San Francisco — Uber Technologies is spinning off Postmates’s delivery robot operation into a separate start-up, marking another chapter in the ride-hailing giant’s attempts to narrow its focus and become profitable.

Uber will co-lead what is likely to be a $50m investment in the new delivery start-up, Serve Robotics, which will bring food, groceries and other items to Uber customers without human intervention. Uber will be a minority shareholder in Serve Robotics, the companies said.

The new start-up will be led by Ali Kashani, who runs the robot deliveries unit for Postmates, which Uber acquired in 2020. Serve Robotics will start with about 60 employees and will be based in San Francisco, operating independently from Uber but retaining close ties with its former parent company.

Uber shares were up about 1% in the first minutes of trading on Tuesday. TechCrunch previously reported some details of the deal.

The start-up plans to expand its current fleet of robots from dozens to thousands. “Over the next five years delivery robots will become the first commercial application of self-driving at scale,” Kashani said. “This is real.”

The move comes as Uber hurtles towards a self-imposed profitability deadline at year’s end. CEO Dara Khosrowshahi has recently cut thousands of jobs and sold off a series of experimental projects. Those included Uber’s self-driving vehicle group, which was burning about $500m a year, and the company’s flying cars unit. But even as it sheds side projects, Uber has worked to ensure it will still have a hand in the new technologies — securing board seats, commercial deals and ownership stakes that will benefit the company once the projects are commercially viable.

Serve Robotics will start with the small fleet of Postmates robots that can now be seen shuttling food around Los Angeles. But Kashani believes Serve robots could make 5% of food deliveries in the US within five years. The company will continue to make deliveries through an ongoing arrangement with Postmates, an Uber spokesperson said.

Venture investments

“This is not just building technology for a hypothetical customer,” said Ali Partovi, founder of venture firm Neo, which will invest alongside Uber in the upcoming funding round. “It’s plugging into a nationwide network of people placing orders and looking for deliveries.” Uber’s Khosrowshahi is an investor in Neo, Partovi said.

For Uber, taking a stake in Serve Robotics increases its sizeable portfolio of venture investments, which already exceeds $13bn. While Khosrowshahi, a former investment banker with a taste for deal-making, didn’t invent this strategy, he did refine it. When Khosrowshahi assumed the helm of Uber in 2017, he inherited shares in China-based Didi Chuxing Technology and Russia-based Yandex.Taxi, with Uber agreeing to abandon business efforts in each region in exchange for stakes in the local ride-hailing leaders. Khosrowshahi repeated the process in other markets where Uber trailed, selling operations in Southeast Asia to Grab and its food delivery business in India to Zomato.

When the pandemic hit — boosting Uber’s food delivery sales but hitting its ride-hailing business — the company’s other bets looked increasingly like a liability. Under mounting pressure from investors to turn its first-yet profit, Khosrowshahi moved to unload even more units and make more investments. The company sold its electric bike division Jump to Lime, and led an $170m investment in the start-up. In December, it sold is autonomous driving unit to Aurora Innovation, and invested $400m. The next day, Uber announced it was selling its air taxi service Uber Elevate to Joby Aviation, and was boosting its investment in the start-up to $125m.

Uber has an arrangement with Serve Robotics to act as both an investor and, through its relationship with Uber-owned Postmates, a major commercial partner. Food delivery was growing quickly for Uber even before the pandemic, but a surge in demand from lockdowns and a push to expand into delivering groceries, prescriptions, packages and more helped increase sales 110% in 2020. Getting robots to handle at least some of those deliveries could improve margins and help speed up Uber’s progress to profit.

Postmates had previously partnered with convenience store Pink Dot. The company’s three robots, which will now be operated by Serve Robotics, are named Pinky, Dotty and Solly (named after Pink Dot CEO Sol Yamini). They have delivered thousands of sandwiches, drinks, cleaning supplies and other items in Los Angeles since late 2020.

Yamini said though he was initially sceptical, a series of improvements to the robots — including the ability to go down stairs — means they can now handle about 70% of all orders. Replacing human delivery drivers with robots is a goal, he said.

“We’re already paying so much for [fuel], payroll, workers’ compensation, insurance on vehicles and payroll tax and it just keeps going up,” said Yamini, who operates 18 delivery-first convenience stores throughout southern California. Robots “will help our bottom line”.



Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.