In 2017, a burger-flipping robot named Flippy put fast food workers everywhere on high alert. The automation era of the restaurant industry had begun, ushered in by a $60,000 machine that slapped patties onto a grill, monitored their doneness with AI and thermal cameras, then lay them on buns.
Three years later, Miso Robotics, the Pasadena-based company behind the technology, released Flippy ROAR—short for "Robot on a Rail"—a more streamlined robotic arm with the same capabilities but half the cost. Shortly after, the company opened up availability to small restaurants with a new pricing model that got rid of Flippy's steep upfront cost and replaced it with a $2,500 monthly fee.
Miso's timing couldn't be much better: It has raised $22 million through crowdfunding, has a growing team of 45 employees, and is hitting its stride during a national restaurant labor shortage caused by the COVID-19 pandemic. Miso is now preparing to launch a Series D through its own crowdfunding platform. It's targeting $40 million in capital (with a minimum investment of just under $1,000) — an ambitious figure, but one that if met would further jumpstart the company's bid for restaurant automation domination.
Employment at eating and drinking establishments is 15% below pre-pandemic levels, according to an April report from the National Restaurant Association. Economists blame the shortage on increased unemployment insurance, which they say has disincentivized furloughed or laid-off workers from returning to the industry. Workers argue that the pandemic has made clear that restaurant jobs just aren't worth the low pay, lack of benefits and safety risks, with many seeking jobs in other industries.
"When the pandemic hit we saw the whole food industry wake up and say, AI, automation, robotics—this isn't sci-fi anymore, this is survival," said Buck Jordan, the co-founder and president of Miso Robotics. His company recently hired Jake Brewer, a former executive at CKE, the parent company of Carl's Jr. and Hardee's, to oversee product and business development as its chief strategy officer.
Even before the pandemic, there was already a turnover crisis in the restaurant business. Industry measures in 2019 estimated a turnover rate between 130% and 150% in fast food chains, according to CNBC. Fast food jobs have become so routinized that workers who quit are easily replaceable. In other words, the jobs are designed for turnover — or robots.
Flippy, which can be programmed to do a growing number of kitchen tasks in addition to burger-flipping, has drawn the attention of quick-serve restaurants across the country. White Castle and CaliBurger were early adopters, and the robot was also deployed at Dodgers Stadium and Arizona Diamondbacks' Chase Field to cook chicken tenders and tater tots. (In White Castle's case, company vice president Jamie Richardson said that they were "not dialing down on the number of people in a restaurant" because of the technology, and instead were using Flippy to free up time for workers to focus on order and delivery accuracy. This year, White Castle added 10 new Flippy units to be deployed at franchises across the country.)
Now, with 1.8 million jobs unfilled in the restaurant business and increased interest in social distancing and "low-touch" cooking technology, "there's a massive, screaming problem to address automation in the food service industry," said Jordan. The entrepreneur was first introduced to automation in the Army, where he was exposed to unmanned ground vehicles in his work in tanks and aviation.
"It was a pretty interesting way to think about the future of automation and how robots and computers can do some of those jobs that humans shouldn't necessarily be doing," he said.
That's not to say Miso is focused solely on automation. This month, it announced CookRight, its most accessible offering yet: a system of two high-definition cameras, mounted over a grill, that use the same AI technology to tell a human cook when it's time to turn over a cut of meat. It costs a restaurant just $100 a month to operate.
CookRight, which can recognize the cut and thickness of a piece of meat cooking on a grill, doesn't involve automation, but it's still meant to increase restaurant revenue by reducing costs associated with food waste and human error. Recognizing when meat is done is one of the most basic skills a cook learns, but humans make mistakes, wasting time and money that restaurants with small margins can't afford. Steaks, for example, are often returned because they're cooked improperly, and the cook must throw out the meal and start over, making the customer wait. Other times, customers eat dishes they are dissatisfied with, decreasing their overall experience of the restaurant.
Jordan said that CookRight, which he likens to an "electronic coach," can help reduce those inefficiencies and ultimately save the restaurant money. It is the same AI technology that powers Flippy's arm and will eventually be expanded to monitor other factors involved in cooking, like the fat content of a piece of meat.
