Revenue Models

2. Primary Revenue Models in Robotics

a. CAPEX Only Model

Definition:
Involves a one-time, upfront sale of the robot to the customer, who then owns and operates it. The company delivers the robot, possibly with initial setup, and recognizes full revenue at the point of sale. Ongoing maintenance and operation are the customer’s responsibility.

Pros:
– Immediate cash flow and revenue recognition
– Simple and familiar to capital purchasers
– Robot ownership liability is the customer responsibility

Cons:
– High barrier for customer adoption due to upfront cost
– Lowest customer engagement
– Minimal or no guaranteed recurring revenue

b. CAPEX + SW and Maintenance Subscription Model

Definition:
Combines a one-time hardware sale with recurring revenue from software, service, or maintenance. The customer owns the robot, but pays ongoing fees to access essential functionality, updates, or support. This creates a hybrid revenue stream for the robotics company and maintains an ongoing relationship with the customer post-sale.

Pros:
– Cash and revenue recognition for hardware immediately
– Balances short-term revenue with long-term recurring income
– Sets a recurring base revenue that will grow with more customers
– Easier upsell opportunities over time with an ongoing engagement

Cons:
– Still requires large upfront customer investment
– Increased barrier to adoption and potentially long sales cycles
– Recurring revenue is still small percentage of total revenue
– Reduced predictability of revenue

c. Software Only Model

Definition:
Software-only providers monetize robotics software—such as control systems, analytics, or fleet management—independently from the hardware. It’s typically delivered via a SaaS model, with optional licensing or per-robot fees. The robotics company focuses purely on software value, selling to hardware OEMs, integrators, or end users.

Pros:
– Recurring revenue
– Can scale independently of hardware deployments
– Able to integrate with multiple hardware platforms
– Highest gross margin potential, able to scale rapidly with minimal marginal cost
– Can become embedded and sticky within customer workflows, increasing retention

Cons:
– Must rely on third-party hardware adoption or installed base
– Requires strong API and integration capabilities
– Can be resource intensive to validate on each target hardware platform
– Highly competitive software market with existing players
– Limited upselling options

d. RaaS Model

Definition:
Offers robotics as a fully managed service with subscription and typically no ownership transfer. Customers pay a flat fee or pay for operational outcomes rather than for equipment. The robotics company retains ownership and handles maintenance, support, and uptime.

Pros:
– Recurring, predictable revenue
– Reduced barriers to entry for customers
– Attractive to SaaS and many hardware investors with strong alignment to SaaS models
-Easiest model to upsell customers due to the ongoing service relationship that enables upgrades, add-ons, or extra units without new capital spend

Cons:
– Startup carries the upfront cost for the robot
– Minimal upfront revenue. Revenue is recognized over time
– Requires robust product and service infrastructure from 1st deployments
– Introduces some credit and payment risks
– Necessitates robot refurbishment or replacement with hardware upgrades

e. Tech-Enabled Services Model

Definition:
This model uses the startup’s own robots to deliver a specific service, such as inspections, cleaning, or farming. The customer focuses on and pays for the outcome or deliverable, not the robot, while the startup owns, operates, and manages the robotic systems behind the scenes.

Pros:
– Works well in sectors where business is usually contracted or sub-contracted
– Naturally fits into existing workflow and business processes
– Allows the startup to control quality and value delivery, build a deep understanding of the customer and use case, and keep tight control of the customer experience

Cons:
– Operationally intensive (requires field teams)
– Underutilization and product downtime is the startup burden, not the customer
– Harder to scale quickly without capital or partnerships

f. Additive Monetization Model

Definition:
Robotics companies create additional revenue streams by offering data services, platform access, or enabling third-party integrations. This model is typically layered on top of hardware, software, or RaaS sales. It can include analytics, marketplaces, consumables or ecosystem monetization.

Pros:
– Unlocks new revenue streams, accelerates growth beyond baseline RaaS
– Stacking revenue streams diversifies the business, makes it even stickier
– Attractive to investors seeking upside and platform potential
– Builds ecosystem defensibility

Cons:
– High development and operational costs
– Risk of distracting team from core offering
– Can be outside the core competence of the existing team requiring new skills and processes
– May create channel conflicts with partners or competitors

SO WHAT:

– At the early stage, don’t turn down cash—flex your revenue model to fit the customer.
– Revenue models that work at the early stages may be different at later stages as the product-market-fit and value proposition solidify. Pivots in later stages are common.
– Start early to identify additional revenue streams – value added software, analytics, data, consumables, and/or services. Develop supporting infrastructure to pursue these opportunities in parallel to core product and go-to-market execution.
– Capex only is a classical approach. Any robotics company today with a Capex model should at least include a software and maintenance agreement. Better for operations, better for customer engagement, better to have some recurring revenue.

3. Secondary Revenue Models in Robotics

a. Rent to Buy/Rent to Lease Model

Definition:
This model allows customers to rent the robot for a defined period with the option to purchase or enter a long-term lease at the end. This model provides a lower-risk path to ownership. It’s often used to support evaluation, pilot programs, or very budget-constrained customers.

Pros:
– Customer pays via OPEX, not CAPEX
– Easier sell to cautious or budget-limited buyers due to reduced upfront costs and increased flexibility
– Clear customer business case for ROI

Cons:
– Startup carries the capital cost AND the customer adoption risk
– May require third-party financing support
– Revenues accrue slowly and unevenly
– Long product lifetime must be ensured

b. Usage-Based Model

Definition:
Customers pay based on usage—e.g., per task, hour, or output—rather than fixed fees or subscriptions. This aligns cost with value delivered and typically avoids upfront CAPEX. Usage tiers or dynamic pricing can optimize revenue scalability. Most attractive for software only businesses.

Pros:
– Predictable, scalable revenue
– Strong customer alignment (pay for performance)
– Flexible for customers; removes CAPEX hurdles

Cons:
– Not always accepted in traditional industries
– Customers may reduce usage to control costs
– Harder to forecast revenue early on

SO WHAT:

– A critical priority at the very early stages is to capture revenue. Be flexible, get the product deployed, delight customers.
– Get creative with ultra customer-friendly approaches such as “rent to lease” and “rent to buy”. Prove the value and then drop these options from the offering once solid traction is established.