Executive Summary:
Anki was a robotics company which produced and sold AI-powered toys. Its most prominent products were Anki Drive, Overdrive, Cozmo, and Vector.
Anki had to shut down in April 2019 after raising close to $260 million in venture capital funding as it failed to raise additional capital.
What Was Anki?
Anki was a robotics company that developed a variety of consumer electronics toys aimed at both children and adults.
The company’s first product was Anki Drive, a racing game in which users could control small toy cars with their smartphones (available on for Android and iOS devices).
The toy cars (which looked similar to Hot Wheels) would then be placed on a track mat. The mat itself had positional codes, which allowed the car’s sensors to assess whether it was on track or not.
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Furthermore, the cars had Bluetooth connectivity to communicate with the smartphone (which acted as the remote control, built-in microprocessors, LED lights, and other features.
Users could then either race against the computer or play against each other. Additionally, cars possessed weaponry with which other players could be attacked.
Later on, Anki launched various updates, such as the Anki Overdrive, which replaced the mat with a modular set that allowed users to built their own race tracks.
Apart from the racing game, Anki also developed and sold a smart A.I. toy robot named Cozmo. Later, a version called Vector was introduced as well.
The toy robot, which resembled Pixar’s Wall-E, had a built-in “emotion engine” which allowed it to pick up and react to a human’s emotions. To that extent, Anki had programmed dozens of personality types into its software, so it would be able to react to an everchanging environment.
Just like with Drive and Overdrive, users could also play a variety of games using the three cubes that were delivered alongside the robot. Since all of Anki’s products were software-based, updates and patches often allowed for the expansion of functionality and the introduction of new game modes.
Unfortunately, after close to 10 years in business, Anki had to shut its doors in April 2019 – a topic we are going to explore closer in the next chapter.
What Happened To Anki?
Anki, formerly headquartered in San Francisco, California, was founded in 2010 by Boris Sofman, Hanns Tappeiner, and Mark Palatucci.
The three founders got to know each other when they enrolled in Carnegie Mellon’s PhD program back in 2005. While Sofman and Tappeiner pursued a degree in Robotics, Palatucci dabbled in the field of Machine Learning.
In 2007, while the trip hung out in a bar having drinks, they were having an engaged conversation about how little of their robotics research ever saw the light of the day to become a widely adopted consumer product.
Around the same time, Apple’s first iPhone began taking the world by storm, showing how hardware and software can be successfully combined into a small pocket-sized device.
After much back and forth, in 2008, they began working on a side project that would combine their interest and skills in robotics and AI. Two years later, after countless failed attempts, they managed to create a rough prototype of what would eventually become the firm’s first product – Anki Drive.
In order to fund the next stage of hardware prototyping and patent costs, they raised a small financing round from a family and friends.
Once the patents were secured, they began talking to institutional investors. One of them was particularly drawn to what he was seeing. Marc Andreessen, partner at legendary venture capital firm Andreessen Horowitz, alongside Two Sigma Ventures invested a whopping $12.8 million in the company’s first-ever institutional round of funding (January 2012).
Instead of taking that to the press, the founding team continued to refine the product while hiring their first outside employees. Then, in June 2013, two bombshell news dropped.
First, Anki was able to raise a Series B round of $36.7 million from its previous backers as well as Index Ventures. In the meantime, Marc Andreessen had previously introduced the founding team to contacts at Apple.
What followed was probably one of the most effective and impressive product launches in startup history. Anki vis-à-vis CEO Sofman was invited to present its first product at Apple’s Worldwide Developer Conference (WWDC).
On June 10th, 2013, Sofman introduced Anki Drive, a real-world racing game that used the iPhone as a remote control, to millions of viewers. Although the presentation didn’t always go as planned, it nevertheless led to tons of press.
They eventually launched the Anki Drive on 23rd October, 2013 at a price point of $200. Purchasing additional cars would cost $60 a piece. Although the firm did not share any numbers, launching right before Christmas certainly helped with having a positive start. TIME Magazine even named it one of the 25 Best Inventions of the Year 2013.
In January 2014, the firm introduced its first-ever software update, fulfilling the promise of continuously patching the system while adding new game modes and features. That same month, the company also launched a developer portal that will serve up an SDK (Software Development Kit), which allowed third-party developers to program new actions and skills.
