Serve Robotics, the Uber and Nvidia-backed robot sidewalk delivery company, made its IPO on Thursday, becoming the latest startup to choose to go public through a reverse merger as an alternative path to capital that required to finance the development.
The company, which spun out of Uber’s 2021 acquisition of Postmates, hits the Nasdaq with ‘SERV’ on gross revenue of about $40 million — “before underwriting discounts and offering expenses,” according to regulatory filings — in share price of $4.
Serve has completed its reverse merger with blank check firm Patricia Acquisition Corp. in August 2023 and simultaneously secured $30 million in a round led by existing investors Uber, Nvidia and Wavemaker Partners, bringing the total amount raised at the time to $56 million. While Serve’s public market debut comes from a reverse merger rather than a SPAC, the two alternative paths to IPO are not too dissimilar. Both provide startups with a faster path to public markets. However, pulling this particular financial lever has its risks, especially if the company is pre-revenue or generates very little revenue. We need look no further than the countless failed autonomous and electric vehicle companies to see that this is not a golden ticket to longevity or profitability.
Like any publicly traded company, this route requires financial disclosures that provide information about revenue and profit or loss.
The service brought in $207,545 in revenue last year, up from $107,819 in 2022, per regulatory filings. That’s a loss of $1.5 million in 2023 and $1.04 million in 2022. However, Serve Robotics said it expects massive growth fueled by money generated by the IPO. These funds will be used to fund R&D for future generations of robots, manufacturing activities, geographic expansion and general working capital and corporate purposes.
The startup also has some big revenue ambitions. Serve said it aims to generate between $60 million and $80 million in annual revenue, with contribution margins above 50% and positive cash flow by the end of 2025. The company pointed to recent momentum, including 25% month-over-month growth in deliveries from 2022, when the startup started deliveries for Uber Eats.
Future growth will come from scaling the 100 robots deployed today in Los Angeles to up to 2,000 robots in multiple US cities by the end of next year through a contract with Uber Eats. Serve has also engaged Magna International as a manufacturing partner. Serve currently operates 300 restaurants through its Uber Eats platform and 7-Eleven in Los Angeles, but has its eyes on Dallas, San Diego and Vancouver, Canada, according to CEO Ali Kashani.
It serves projects where a large portion of its revenue will come from advertising, Kashani told TechCrunch.
“I never thought I’d start a robotics company and then be in advertising,” a tired but excited Kashani said in a phone interview minutes before the bell rang. It’s normal for companies to barely sleep before making their public debut from the need to finalize all the financials and the sheer adrenaline. “But it’s great because this can help offset the cost of delivery so everyone wins.”
Kashani said Serve has had a lot of interest in advertising on the cute little sidewalk robots. On an annual basis, ad revenue can generate 25% to 50% of Serve’s total revenue, he said.
This is one of the value propositions that Serve has presented to investors. Serve also says it can leverage rapid advances in artificial intelligence and robotics to help reduce reliance on cars, because who needs something as small as a burrito delivered in a sedan?
“The tailwind here is that these robots are much more scalable than many of the alternative approaches we have,” Kashani said. “If you look at a car, it has about 3,000 times more kinetic energy than one of our robots, so by nature, those are safer… for pedestrians, cyclists for everybody else, and I think that’s definitely recognized when we talk about in cities. So there’s a lot of regulatory momentum, but you also have the fact that there’s a labor shortage. You can see that companies in the delivery space are still not necessarily profitable and are looking for ways to bring some mix of automation to their fleets. Therefore, we see a lot of interest in the solution we provide.”
Serve’s bots work on Level 4 autonomy, meaning they can operate autonomously within certain limits and conditions. However, Serve still relies on remote human operators to oversee operations in certain scenarios, such as at intersections or if something unexpected happens.
The company’s offer is expected to close around April 22. Serve’s gross proceeds from the offering could reach about $46 million, according to Kashani, if Aegis Capital Corp., the underwriter of the deal, commits the company to a 45-day call option on an additional 150,000 shares of common stock. or approximately 15% of the number of shares sold, to cover any over-allotments.
After the merger closed, Uber owned a 16.6 percent stake and Nvidia a 14.3 percent stake in Serve, according to regulatory filings. An April filing shows the stake will change to 11.5% and 10.1%, respectively, once the offering closes, but a Serve spokesman cautioned that those percentages could change given the share’s opening price of $4.
Sarfraz Maredia, Uber’s vice president of delivery and head of the Americas region, has joined Serve’s board of directors.
Serve Robotics began life as Postmates X, the robotics division of on-demand delivery company Postmates. Autonomous sidewalk robots began delivering to Postmates customers in several Los Angeles neighborhoods in 2018. It launched a commercial service in 2020.
Uber acquired Postmates in late 2020 for $2.65 billion. Three months later, Postmates X emerged as an independent company called Serve Robotics. The new name comes from the autonomous curbside delivery bot developed and piloted by Postmates.
