Formic is where fintech meets robotics. They’re creating outcomes as a service, taking away finance and systems integration risk for manufacturers by building 10x more robots for American factories.
Our robotic future is here. Robots can 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 U.S. manufacturers automate? Well, it turns out the answer is simple: it’s risky for them to implement robots.
A new company helps those companies take that risk — it’s called Formic. This startup helps manufacturers by taking the finance and systems integration risk. The result is U.S. manufacturing wins and 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.
How robotics will shape the future
Garry: Saman, thank you so much for coming on the YouTube 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.
Saman: Thanks so much for having me. I’m excited to be here.
Garry: To start, something that really stands out to me is the type of crazy robotic automation that’s out there. What really speaks to you and your time previously?
Saman: 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 are so many applications of that in pretty much every field.
There are companies like AMP Robotics that are sorting recycling and trash using robots. There are companies like Iron Ox and Abundant that are using this in agriculture, either for greenhouses or apple picking. Then, there’s a lot of cool stuff in the manufacturing world too like McKenna Labs, which is doing new types of metal fabrication. There are companies that are using computer vision to enable people to work around big, scary industrial robots.
I just named a few, but there are probably hundreds of companies like this, that are applying new technology in computer vision and machine intelligence and new sensors to solve real problems in industry. A lot of that is being enabled by the smartphone revolution, which brought down the cost of all these components because of the sensors that are in your phone and the cost of cameras coming down. Now, we’re able to build robots that are cheaper than ever, smarter than ever, able to see and feel the world, and able to make decisions. We’re really living in this new paradigm, and it’s really exciting.
Robots are in the real world now
Garry: Yeah, we’re at the dawn of The Jetsons — the cartoon that we grew up with — with this idea of real robots doing real things in the real world. At the same time, one of the things that’s crazy to think about is if you look at your day-to-day life, how much of these innovations has actually penetrated our daily life or even more importantly, the lives of manufacturers of the actual factories out there? It sounds like we’re only scratching the surface of it. Walk me through that and why. It’s astonishing. As technologists, we like to think about the world as someone comes up with something great and instantly, it gets deployed to a billion people overnight. The true reality of it is clearly not that.
Saman: 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. I think we’ve seen over and over again that 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. When it comes to robotics in particular, there’s a lot of custom engineering that needs to happen, and there’s a lot of programming that needs to be done. There’s also a lot of service and maintenance of those components. When something wears out — like a joint for example — somebody has to come in and replace that every once in a while. You need to monitor all of that in real time; there’s so much that goes around it. Then, on top of that, there’s 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.
In the manufacturing world, that’s even more true. I don’t know if this audience is familiar with the issues of manufacturing, but if you look around you, everything is built in a factory. From your iPhone to your couch to the carpet, all of these are built by people. Unfortunately, most factories in the world are 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. Just a few weeks ago, we were talking to a factory worker that makes metal parts for aircraft. He has 20 open positions, and he’s paying high wages for people to come and work. The plant is running 24 hours a day, seven days a week. He just can’t fill his positions, and he has all this equipment that’s just sitting there idle because he can’t fill up his workforce. That’s the kind of thing that we’re trying to solve with Formic.
Garry: Yeah, that makes sense. There are really two types of risk 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?” That’s a real risk. It might not work. The first time you try to do something, it often doesn’t work and requires a lot of brain power and engineering to actually make a practical solution. It’s not just taking a bunch of off the shelf things. Then, on the other hand, that technical risk results in financial risk. You might put a million dollars or multiple million dollars into a project and not know if you’re going to get that money back on the other side. I think 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.”
How Formic de-risks robots
Saman: Exactly. I think that’s what we’re thinking of Formic as. It’s really this wrapper that takes all of the complexity around automation and wraps it all into a nice bundle, and we take care of all the complexity and all of the risk. We’ve lined up a $100 million 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. 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 lidar scanners; we scan the work cell; we get all the dimensions; and we program all of it into the robot. Also, on an ongoing basis, we’re monitoring the health of that robot and doing 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.
From the factory owner’s perspective, it’s a set it and forget it. We like to joke with owners that we walk through the facility with them, and they’ll point out things that they want automated. Then, we take care of everything else. It’s extremely safe and super reliable. Like you said, the financial risk to the factories is resolved because they no longer have to worry whether this $200,000 piece of equipment will work or not. The other benefit is that the little amount of money that they do have 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. Now that’s possible because we front the cost for all of the equipment.
Garry: I’m really excited about what you’re doing because anyone who watches this YouTube 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 had no idea that was the case. One of the things that really astonished me as I went into society was that there’s an astonishing amount of capital, but it’s not being deployed to things that can become more capital. This is a very pure form of that. 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 but better, cheaper and faster through technology and the application of capital.
