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Karasuyama Elementary School uses the mBot to teach computer programming. (Photo by Ken Kobayashi)
Startups in Asia

Chinese robotics startup cracks the code for Western markets

Makeblock's build and play approach to computer science is winning over educators

COCO LIU and ERI SUGIURA, Nikkei Staff Writers | China

HONG KONG/TOKYO - At a primary school in Tokyo, a Chinese robotic startup is reshaping the future of Japanese children.

"Remember that we've learned how to move forward, backward and turn around?" asks Masayuki Yasuda, a teacher with a class of nearly 40 pupils. "Now let's try to make your robot move in the way you want." As soon as he finishes the sentence, the children grab robots and start coding.

In 2020, computer coding lessons will be mandatory for all Japanese primary school children. Tokyo-based Karasuyama Elementary school has made a head start after introducing robotics three months ago to help their pupils learn programming in a fun way.

The key to Karasuyama's lessons is Makeblock, a startup based in Shenzhen, China, which makes a do-it-yourself robot building kit and compatible software.

Eleven-year-old Kento Tsunoda is a big fan of Makeblock's products. "What I like about mBot is that I need to use my whole brain," Kento says, referring to a programmable robotic ranger he is operating. As the sixth-grader uses his drag and drop interface to code, his robotic ranger starts to race forward, red and blue lights flashing.

The excitement it generates keeps Kento learning; it has also helped Makeblock to achieve something that even the country's big tech conglomerates such as Huawei Technology find challenging -- cracking Western and other developed markets with made-in-China technology. In fact, the Chinese robotics startup has generated more revenues abroad than in the domestic market, with 70% of its products shipped overseas last year, mainly to the U.S., Europe and Japan.

For its 32 year old founder, Jasen Wang, the journey to create Makeblock began with his personal obsession with robots. Wang grew up in a poor farming village in central China, but he was clever and went to university to study aerospace engineering. It was there that he first touched a robot at the age of 20, when he participated in a college competition.

"I was amazed by how smart a machine could be," Wang says in an interview with the Nikkei Asian Review. "I had heard of advanced machines from books but never interacted with one in real life. It was my first time and it was mind-blowing."

Five years later in 2011, after working at a listed electronic manufacturer in Shenzhen for a year, Wang quit his job to found Makeblock.

What started out as a one-man company offering robotic parts to hobbyists has now become a global leader in educational robots, with products retailing from $70 to several thousand dollars for a complete educational package of hardware and software.

The company claims to have sold products in more than 20,000 schools worldwide, including AltSchool, a Silicon Valley education startup backed by Mark Zuckerberg. Last year, its revenue climbed to 203 million yuan ($29.6 million), up from 3 million yuan in 2013 when Makeblock began mass production. Wang, who remains the biggest shareholder, says his young startup was initially profitable, but fell into loss when the company expanded. It remains debt-free, however, as it does not own any production facilities. It outsources robotics manufacturing to nearby factories.

While all entrepreneurs take risks to grow their businesses, Wang took a risk that even by their standards would be considered daring.

Back in 2012, Makeblock was struggling to raise funds. Wang -- a first-time entrepreneur with a degree from a Chinese university and little work experience -- was never going to be a safe bet. Wang wanted to try his luck on Kickstarter, a global crowdfunding platform he first heard about from an incubator. But being Chinese meant he could not launch a fundraising campaign, as the platform was only open to American citizens and U.S.-based firms. To circumvent the rules, Wang agreed with an American friend to list his project on Kickstarter under his friend's name.

His bold move paid off. Wang had asked for an investment of $30,000; Instead, he received $180,000. Along with the funding, his company won global recognition. Thanks to Kickstarter's huge international user base, Makeblock quickly caught the eye of robotics enthusiasts around the world.

"The Kickstarter campaign helped us open the door to the overseas market," Wang says. The international sales were a lifeline for Makeblock's business as the Chinese robotics market was practically non-existent at that time.

Fast forward to 2018, Makeblock says it has sold products to more than 6 million customers across 140 countries. Wang has won the backing of A-list venture firms such as Sequoia Capital and attracted Japan's SoftBank to be Makeblock's distributor. In August, Makeblock closed a series C-round financing of $44 million, putting its current valuation at $367 million.

Wang, who will soon celebrate his 33rd birthday, attributed the company's success partly to good timing. "When we first entered the market, there were no robotics part suppliers out there. We filled the vacuum," he says. The company then shifted its focus to making robot kits for kids, profiting from the rising popularity of science, technology, engineering and math education around the world.

