How a Russian Drone Developer Became an Exclusive Supplier in Oman

15 сентября 2021 г.

 

The Russian company UVL Robotics (a Skolkovo Foundation resident) that develops goods delivery drones has received $3.5 million from investors worldwide over four years. Now it has offices in the US, Turkey, Europe, and the Middle East. So how did it attract clients such as PepsiCo, Toyota’s Russian office, and other large companies and become the only player for goods delivery drones in Oman?

 

 

The half-million mistake

 

Thirty-four-year-old Evgeny Grankin began his career in the oil & gas company Shell, where he ended up in 2008 right after completing his studies in logistics and supply chains at the Higher School of Economics (HSE). He worked in several positions at the foreign corporation and rose from a logistics analyst to a financial advisor for Russia and Eastern Europe over seven years.

 

Although that job in the logistics department inspired Grankin to create his own business, he remembers that time as the most difficult in his career. Evgeny’s work responsibilities included running an inventory together with a contractor – they had to calculate how many goods (barrels, etc.) were in a warehouse and their exact locations. There were six warehouses at Shell, and they did a cyclical stocktake weekly; then, each quarter, they did a complete stocktake, when all warehouses stopped working for three days. The goods took the entire space with high ceilings, so to see a particular article, you would have to climb with the aid of a forklift and then write down on paper the number and location. According to Grankin, manual calculation unavoidably leads to mistakes, with lost goods for one warehouse alone amounting to $500,000 annually.

 

 

Sometimes Grankin and his colleague discussed how it would be good to have a flying device to inventory all the goods in the warehouse instead or to have a large pair of binoculars that would allow them to see the markings on the packaging from afar. “But binoculars were not possible as the lighting wasn’t good everywhere, and a flying device seemed like a fantasy,” the entrepreneur recalls. He still did not know then that he would have to bring about this great scenario himself.

 

Focus on the West

 

After Grankin became a financial advisor at Shell, he became interested in corporate venture funds and read a lot about them, and wanted to launch a similar project. Finally, he succeeded in implementing the idea in another company. In 2015, Evgeny was invited in as director of the innovative development department at FSUE “NAMI” (State Research Center of the Russian Federation) to create a corporate venture fund for startups working in automobile production.

 

In his new job, he met Dmitry Teslenko, an engineer who enjoyed developing flying drones in his free time. During a conversation, Grankin asked Teslenko if he could build a flying camera with a scanner that could independently read and make an inventory of the goods in a warehouse. The engineer replied that it was technically possible.

 

The two young guys then decided to found the startup UVL Robotics, which launched such a product onto the market. First, the partners left their jobs because the project took up all their time and effort, so they developed a business plan. Next, they worked out what financing they would need and what components they would need to buy. Finally, they built the first demo model of the drone in 2017. Grankin would not say what personal investment he put into the project, but he lived on his savings in leaving his job.

 

Grankin soon met Teslenko’s friend, the MIPT graduate Danil Velovaty who taught at the physics and technology institute and had helped develop the Large Hadron Collider in Geneva. The partners invited Velovat to become a part of the project, and he headed the scientific research block to produce the drone. Grankin took on the job with the partners and clients, but also in attracting investments. He is the only shareholder in the company, and Teslenko and Velovat received stock options, the size of which he would not reveal.

 

In 2018, the UVL Robotics team decided to participate in the HSE startup competition to get exposed. Thanks to Velovaty, the organizers noticed the project, and the venture fund, Phystech Ventures, wrote the company a check for $300,000 in the form of a convertible loan.

 

“We try to support MIPT graduates,” said the Phystech Ventures partner, Danil Shaposhnikov. But, according to him, the fund also liked Grankin’s experience in the logistics sector and the “company’s unique technological solution.”

 

“UVL Robotics is focusing on the international market, and that is important from the investment point of view. European revenue is more stable because of the currency value, although the cost of services in European and US companies are on average four times higher, so market entry onto the international market will have a much higher marginality,” Shaposhnikov hopes.

