Andromeda Robotics: On the brink of profitability with a lean approach to hardware

After only two years in business, Melbourne startup Andromeda Robotics is less than four deployments away from breaking even. Having raised $1 million in funding to date, the company is defying the idea that it’s too expensive to build and ship hardware in Australia.

Andromeda’s Abi robot is looking to revolutionise the future of human and robotic interactions, particularly with the elderly and children in healthcare institutions.

Abi is a colourful, warm and fully customisable companion infused with AI and machine learning.

She is able to ask and respond to questions, express emotions and learn from her interactions with humans. She also has a memory and recognises human faces.

Andromeda Robotics’ founder and robotics engineer Grace Brown, says Abi’s personality is able to be customised to suit individual client needs. However, there are baseline archetypes, including a motivational coach and salesperson. This does indeed mean that Abi does a lot of successful sales work for Andromeda.

But the most popular personality type with customers is The Sarcastic Maven.

“That was one is very sassy, witty and childlike. A little bit naive. She also thinks she’s the best thing since sliced bread,” Brown said on a call with SmartCompany.

In the future, the clients themselves will be able to customise the personality traits out of the box with the Abi app.

Hardware companies aren’t as expensive as what the Australian startup ecosystem says

A common narrative within the Australian investment scene is that hardware is too difficult and expensive.

The Australian ecosystem is also one that has been largely built on SaaS over the past decade. If you look at the majority of Australian startup unicorns, they’re SaaS-based.

But according to Brown, the idea the hardware isn’t financially viable simply isn’t true. Despite each Abi costing around $10,000 to manufacture, Andromeda Robotics is already close to breaking even with just eight Abi’s currently deployed.

“We’re making really high margins on our product. And until investors do proper due diligence into our company, they don’t really see that,” Brown said.

“We recover the cost of one Abi in less than two months of a customer contract. So over a three-year contract, we’re making 90% plus profit margin. That includes ongoing maintenance, cloud computing costs, everything.”

Last year Andromeda Robotics charged a significantly lower amount per month in order to achieve proof of concept with customers. Due to Abi’s current success, that figure is now sitting far higher per month for each Abi.

While Brown concedes that it is easier to prototype a Saas product over hardware, she believes the scope for future profit is significant.

“When you’re looking at those margins, it’s so much higher. What you usually see with the trend is that once [a hardware company] has that prototype, it’s far more exponential than software companies generally,” Brown said.

“Everything is hardware in this world. Cars are hardware. Apple is hardware. Houses are hardware. Everything is hardware. It’s so much more lucrative.”

Success out of necessity

While raising even a million dollars is an impressive achievement, it’s a far cry from some of the larger raises we see go to early-stage startups in Australia. And hardware can indeed be pricey. But Andromeda Robotics has made it work out of pure necessity.

For the company, this has meant working with cheaper tools that aren’t as efficient as they’d like and having to work harder than if they had more cash in hand.

“We’ve been forced to do more with less. I’ve gone out on two occasions and tried to raise significantly more than we have and really haven’t quite succeeded in that way, to be honest,” Brown said.

“I did have the assumption, just like everyone else, that I needed more money to get to this point. I was a little bit taken aback with how far we could go. But when you’re so limited in resources you just find ways to make things work. We didn’t have any other options.”