How Kuka was squeezed out of the 25 million Panda project
A typical fear of founders who take on an investor is being pushed out by the investor. More rarely, it happens that the investor is pushed out. This was more or less the case with Franka Emika's predecessor company, the Munich-based startup that developed the "Panda". Kuka held a 45% stake in the predecessor company, KBee AG. In its 2016 balance sheet (available from the German Federal Gazette), it says: "In the summer of 2016, the company lost all key employees through self-termination (sic! - author's note). The termination of the license agreement of its technology provider Kastanienbaum GmbH in the summer of 2016 deprived the company of further essential economic foundations. The Company subsequently discontinued its ongoing project work in the summer of 2016."
(Managing directors of Kastanienbaum GmbH were - alternately - the Haddadin brothers, the main heads of Franka).
At the same time as the terminations, Franka started operations on June 14, 2016. In other words, the team resigned and joined the new company Franka in parallel, which was probably already sufficiently financed at that time. KBee AG had generated losses totaling just under €11.6 million by the end of 2016 (presumably more likely by the separation date) as a result of the extensive development measures, at least 45% of which had to be borne by Kuka.
KBee has already not had to file a balance sheet for 2017 and hopes to participate from a possible Franka success: "The company entered into a purchase and license agreement with FRANKA EMIKA GmbH, Munich, on June 30, 2016, from which the company plans future revenues."
Kuka reports expenses for the further business acquisition of KBee of €1.6 million (milestone payment) and €1.0 million in the 2017 balance sheet for 2016 and 2017, respectively. (The Kuka CEO at the time, Dr. Till Reuter, had a stake in KBee, which surprisingly was probably not discussed at length until a Kuka Supervisory Board meeting on Oct. 11, 2016 - i.e., after the separation). At the same time, Kuka wrote off €9 million in its 2017 balance sheet related to the impairment of the financial asset KBee AG. (More painful than this write-down is likely to be the loss of the hoped-for profit shares - the future Panda family may well result in a three- or four-digit million company value). In fiscal 2018, Kuka sold its KBee shares. The proceeds are likely to have been in the million range, so that the previous value adjustment is put into perspective. However, it will no longer be possible to participate in future profits. It would be interesting to know who paid quite a lot of money for the apparently now worthless KBee.
According to my information, the background to the dispute is likely to be found in the different business models of the companies. The Franka founders wanted a low-cost robot with direct sales (Internet) and a self-sufficient customer who could program the cobots himself thanks to their simplicity. They have impressively achieved this. Kuka, on the other hand, offers high-priced solutions where programming by Kuka or its partner is essential. Given larger robots, Franka could become a threat to Kuka. In turn, cooperation would not have made sense, since Franka's low prices would not generate the contribution margin required for the Kuka apparatus. For the new Franka Emika company, on the other hand, they may be more than adequate. (Irony of fate: The Chinese Midea Group, which entered the market almost at the same time, is currently criticizing the high Kuka prices. ) Perhaps, this also seems conceivable, the Panda team just wanted to set itself apart from the Chinese. However, this would have presupposed early information about the entry, which seems rather unlikely in view of the stock exchange laws (insiders).
Anyone who wants to know how much the development of the Panda has cost should add the loss of €8 million reported in Franka's balance sheet as of December 31, 2017 to the aforementioned KBee losses of €11.6 million. Further losses are likely to have been incurred up to the market launch in 2018 and thereafter. The Panda - including the establishment of the organization - is therefore likely to have cost at least €20 million. "At least" because the Franka balance sheet for 2017 showed a cash balance of €3.1 million at the end of December, but this was apparently largely used up in spring 2018, which would also be logical: the current expenses (personnel) were not yet offset by any income. Because the said balance sheet also shows:
"Against the backdrop of the available equity and the liquidity requirements associated with the successful market entry, a strategic partner was acquired in the first half of 2018, which took over new shares in Franka Emika as part of a capital increase. As a result, the company is equipped with sufficient liquidity and equity to assume that it will continue as a going concern in the forecast period. At the same time, all legal legal disputes with the KuKa Group have been settled."
The accumulated losses up to market entry of presumably €25 million were not small - compared to Yuanda (simple calculation 20 employees x 100,000 p.a. x 3 years + material/other) or Automata (the startup received US$9.5 million from investors) - and in view of the enormous expertise of its executives that already existed beforehand. In comparison to developments in other industries, however, spending was not as high. Franka not only developed, but also conducted basic research. (Since Franka has a contract manufacturer, TQ in Durach/ Kempten, no capital was needed to set up manufacturing).
In view of the cash drain, receiving the German Future Prize from the hands of the German President at the end of 2017 was probably not only proof of concept, but the endowment of €250,000 also helped.
As is well known, the strategic partner mentioned is the family-owned Voith Group, which took a 10% stake in Franka and a 51% stake in the new sales company Voith Robotics. Details can be found in the balance sheet of Voith GmbH & Co. KGaA for the fiscal year 01.10.2017 to 30.09.2018. As is also known, Voith was a major shareholder in Kuka until the entry of the Chinese and was able to sell its share to Midea at a high profit.
For Franka's success, the entry of Voith can be decisive. For an outsider like the author, the corporate culture still seems to be too little market-oriented. A press inquiry from him was answered in English (rather a no-go for medium-sized companies), ignoring the topic, and if a user asks a question about a YouTube video, it is consistently not answered (see screenshot).
Incidentally, the world market leader Universal Robots was acquired in 2015 for US$285 million and a possible additional US$65 million. Terradyne, the buyer, also took over the world market leader for mobile robots, MIR, for US$272 million in 2018. Of the Chinese cobot manufacturers, Siasun appears to be the first to plan to enter the German market(link).
The author of this blog is available for market research or even a walk through your production/manufacturing(detail) to then provide concrete cobot proposals incl. funding opportunities. Both SMEs and large companies are visited.