 

In 2018, the company received another $300,000 loan with a guarantee from the Moscow Seed Fund. Then the work began with the first client.

 

Attempt number five

 

Personal connections helped Grankin find potential clients – he knew the directors of logistics at the company Itella and the PepsiCo corporation. UVL Robotics also communicated with the logistics companies Filuet Group and Kuehne+Nagel, the cosmetics seller Oriflame and others. Grankin asked what device would clients like to have to inventory goods automatically. It became clear that they needed a pilotless drone that could fly for no fewer than 30 minutes without needing to charge, that can scan labels in five seconds, broadcast videos online, take photos and integrate with client service.

 

The first clients – Itella and PepsiCo Russia – signed contracts with UVL Robotics when the startup still had no working version of the product.

 

The drone’s maiden flight at the PepsiCo warehouse was unsuccessful: the gadget’s software didn’t allow it to scan the product labels. It failed the second test within a few months – the drones scanned the goods but fell. During the third flight, it became clear that the drone didn’t have enough charge, Grankin recalls. However, during the fourth launch, there were problems with uploading the data to the computer.

 

“When you go to a client four times, and nothing works out, then the whole team gets frustrated. So I had to encourage my colleagues and promise investors that the project would work and persuade the clients to give us another chance,” said the founder.

 

As a result, PepsiCo gave an ultimatum – the fifth attempt would be the last. The company cited Elon Musk’s example, which was to argue with the Australian authorities that in 100 days, he would succeed in installing the most extensive solar battery: in the worst-case scenario, Australia would get it for free. Musk made the deadline. “They were saying in PepsiCo that ‘Musk promised and fulfilled, so you do too. Be like Elon Musk. We believe in you to the last,’” Grankin recalls.

 

The succession of failures woke in him a passion for winning, wherein the team threw in all its efforts to perfect the drone. Then at the beginning of 2019, the UVL Robotics device successfully flew around the PepsiCo warehouse (the company representative did not respond to Forbes).

 

As an aid during the pandemic

 

The main component of the UVL Robotics drone is its software. The software allows the device to fly indoors according to a given algorithm without GPS or Wi-Fi. The identification system is based on machine learning. Under the hood of the device, so to speak, there is another data exchange system with the client service, but also a security and soft-landing system for the drone. The team builds “Iron” – the drone support structure, the frame, and the circuit board – in its office at Otradnoye technopark. They buy the motors, electronic motors, and the controls from different suppliers, but the scanning modules they order from the US firm, Honeywell.

 

After the drone worked, the startup began to grow rapidly and now has 35 employees, most of whom are developers and industrial designers. By the end of 2019, the company’s revenue amounted to $100,000 from ten clients. In 2020, they already had 20 clients, among whom were Toyota Tsusho Rus (a Toyota brand), KraftHeinz, Gazprom Neft, Unilever, PepsiCo, etc. As a result, their turnover for 2020 multiplied to $400,000, reaching $1.5 million in 2021, according to UVL Robotics.

 

According to Grankin’s calculations, one UVL Robotics client could bring in from $300,000 to $500,000 of revenue annually and a large company up to $2 million. At the same time, the average check to UVL is significantly lower (the company would not reveal the actual sum). “We are starting work at one client’s warehouse, and then we’ll scale up to other facilities – then the revenue will increase,” Grankin explains.

 

The coronavirus pandemic favored UVL Robotics – electronic commerce began to develop intensely, and at the same time, employees at warehouses across Russia were going into quarantine. “Because of the coronavirus, there was a lack of staff, but drones helped free up employees amazingly for more important work,” confirmed the head of the department of chemical materials at Toyota Tsusho Rus, Oleg Ustinov. According to him, Toyota Tsusho Rus has three warehouses in Russia, and UVL Robotics drones fly in one of them. When the employees remove heavy pallets from above, it can result in severe injury: pilotless drones solve this problem, with the result that personnel doesn’t need to climb up high to lift a heavy load from shelves, Ustinov noted. He believes that UVL Robotics technology better suits large logistics centers – to use it only at one warehouse is financially not profitable. Therefore, Toyota Tsusho Rus wants to promote the services of UVL Robotics at its logistics centers located in Europe, Ustinov added.