Saman: It’s yield for our capital sources, but it’s also yield for the factories that we work with. 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. That’s also fighting against inflation. That’s another huge benefit to 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. 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 started to build governments, study engineering and science, and do art. All of a sudden, we had this huge boom in the way that humanity functioned. I think we’re again at that turning point today, where there are still hundreds of millions of people who work in highly repetitive jobs. With automation, all of a sudden, we’ll be able to see a huge release of potential for humanity. We’ll see people move away from doing repetitive work to actually being able to do more creative work. If we can really see that release, we’re going to be facing a whole new revolution in the advancement of our civilization.
Garry: I love that vision. One of the things that we talk about at Initialized quite often is that 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 rather than having jobs where people go and have to 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 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? 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 robotics is pretty clearly a very large piece of that, and it is through the application of math, science and technology. It’s powerful stuff. It’s not always exactly simple, but I’m excited that you get to work on this.
Saman: Absolutely. There are 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. 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. I think that’s just magical, but we’re really close to seeing that happen. I think part of Formic’s mission is to really push that forward.
Garry: 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?
Saman’s journey into tech
Saman: 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 one day, he invited me to his house, and I helped him build a computer for his mom. Then, I was like, “This is amazing.” 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. That was so much fun for me, both the aspect of having a business at that age and being able to build things that people really needed.
I studied engineering, and then I went and worked for a couple of big companies, like Deloitte Consulting, Verizon and Microsoft. I craved being back in the world of a startup, so after a few more bounces back and forth, I ended up starting a 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, I couldn’t help but keep doing more and more, so I started another company, which was a total failure. I lost a bunch of money but really learned a lot. Then, I started another company and then went into venture capital, and I’d been investing. I started my own venture capital fund for a few years in an incubator, and we were focused on AI, robotics and machine learning. Each step of that journey brought me closer and closer to Formic. 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 the 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.
Garry: Did you grow up in China, at least partially? You actually speak fluent Mandarin.
Saman: Yeah, 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 as it went 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. 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 everywhere.
Garry: I’m going to go off script a little bit because this is a personal interest area of mine. You started a venture firm, and you worked very closely with Baidu Ventures, which is very much on the forefront of AI and robotics. I’m curious — it’s hard to talk about robotics and frankly, technology without also talking about China and U.S. tech — what’s your perspective on where you think this stuff is going to go? I think that Formic is incredibly pro-U.S. because this is a very pure form of helping American businesses modernize and access both tech and capital in a way that is really necessary for the United States to continue to prosper.
China vs. US tech
Saman: For those who may not be aware, Baidu is like the Google of China. I ran their global investing practice for the last few years. Coming at it from that perspective, my opinion is that cooperation is always better than competition. I think both in the U.S. and in China and in every single country in the world, there are people who are extremely hardworking, extremely creative and extremely dedicated to improving their lives and the lives of other people.
Garry: I think one of the things that was remarkable to me visiting China — I haven’t been in many years — and spending time with startups in that area was that 10, 20 years ago there was this idea that China needed to copy the U.S. I think in a lot of ways China has leapfrogged the United States in a lot of different areas. It’s astonishing the amount of both capital and brainpower that has concentrated not just on AI and robotics but across the whole tech ecosystem. Their markets are actually a multiple larger. It’s several times larger than the United States market. The interesting thing about the word competition is that the Latin root is competere, which means to strive together. Once you know humans can do something, it’s a race. That’s part of the fun of being a VC or being at the forefront of tech — this recognition that the second human beings are capable of doing something, it’s actually a race. Who’s going to be the one who actually brings it to billions of people?
Saman: There are so many examples of companies that started at the same time doing something very similar, and only one or two of them ended up surviving. 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 aggressively forward.
Garry: What do you wish you knew when you just first started when you were 18 or 22, just coming into tech?
What Saman wishes he knew when he started in tech
Saman: Do the things that you want to do. Don’t worry too much about what society says is right or not worth wasting time on. Another layer on top of that is you have to act. I think we have to 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.
Garry: Yeah, especially for people who are highly technical. The only risk actually ends up being not taking enough risk. So in terms of Formic, a $100 million debt facility, we funded you at Initialized, so you’ve got some good investors. It sounds like the two things that might be most useful for Formic are that you’re hiring and if you are a manufacturer or know manufacturers who could use Formic, get in touch.
Saman: Absolutely. We’re always looking for talent. If there are people who are interested in project finance or robotics engineering or service and maintenance, we have a lot of roles that we’re looking to bring people on for. Then, on the other side, any factories or manufacturing facilities, whether it’s food and beverage, metal machining, or packaging, we run the gamut in the types of automation that we can do. We would love to come and see if there’s anything you can point at that we can automate.
Garry: 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 foundational to civilization. It’s literally, “How do we increase our tool use to move society forward?” We have these unstoppable forces of quite a lot of capital and then quite a lot of problems to solve. So Formic, I think, is just getting started, and I’m really proud to get the chance to work with you here.
Saman: Likewise. I’ve learned so much from you already, and the Initialized team has been such a support. I’m 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.
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