Image courtesy of 123rf.com

The Software-as-a-Service (SaaS) business model has been revolutionary. The cloud-based approach has paved the way to streamlined apps without having to maintain them directly while also reducing upfront costs.

And because SaaS scales so well, businesses can adjust on the fly without the limits of traditional software licensing. But can this approach also be applied to Robotics as a Service (RaaS)?

After the reverse merger in August 2023 with Patricia Acquisition Corp., a blank-check company, alongside investors, Uber (NYSE: UBER), Nvidia (Nasdaq: NVDA), and Wavemaker Partners, Californian Serve Robotics (Nasdaq: SERV) is accelerating the RaaS gambit. 

Following the 52-week average price of $3.24 per share, SERV stock has rapidly exited the penny stock territory. In the last 30 days, SERV shares have gained 702% value, propelling the price to $16.46 per share at press time. 

Given that robotics is expected to be a $100 billion industry by 2030, boosted by AI advances, is Serve Robotics’ RaaS business model the next Nvidia in terms of stock performance?

How Did Serve Robotics Start?

Hinted by its namesake, Serve Robotics operates a fleet of small autonomous delivery robots. These robots serve various businesses, such as local restaurants, UberEats, convenience chain 7-Eleven, and German food delivery platform Delivery Hero.

Serve Robotics emerged from Postmates X in February 2021, the same on-demand sidewalk delivery startup that Uber bought for $2.65 billion in December 2020. Since then, Serve’s CEO and co-founder, Dr. Ali Kashani, plans to have a fleet of 2,000 delivery robots under an UberEats contract across major metropolitan areas in the US by the end of 2025.

Having first started as a test pilot in West Hollywood, Uber Technologies expanded the partnership with Serve Robotics in November 2021 for Los Angeles. The next cities to receive RaaS are Dallas and San Diego, with the inclusion of Canadian Vancouver.

What Propelled Sudden SERV Growth?

Long before Nvidia became a trillion-dollar company, the AI/GPU chipmaker placed a $10 million equity stake in Serve Robotics in 2022. On July 19th, SERV stock began its over 200% liftoff within days once Nvidia disclosed its SERV stake the day before.

Nvidia converted $3.7 million worth of Serve Robotics bond via SEC filing of Form 4. Materializing the 6.0% convertible debt note, Nvidia bought 1.05 million SERV shares at an average price of $2.42 per share in April, the same month Serve Robotics began trading on the Nasdaq Capital Market under the ticker SERV. 

What Is Serve Robotics’ Bottom Line?

As a novelty feature traversing across sidewalks and catching the public’s eye, turning Serve robots into walking ad platforms would make sense. This is precisely what Kashani plans on doing, hoping to turn 25% to 50% of the company’s total revenue to ad revenue.

“I never thought that I would start a robotics company and then be in the ads business,”

Serve Robotics CEO Ali Kashani to TechCrunch

But for that to be effective, what is the competitive edge for small sidewalk robots to replace regular on-road vehicles? That question answers itself. In May’s corporate presentation, the company painted Serve Robotics’ bottom line as “Why move 2 lb burritos…in 2 ton cars?”

According to the SkyQuest market forecast, the same-day delivery market size is expected to grow at a CAGR of 38.5%, from $24.7 billion in 2024 to $140.4 billion by 2031. This trend naturally follows the growth of online shopping/e-commerce. 

Currently, Serve Robotics considers its first growth stage completed, having supplied 300 restaurants with 100 robots in the Los Angeles area. With over 50,000 deliveries completed, the company reported 10x better reliability than human drivers, with robots failing approximately 0.5 per 1,000 deliveries. 

Unlike alternative delivery methods, Serve Robotics places high value on autonomous urban robots because their regulatory and safety risk profile is superior.

However, part of the regulatory challenge is also indirect. If the policing in these metropolitan areas is not up to par, the company may suffer greater costs in insurance premiums alongside having to rebuild stolen/damaged robots. After all, the Council of Criminal Justice (CCJ) reported a 105% increase in motor vehicle thefts during 2023. 

Serve Robotics’ Financial Runway Is Contracting

Nonetheless, Kashani expects to see up to $80 million in revenue by the end of 2025, followed by 25% MoM revenue growth since early 2022. In Q1 earnings, Serve Robotics reported $0.95 million in revenue with a net loss of $9 million, a significant increase from the net loss of $5.1 million in the year-ago quarter.

For the quarter ending March 31st, the company had $427.482 in cash and cash equivalents, more than halved from Q1 2023. The recent Nvidia-boosted capital inflow will certainly help. According to NasdaqCM, insiders hold 34.21% of SERV shareholders. 

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