In the U.S., improving this so-called STEM education has become a national strategy since 2013 with billions of dollars spent subsidizing relevant courses. The U.K. government has also made the development of STEM skills a national priority, acknowledging that it faces a severe shortage of engineers and technicians over the next 20 years.

Part of that desire will translate into sales of robotics and coding courses. The global market for educational robots is expected to reach more than $6 billion by 2020, according to London-based market research firm Technavio.

As the demand for educational robots rises, however, the fight for market leadership is also heating up. Makeblock's chief rival is Lego, a Danish play material manufacturer which made its name for the iconic LEGO brick and then expanded into other sectors including educational robots. Other strong competitors include Silicon Valley-based startup Wonder Workshop and LittleBits in New York City. Earlier this year, Sony introduced its first-ever robot-building toy called Koov, as the Japanese electronics titan also eyes a slice of the multibillion-dollar STEM education market.

To stand out from the crowd, Wang knows he needs more than luck.

"I rarely spend time on sales," Wang says. "I'd rather devote my attention to research and development. As long as we offer good products, we don't have to worry about the competition."

Wang speaks from experience. In 2014, when a U.S. company placed an order worth 10 million yuan, the startup could not provide all the certifications required by the client. Yet, "the US company green-lighted the purchase because they loved our products so much," Wang says.

Makeblock's robotics building kits allow customers to create all sorts of machines ranging from a laser cutter to a 3D printer. "The product range of Makeblock is very broad and differentiated [from others]," says Benjamin Joffe, a partner at the global hardware startup incubator HAX which is one of Makeblock's early investors. "Some [of Makeblock's] products even got copied," Joffe says, though he adds the company has maintained its edge thanks to its easier-to-operate software.

"Technology is really the foundation of everything," Wang says.

About 30% of the company's revenue goes to financing R&D. Engineers and programmers account for roughly half of Makeblock's 460 employees. And its 1,000-square-meter R&D center in the heart of Shenzhen's high-tech district is a fantasyland for geeks, with engineers commanding robots to play football as part of their daily work.

Even non-tech personnel are encouraged to help innovate. Makeblock frequently hosts Makeathon, a 24-hour design competition. Employees are encouraged to drop their routine work to create something they are passionate about in the realm of robotics. During its last competition in September, salesmen teamed up with engineers to put together a robotic car and web designers compared notes with programmers. The logic behind such activities, according to Wang, is to test the accessibility of their robotic building kits for ordinary people.

That strategy appears to be working. Earlier this year, when the elementary school in Tokyo adopted both Lego's WeDo 2.0 and Makeblock's mBot to compare their usability, Makeblock won over the Danish giant.

Makeblock frequently hosts Makeathon, a 24-hour design competition. (courtesy of Makeblock)

"Unlike Lego, [Makeblock's] mBot offers simplicity, so children can concentrate on coding instead of being distracted by the robot hardware," says Yasuda, the school teacher.

One of Makeblock's best-selling products is Airblock, a modular toy drone that can be assembled by beginners. Neuron, another well-received programming platform, keeps children engaged in programming with the help of interactive design such as a voice sensor and an infrared detector.

Until last year, Makeblock had managed its foreign sales expansion without overseas staff. But recognizing more effort was needed to compete with Western rivals, Wang has opened three offices abroad last year in Tokyo, Amsterdam and San Jose, with a plan to double the workforce there this year.

Being a global company also means not missing out on the world's most populous country, and Makeblock is now turning its sights on its home market.

"China is the market that we will pay the most attention to in the coming years. It is big enough and we know it better [than our competitors]," Wang says. Last year, Makeblock sponsored a national robotics competition for Chinese students as part of its strategy to raise awareness. "The market demand is picking up. We believe the Chinese market will contribute 40% of our revenue this year," Wang says.

The shift to sell more in China may also provide a bit of protection as Washington cracks down on Chinese imports. But Wang still believes that the U.S., the biggest STEM education market in the world, will continue to be important. "The US-China trade war will certainly affect the price of our products," he says. "But I don't think the impact will be significant ... Unlike made-in-China industrial products with thin margins, [our big margins] will allow us to withstand the blow of the trade war."

But no matter where the revenue comes from, Wang says his company follows the same goal: "Whenever a school is looking for hardware or software for educational robotics, we hope that Makeblock will be the first name to come to mind."

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