 

Grankin has ambitions to enter foreign markets. Therefore, in March 2020, the UVL Robotics team applied to participate in the Alchemist accelerator for B2B startups in the United States. However, due to the Covid-19 pandemic, the entrepreneur recalls how training in the accelerator took place remotely. The founder of Phystech Ventures, Peter Lukyanov, told Forbes that the foundation is trying to invest in solid Russian and European teams and further turn them into American ones with the help of local accelerators.

 

During the internship stage, Grankin understood that “50% of the market for stocktaking is in the USA.” Hence, he opened an office in California with a legal entity in Delaware so as “not hit a glass ceiling.” At the same time, the startup found itself a new niche on a different continent.

 

The Arab partnership

 

In January 2020, a Boeing 737 passenger jet heading for Kyiv and belonging to Ukraine International Airlines crashed soon after taking off from Teheran airport. An Iranian anti-aircraft defense system shot the plane down. The event threatened a large contract for UVL Robotics – the startup’s team was preparing to fly to Oman to a potential buyer, the postal company Oman Post. The flight was supposed to go over Iran, and the startup’s employees were afraid of a repeat tragedy.

Grankin first met the Oman Post employees in 2018 after presenting at the most prominent technology conference in the world, Web Summit, in Portugal; an Arab interested in UVL Robotics came up to him. The two exchanged business cards, but he forgot about that person because of an influx of meetings and calls.

 

A few months later, the new acquaintance emailed the company and suggested that the startup run some pilots and sign a contract to develop unpiloted deliveries in Oman. In December 2019, both sides signed a document whereby Oman Post had to compensate all travel and living expenses for UVL Robotics employees during the trial drone flights.

 

After the shooting down of the aircraft, Grankin had doubts for a few days but then decided to fly nonetheless, along with four colleagues who had brought with them five drones. “Having passed through customs, we arrived in Oman at 4:00 and within 15 minutes, they announced the death of the Sultan – that immediately paralyzed all services, so it was difficult even to get from the airport to the hotel,” Evgeny recalls.

 

Nonetheless, after the flight demonstration took place, Oman Post and UVL Robotics shook hands – the startup became the first company to receive official permission from the Oman authorities for unpiloted delivery. It will continue until the end of September 2021, and the contract exceeded $1 million.

The delivery drones differ from stocktaking drones in that they can hold and deliver cargo in full. Together with the UVL Robotics drone, they created mobile automated parcel terminals for storing goods. Thanks to these, customers can get their orders in 30-60 minutes. There are 36 cubicles in each parcel terminal, and on its lid, there is a landing platform for the drone. When a user in Oman orders goods through the app and selects a delivery using a UAV, the drone flies to the landing platform and collects the parcel, says Grankin. The package should “fall in” to the correct cubicle of the parcel terminal from which the customer can collect it at a convenient time. At the same time, the drone automatically changes batteries, after which it flies off for another delivery.

 

Asyad Express (the parent company of Oman Post) did not respond to a request from Forbes.

 

UVL Robotics could cost $7-10 million, says a venture investor, the founder of the investment firm A.Partners Alexey Slovyev. By the start of 2021, the company raised $3.5 million of investments, including from new funds NRG Ventures and People&People Fund.

According to Solovyev, A.Partners reviewed UVL Robotics for investments in 2020. “The market on which they work is, of course, difficult, but the founder seems to know what he is going to build,” he concluded. One of the current investors estimates the project at $20 million.

According to Grankin, there are now quite a few willing to invest in his startup, and if one were to accept all offers, “you could raise $4 million.” However, the entrepreneur will not only look at funds that can add value and expertise to his company: “I would like to choose those investors that are prepared to turn the company into a unicorn,” the entrepreneur is convinced.

 

Original source: Forbes.ru

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