It, furthermore, added new hardware products along the way as well. In April, it introduced two new cars, a new racing mode, as well as two new tracks. In order accelerate adoption, the firm also launched its Android app in October 2014.
To double down on its growth, Anki’s founding team raised another round of funding. This team, J.P. Morgan led the round which saw the company scoop up another $55 million. More than 70 people were employed by the company at that point.
The new year then started with a bang. In February 2015, the company announced a new product line called Anki Overdrive, which eventually launched later in September. Overdrive’s most significant change was the racing track, which could be assembled in a variety of different ways.
A year later, players had already managed to build 55,000 different tracks. Furthermore, more than 3.2 million hours were played in total over the course of the firm’s existence. This led existing backers including J.P. Morgan, Andreessen Horowitz, and Index Ventures to invest another $52.5 million into the company.
Yet again, the investment was used to fuel another product launch. This time, Anki introduced the Cozmo, a Wall-E-like robot that is powered by AI technology. As such, it can react to a human’s emotions and even be used to play games. The Cozmo was ultimately launched in October 2016.
Reportedly, Cozmo did end up becoming one of the most demanded products of the 2016 Christmas holiday season. In March of the next year, Anki raised another $77.5 million at a valuation of $600 million.
Meanwhile, it also worked on expanding its existing feature set. In December, for instance, it launched the Cozmo Code Lab, an SDK specifically geared towards children. It allowed them to learn about coding while expanding the robot’s skills.
By mid-2018, the company had successfully sold more than 1.5 million products (including both the cars as well as the pet robot). However, the firm’s impeccable image soon began to crumble a little.
A few high-profile investors, including Marc Andreessen and Danny Rimer (partner at Index Ventures), departed from their position as board members. Despite those setbacks, the firm continued to innovate, launching an adult version of the Cozmo, named Vector, in November 2018.
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But then, in April 2019, the company suddenly announced that it would, effective immediately, release all of its 200 employees (it paid one week of severance) and shut down the company.
This news came amidst previous reports in which company execs stated that Anki had generated $100 million in revenue for 2017 while expecting to exceed that figure in 2018. The company, furthermore, claimed that it had sold more than 6.5 million products in total.
Allegedly, Anki needed another round of funding to sustain its operations but an investment fell through in the last minute. The firm’s closure was part of a wider trend in the robotics industry, which saw other startups like Jibo, Kuri, or Rethink folding their business just weeks prior.
Luckily though, this did not mark the end of its product line. In December 2019, Pittsburgh-based Digital Dream Labs, an EdTech startup, announced that it had acquired all of Anki’s assets, including patents, trademarks, data, social media accounts, and even its domain.
As such, Anki products can (for now) be pre-ordered. The company even made improvements to the existing product line, for instance by introducing the Cozmo 2.0, which offered increased battery life or improved camera resolution amongst others. Dream Labs announced that it plans to make them available for purchase somewhere in 2021.
As for Anki’s original founders: they remained close to what made Anki special. Sofman and Palatucci joined autonomous driving Waymo while Tappeiner was hired by Apple.
Why Did Anki Shut Down?
Anki was shut down because the company ran out of money. The company was allegedly in talks to raise another funding round, which ultimately fell through.
With a staff of 200 people, all while producing and storing physical products, its operations could not be financed anymore.
However, there were some indications that the company was a little too careless with its spending (especially considering that the company had an annual turnover of more than $100 million).
For once, Anki hired multiple people from Dreamworks and Pixar, the studios that created Wall-E, to design the Cozmo robot. Given their accolades, it could be assumed that hiring these experts was no cheap undergoing.
Furthermore, some have pointed towards a very complex and unsustainable manufacturing process, which meant that production wasn’t easy to scale and likely very expensive. Couple that with the need to develop highly sophisticated software and you likely have millions of dollars in R&D expenses.
As such, Anki had comparatively high price points. For instance, the Cozmo robot hit the market at a price point of $180. Comparing that to game consoles, which are only slightly more expensive but offer a lot more games, and you have yourself a product that isn’t really appealing to a large demographic.
To that extent, many people that reviewed the products often stated that playing with them only was entertaining for a few weeks at best. More often than not, the products simply ended laying around somewhere instead of being played.