The rise of restaurant robots, which also includes Spyce's robotic kitchen, Creator's burger pipeline, and Costco's Pizza Robot, has raised concerns that automation will eventually replace restaurant workers altogether. Some restaurant executives have argued that labor groups like Fight for $15, which pushes for a fair minimum wage for workers, are to blame for the rise in automation across the industry.
But Jordan insists that robots are not meant to replace human workers. "Automation, AI and robotics — I think they all complement the role of a restaurant worker," Jordan said, "freeing up humans to do what humans do best."
Abraham Pizam, founding dean and professor at Rosen College of Hospitality Management at the University of Central Florida, said that robotics may someday take the jobs of some restaurant workers, but not until the cost of the technology becomes cheaper than labor. But automation, he argues, is not necessarily a bad thing for human workers.
"Peeling potatoes in the kitchen: Who wants to have eight hours a day peeling potatoes when actually there is a robot that can do that?" Pizam said. "You might put the same person in a higher-level, better paying and more sophisticated job."
The labor shortage, said Pizam, is forcing the restaurant industry to reckon with the need for higher salaries, which are necessary to draw workers back from taking unemployment or from other industries that offer better pay and more satisfactory work.
"When the industry is pushed in a corner, they will have no other choice but to look elsewhere," said Pizam. "And robotics will be one of those elsewheres."
'There's Not a Bigger Problem Right Now': Wavemaker Labs' Buck Jordan on How Robotics Will Change Restaurants
On this week's episode of L.A. Venture, hear lots of insights on equity crowdfunding from Buck Jordan. He's raising $50-$100K a day, mostly on SeedInvest, for the robotics and food companies coming out of WaveMaker Labs.
Jordan also addresses the dramatic changes coming to the food industry, and why WaveMaker is so focused on the application of robotics to this industry in particular.
"The best investments I think come from the really hard problems," he says. "There's not a bigger problem right now or an industry that's more under siege than the food industry is."
Even before COVID struck, he said, the food industry was a very difficult business.
"Restaurants fail faster and more often than startups," he says. "This is an industry that's under massive strain from all areas. There's rising labor costs. There's rising food costs. Real estate costs is going crazy [...] And most of those problems I mentioned are really well served by automation."
Robotics is uniquely poised to solve these problems, he says, because of recent advances in technology, as well as a massive drop in costs. Robotic arms that cost around $100K in 2015 are now selling for $1,000, he says.
" All of a sudden, really only in the past couple of years, the entire problem of automating low-cost labor is relegated to more of a software problem and less of an expensive hardware problem."
Jordan also shares his ideas about equity crowdfunding, corporate innovation and how seed stage companies can take advantage of corporate partners.
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- Miso Robotics Is Preparing to Launch a $40M Series D Raise - dot.LA ›
'Keep the American Dream Alive': Equity Crowdfunding Is Surging From an Appeal to Patriotism and Altruism
When Christine Outram, founder and CEO of Everydae, a digital tutoring app, met with investors last year to try to raise a seed round she kept being told to come back in six months.
"I guess you can say we were turned down," she said.
Outram decided to try a different route, turning to equity crowdfunding, which allows mom and pop investors to dabble in something that until recently was solely the domain of professional investors. Her campaign proved successful – she raised $1.2 million from 1,586 people who wrote checks between $250 and $50,000.
"I've been really pleasantly surprised by the whole process," said Outram.
For reasons no one can quite explain, equity crowdfunding is having its moment during the coronavirus pandemic. Wefunder, the largest funding portal, recently had its best three months in the company's four-year history, with investor volume up 35% February through April. In early May, the site recorded $2 million of investment in a single day, a new record.
Wefunder had its best three months in the company's four-year history, with investor volume up 35%. assets.rebelmouse.io
"I have been so confused," said Nick Tommarello, co-founder and CEO of Wefunder. "I don't know the answer. The big question for us was always how we would respond to a recession. You would assume that people would not want to invest."
