covered more than 150 million kilometers in 40 countries, claiming 80% of the 2B cleaning robot segment. Customers include real estate developers Soho China, Longfor Properties, Vanke, and Sun Hung Kai Properties, as well as Singapore Changi Airport, SF Express, and retailers RT-Mart and Wumart.

Tan believes that robotics in China is at a tipping point. “Last year, the robotics companies we’re invested in were still in the small-batch trial stage. What shocked us was how many have entered the large-volume landing stage within 12 months,” he says. “Supply can’t keep up with the demand.”

One explanation for this rapid growth is cost reduction. According to Tan, the longstanding bottleneck in driverless cleaning robots was the high price of LiDAR, which uses light to measure the distance between a robot and obstacles, aiding navigation. However, technological advances and the rise of domestic manufacturers in this space have brought down costs.

In conjunction with the Series C, SoftBank agreed to buy "thousands" of Gaussian robots for its own use, helping drive international expansion. Tan adds that China is globally competitive in robotics, supported by robust supply chains and application scenarios in the domestic market.

“China has a strong supply chain, low manufacturing costs, and fast product iterations. And then the application scenarios are rich,” he says. “From the technology perspective, China is at the same level as global peers, but the cost of core components is generally lower in China, which is a huge advantage.”

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• Topics
• Greater China
• Expansion
• Technology
• Industrials
• China
• Softbank
• manufacturing
• BlueRun Ventures
• Growth capital