🤖 Investing in the 10-finger robot

My summer job growing up as a lifeguard paid $7.25/hour - minimum wage. Pennsylvania (where I grew up) just approved a bill to more than double the minimum wage to $15 by 2026. These minimum wage hikes are happening across the board, and human capital is more expensive than it’s ever been.

Today, we’re deep-diving into Clockwork, a startup that’s designed a robot that can autonomously paint your nails. The robot isn’t meant to fully replace your expensive nail technician - but it’s pioneering ‘express beauty’ as an inexpensive alternative option.

• 🤖 Mani Robots: Clockwork is infusing manicures with deep tech

• 💅 Paint the Picture: Filing away at $150M/year revenue potential

• 🕑 The Verdict: Will I add Clockwork to my portfolio?

MANI ROBOTS

The robot invasion has begun:

There’s been a recent batch of startups popping up with a common thesis: replace expensive humans with robots. Some have seen great success (self-checkout machines, Roomba), but many have failed (Zume, Karakuri).

I personally am a believer in this thesis, most notably with an investment in CafeX, the robotic coffee barista. I don’t believe every company with this approach will be successful, and I’ve passed on several opportunities like Piestro (pizza-robot), Graze (Lawnmower-robot), and Blendid (smoothie-robot).

When Clockwork came onto my radar, I immediately began digging to see if this thesis-aligned startup was worth an investment. Clockwork has designed a machine that autonomously paints a user’s nails in 10 minutes for half the price of a manicure.

Their founding team consists of ex-Nvidia/Dropbox operators with expertise in Machine Learning, Software Engineering, and Robotics. It’s a talented roster that couldn’t have been made better in a test tube for this specific mission.

The caliber of investment backing also caught my attention, with early support from the CMO of Sephora, Garry Tan’s VC firm, the former CTO of Coinbase, and more.

Clockwork has made it out of the lab and already has a functional product that’s served over 17,000 customers. The tech is really impressive - structured light cameras capture 100 images to form a 3D map of each finger in 1 second. This allows the machine to apply paint to the nail with sub-millimeter accuracy.

Clockwork engineered the machines so that they can be serviced remotely, likely saving the company thousands on maintenance costs.

The product has a virality element to it as well, there are dozens of Tik Toks and millions of views of people testing out the machine. I’ve scoured these videos (and comments!) to see how consumer perception is panning out. While there is a lot of excitement around the machines, these videos have illuminated some shortcomings.

• No filing or shaping (feature is coming)

• No base coat or top coat is applied (top coat feature is coming)

• Some complaints around how the texture of the nail paint looks

• Not a perfect paint job because the machine can’t buff/trim the cuticles

Many of these issues will be resolved with updates and future models, but as one Tik Tok user said - ‘it’s a mini-cure, not a manicure’.

PAINT THE PICTURE

Can ‘Minicures’ have mega-profits?

I reached out to several of my friends who routinely get their nails done, and all pushed back on the idea that this machine could replace the traditional manicure.

I actually agree with that statement, but that’s not the current purpose of the Clockwork machine. If you consciously decide you need to get your nails done, you’re going to go to the salon 98% of the time over this machine.

Clockwork is positioned as a nice-to-do time filler, or when you could use a mini-upgrade to your appearance. Locations that have captive audiences - airports, hospitals, transit hubs, dentist offices - are ideal for the Clockwork device.

As the tech develops and they add filing/shaping, there may be an opportunity to snag some of the salon market share - but that is future state for the company.

How Clockwork makes money

Clockwork partners pay an upfront hardware deployment fee, a monthly fee, and a percentage of revenue generated from the services provided by the robot.

I like this revenue model because all 3 elements work together:

• Deployment Fee - likely less than the actual cost of the machine, so it gets partners in the door with a subsidized rate

• Monthly Fee - incentivizes the partner to feature the machine prominently and make sure that they generate revenue from it.

• % of Revenue - ensures that Clockwork benefits from the upside use of the machine over its lifetime.

Clockwork projects that each machine can make $100,000 per year with 72% profit margins. I don’t have the exact figures of what they’re charging, but $100,000 seemed high if the partner is only charging $15 per session.

However, I received estimates that Clockwork takes a pretty hefty 75% share of revenues. In this case, they could reach the $100,000 per year figure on rev-share fees alone by servicing just 25 people a day.

At that reveue-per-machine, I think it’s feasible for the company to reach 2,500 locations. And at that volume, it’s believable to see Clockwork bringing in $250M in sales.

TLDR: the upside potential for this business is massive.

THE VERDICT

Will I invest in Clockwork at a $37.5M valuation cap?

Clockwork machines may have a more niche appeal than people think, but I’m on board with this investment. Clockwork partners can add a revenue stream to their location with minimal effort + space. And because they’re not manned, Clockwork machines can generate hefty profit margins.

I really like that the machine is so far along, proving that it is past the conceptual phase and into reality. Clockwork is in advanced talks with Target after running a test in six of their locations - this could be huge for the company if Target decides to go all in.

I also think that having the CMO of Sephora as an early backer will be extremely beneficial for partnerships + even a potential acquisition down the line.

Clockwork does own patents that protect its technology, and has not seen serious competition in the space. I liken this investment to getting in on the ground floor of vending machines….and Clockwork has a more extensive moat than typical vending machines.

Long-term, wages are only going to increase, giving Clockwork a boon to its efforts and ever-improving margins. The machines will also be able to up-sell customers into designs, gel nails, and filing options.

I believe in the team, product, and business model. Welcome to the portfolio, Clockwork.