Tommarello theorizes that more startups are turning to platforms like his as other sources of capital dry up, attracting casual investors who don't mind parting with what usually amounts to no more than the cost of an expensive meal to take a lark on a company. The median investment is $200 and 80% are less than $500.
"Our users aren't rich but they're middle class," said Tommarello. "People are not allocating it as an investment, but as discretionary income. They say they can go out for dinner or back someone and support them."
Brian Citizen, who lives outside Washington D.C., has invested in about a dozen startups through Wefunder usually at $250 a piece, including Everydae.
"It's become a passion of mine and something I really believe in and it's also fun because I get to help out entrepreneurs and be a part of the building process," said Citizen, who adds that COVID-19 has made him more excited to invest. "I think there's an opportunity to get better deals. The terms are going to be better for investors."
There is an oft repeated statistic that 90% of startups fail. Even professional VCs who have been at it for decades expect most of their portfolio to be a bust, so experts are wary about casual investors trying their luck in such a risky asset class.
"Some analysts even project that equity crowdfunding could surpass VC investments in the not-too-distant future," Waverly Deutsch, clinical professor of entrepreneurship at The University of Chicago Booth School of Business, wrote in a post warning investors. "This may be exciting news for entrepreneurs, and perhaps for people eager to help start-up founders that they know—but will likely lead to a start-up bubble and massive losses for the majority of individual investors."
Citizen says he is well aware of the risks and limits his total crowdfunding investments to about $2,000 a year. "I'm only willing to invest what I'm willing to lose," he said. "But the returns have the opportunity to be great."
Wefunder is upfront with users about the risks and avoids any impression that users will strike it rich, according to Tommarello.
"Our marketing is very blunt that you might lose all your money and most startups will fail," he said. "We say that over and over again. We don't even talk about our investment returns."
Instead of returns, the site tries to appeal to a blend of users' patriotism and altruism with a hopeful message on the homepage: "Keep the American Dream alive. Back founders solving the problems you care about and help their startups grow."
Equity crowdfunding was made possible by the SEC allowing anyone to invest in private companies in 2016, a privilege previously only accorded to "accredited investors" who made more than $200,000 per year or had investable assets of $1 million or more. A further loosening of the rules went into effect this year, which Tommarello says is likely contributing to the platform's popularity.
"A lot of the downsides have been taken away," he said. "The biggest crowdfunders previously needed to have thousands of direct shareholders on their cap table."
The SEC announced in May it would temporarily make it easier for companies affected by COVID to qualify. "In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner," SEC Chairman Jay Clayton said in a statement.
Wefunder has backed 382 startups with $135 million, an amount smaller than many individual venture capital funds. Crowdfunding is still a niche, but it is gaining more widespread acceptance.
"I do think VCs are opening up to it more," said Kevin Morris, Chief Financial Officer at Wavemaker Labs, an early stage firm with offices in Santa Monica and Singapore. "Crowdfunding has been a bit of a bright spot in this economy so I think it would only help them."
Christine Outram, founder and CEO of Everydae, a digital tutoring platform.
Wavemaker invests in the pre-seed and seed rounds of companies and then raises follow-up capital via equity crowdfunding, a strategy that has worked well with Miso Robotics, a robotic kitchen assistant and Graze, which makes a roomba-type device that mows lawns.
"Both of these businesses were always well suited for crowdfunding but what we've seen in COVID is businesses in the automation space are doing even better," said Morris. "With crowdfunding in general you can get slightly higher valuations than you would from a VC and in a business that is consumer facing you're not only getting capital but you're building brand ambassadors."
Marketing her virtual tutoring app has been one of the most appealing parts of equity crowdfunding for Everydae's Outram, but she says attracting investors took considerable effort. Most campaigns, including hers, see a spike at the beginning but trail off after the initial excitement.
"My job was to always have new news to draw eyeballs to the page," she said.
Outram posted a steady stream of content to her Wefunder page and appealed directly to podcasts and groups centered around education and investing. She also bought ads on Instagram and Facebook, which proved to be worthwhile when a Facebook ad led to a $150,000 commitment.
"What a lot of founders don't realize Is that equity crowdfunding is as much work as other kinds of fundraising," she said.