By Amara Osei

Robotics and physical AI startups raised $27.6 billion across 1,009 deals in 2025, more than double the previous year’s total, according to PitchBook.

Bain Capital Ventures is backing the category again. The firm first backed construction robotics company TerraFirma in 2024 and invested again in July, when Kleiner Perkins led the startup’s $100 million Series A (an early-stage funding round).

Bain Capital Ventures’ Ajay Agarwal said: “We’re in the golden age of hardware and physical AI.” He defined physical AI (artificial intelligence that lets robots and other machines perceive and act in the physical world) as entering that era.

The precedent is Kiva Systems: Amazon acquired the robotics startup for $775 million eight years after its first funding round, and Bain said its initial investment generated a 26.6-fold return.

Why did Bain back Kiva before Silicon Valley?

Bain’s earlier wager began more than two decades ago, when Agarwal backed Kiva despite Silicon Valley investors largely turning the company away. In 2004, he met Kiva cofounder Mick Mountz, and the company had no revenue, no finished product and no customers.

Software offered a quicker, cheaper route to market at the time. Mountz proposed a different model: robots would bring warehouse shelves to workers rather than requiring workers to walk aisles and retrieve products.

Agarwal said that within five minutes, the meeting ranked among the best he had experienced in 18 months. He knew little about robotics or hardware, but Mountz explained the problem so plainly that Agarwal believed he could explain it to his grandmother.

Convincing Bain’s partners required more persuasion. Their initial reaction, Agarwal recalled, was that they knew nothing about robots.

Agarwal used Bain’s network to introduce Kiva’s team to Don Ralph, who ran North American e-commerce order fulfillment for Staples. The initial one-hour meeting became a series of three meetings, and Ralph called Agarwal the next day.

“I’ve been in this industry for 35 years,” Ralph said. “That was the single most compelling technology I’ve ever seen. You have to invest.”

Bain led Kiva’s first funding round, and Staples became its first customer. Zappos, Gap and Zara followed as customers.

What makes physical AI investable now?

Agarwal identifies three drivers: talent, lower component costs and more capable artificial intelligence. Each supports his view that the 2025 funding surge can persist rather than reflect short-term investor enthusiasm.

TerraFirma founders Noah Schochet and Noah McGuinness came from SpaceX. Physical Intelligence, another leading robotics startup, was started by Berkeley roboticist Sergey Levine and former Google DeepMind researcher Karol Hausman.

Agarwal linked renewed ambition partly to jadedness after 20 years of workflow software. In his view, some people now consider routine software insufficiently ambitious and want work that is bigger and harder.

Many crucial hardware components now cost a fraction of earlier levels. Smartphone and electric-vehicle manufacturers buy cameras, sensors and batteries in massive quantities, helping reduce the cost of components used in robots.

The lower prices make potential return on investment (ROI), or the gain relative to an investment’s cost, much more compelling, Agarwal said. The cost reduction applies directly to the cameras, sensors and batteries that robots use.

More capable artificial intelligence gives machines a better chance of handling real-world scenarios they have not encountered before. They can adapt to edge cases (unusual or unforeseen conditions) that inevitably arise in physical environments, Agarwal said.

Where does that leave investors?

Twenty-two years ago, Agarwal had to persuade Bain’s partners that robots deserved serious consideration. The 2025 market produced $27.6 billion across 1,009 deals, so category credibility no longer presents the same barrier.

The strategic challenge has shifted to identifying an opportunity before Silicon Valley crowds into it. Bain’s 2024 TerraFirma commitment and July reinvestment test whether the firm can repeat its Kiva timing advantage in construction robotics.

TerraFirma’s $100 million Series A, founders from SpaceX and lower component costs strengthen the current investment case. Advanced AI also expands the range of tasks machines can attempt.

For Agarwal, the question is no longer whether physical AI will attract capital; $27.6 billion already answers that. The harder task is finding the next Kiva before the rest of Silicon Valley crowds into it.