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Starship Technologies, one of the earlier companies to enter the outdoor robot delivery market, recently laid off 11% of its global workforce. The company, which has engineering headquarters in Estonia and business headquarters in San Francisco, said it has been negatively impacted by the “dramatic downward shifts” in the global economy and investment market.

While it’s unclear exactly how many employees Starship has, a LinkedIn search finds 622 people list Starship as their current employer. On top of the layoffs, Starship is closing a small number of unnamed service locations in the U.S. and Germany over the next two months. It said all of the changes focus on cost savings and improving profitability. According to Digi Geenius, an Estonian news outlet, Starship also laid off a number of employees in March 2020, which is when the COVID-19 pandemic started to impact the world.

“The locations that we must close do not have the right mix of merchants and customer base to meet our near-term profitability goals,” the company said. “In addition to the staff impacted by these decisions, we are also reducing the team at the corporate level.”

One of those shuttered locations is Save Mart’s flagship store in Modesto, California. It came as quite a surprise because in February 2022, the companies announced the robot delivery service was being expanded to another location.

Starship has added its delivery robots to a growing list of college and corporate campuses, which could be a more profitable, controllable environment for the robots. In 2018, Starship co-founder Ahti Heinla seemingly told The Robot Report college and corporate campuses were a more sustainable approach.

“The needs of people on corporate campuses are very different,” Heinla said. “In suburban neighborhoods, people don’t order food much because they’re at work. At corporate campuses, it’s vice versa. Food ordering is the most popular ordering service.”

Not only are people’s needs different, but the economics of campus delivery vs. city and suburban delivery are also different. Keep an eye on the partnerships Starship announces going forward to see if they’re more focused on campuses.

The layoffs come just months after Starship raised another round of funding. At the time, Starship said the new funding would be used to further research and development and build thousands more robots in Estonia. The company has raised around $200 million in total funding.

Delivery robots face more competition

Starship was founded in 2014 by Skype co-founders Janus Friis and Heinla. Its commercial service launched in 2018 in Milton Keynes, which is the largest settlement in Buckinghamshire, England, and has covered more than 4 million miles ever since with Level 4 autonomy.

However, the outdoor robot delivery market has become much more crowded since 2018. Not only are there many more companies developing sidewalk delivery robots – see Coco, Kiwibot, Serve Robotics, and Synkar, to name a few – other companies such as Nuro and White Rhino are developing autonomous delivery robots that can carry heavier payloads and drive on streets. Nuro, for example, recently raised $600 million in funding and announced a partnership with FedEx.

Food delivery giant DoorDash also appears to be developing its own autonomous delivery robots. DoorDash has filed several relevant patents with the United States Patent and Trademark Office for autonomous delivery vehicles.  DoorDash tested last-mile delivery with a number of robotics companies since 2017, including Cruise, Marble and Starship. However, none of those solutions seem to have stuck for DoorDash.

There have also been legal hurdles for sidewalk delivery robots over the years. San Francisco in late 2017 voted to ban delivery robots on most sidewalks and greatly restrict use in permitted areas. The ban prevented robotics companies from operating sidewalk delivery robots in San Francisco until 2019. Then in December 2021, the Toronto City Council voted to ban sidewalk robots until the council has the opportunity to further study the effects they have on the community. The ban prevents all robots that operate on anything other than muscular power, are automated or remote controlled, and don’t transport passengers from traveling on the sidewalks and in bike lanes.

“These unfortunate but necessary changes will help put Starship in a stronger position moving forward. We are continuing to improve efficiencies over time and this focus will set us up for long term success,” Starship said. “We believe our delivery robots are a big part of the solution to the pain a lot of other delivery companies are experiencing right now, and we’ve already proven this in multiple places. We are eternally grateful for our partners and customers who have supported us and we hope that we can continue to earn the love and loyalty for those we still continue to serve.”

Message from Starship’s CEO

Starship held an all-hands-on-deck global meeting the morning the changes were announced. After the meeting, CEO Alastair Westgarth sent the following message to the company:

Today is an incredibly difficult day for Starship Technologies and everyone who cares so passionately about the company and our hugely talented team.

Delivering news of this nature is never easy, particularly when it concerns such hard working, professional and dedicated team members. But sadly we have had to make the very tough decision to reduce our team size and close a small number of sites in the US and Germany.

Why we have made this decision

The significant downward shift in the global economy and capital markets’ changing their investment strategies has meant we have needed to make changes and increase our focus on costs and profitability improvements which will allow us to safeguard Starship’s long term future.

We are taking four main steps, which include:

• Staff reductions: we are reducing our global team by 11%. This includes employees in the US and Europe.
• Reduction in service areas: Starship will be ceasing service at a small number sites in the US and Germany. We will be stopping service in these areas over the next two months. We remain committed to all of the other locations we currently serve both in the US and globally.
• Reducing our monthly capital expenditures
• Examining all other expense items across the company for optimization

We have chosen to close the locations that do not have a near-term roadmap to profitability as we have learned some locations are not consistent with our cost improvement objectives. This is down to a combination of factors that impact our commercial results, like the number of merchants that participate, and the number of potential customers in a service area. We want to thank our partners and customers in these areas for welcoming and embracing Starship. We are hopeful that at some point we will be able to serve these markets again but we must say farewell for now.

How Starship moves forward
While it is never easy to share such difficult news, Starship will be better positioned for success in the future, allowing us to continue to extend our position as the autonomous last mile delivery platform of choice. Starship is the only commercial autonomous delivery service currently operating at scale. Our robots are completing more than 2x the deliveries we did last year, highlighting our extraordinary growth and Starship’s ability to solve the many problems that human-based delivery businesses are facing. Each and every member of our team, past and present, has made a contribution to this success and I am so incredibly proud of what we’ve achieved to date. To ensure we secure the long term success of Starship, we will be taking the following steps moving forward:

• Focusing on commercial opportunities where we have been and will be the most successful. When we have the right mix of merchants, consumer base and commercial terms, our service excels and expands. We will redouble our efforts towards these markets.
• Adding new partners as part of our ‘Delivery as a Service’ model, where we provide the power of Starship’s automated delivery platform to meet the needs of retailers, delivery platforms and others which are searching for an environmentally, socially and financially sustainable way to meet the growing demand for local delivery in their businesses.
• We will operate with a more efficient business and operations team across all regions and as we scale to more cities and campuses.

To our team members who are leaving Starship, we want you to know that this is absolutely not a reflection of your performance or your value to us. You have all helped us enormously with our mission to make on-demand delivery more accessible, affordable and sustainable, and you have paved the way to build something that has impacted so many people globally. I want to express our sincere and heartfelt gratitude for your support and thank each and every one of you for your contributions on our journey so far. We will do everything in our power to help find new roles and support you during this transitional period.

Alastair