The Collapse of iRobot: When Regulation Blocks Innovation. Column by Colin Engel about Amazon, the FTC, and the Future of Robotics

The bankruptcy order of iRobot, filed in January 2024, has become a symbol of the conflict between ambitious commercial plans and US regulatory policy. The fact that the company, which delivered home robotics to millions of households and built a billion-dollar franchise around the legendary robot vacuum Roomba, collapsed right after being close to a major merger with Amazon, confuses many.

The American giant began negotiations to acquire for $1.7 billion, but the initial deal never materialized. Obstructing the process were 18 months of intensive investigations by the Federal Trade Commission and European authorities. Founder Colin Engel emphasizes in his position the excessiveness of regulatory pressure and describes this period as a “destined” collapse caused by unjustified resistance from regulatory bodies.

What went wrong: analysis of regulatory protest

According to Engel, the FTC and the European Commission misjudged the competitive situation in the home robotics market. At the time of the deal’s decline, the company held only 12% of the European market, with this figure trending downward. The main competitor entered the market just three years prior, which in a traditional sense indicates the presence of lively and dynamic competition, not a monopoly.

In the United States, the situation was similar, although the market share remained more significant. Numerous players introduced new technological solutions, expanding the range of options for consumers. Instead of a detailed analysis of this reality, regulatory agencies stretched the investigation over 18 months. During this period, iRobot and Amazon built a huge operational and legal machine.

Inside the corporations, teams composed of internal specialists, external advisors, lawyers, and economists started working. Over 100,000 documents were generated to prove that the deal would not lead to the formation of a monopolistic structure. Millions of dollars were spent, but the arguments developed never gained convincing weight in the eyes of authorities.

Spirit over letter: why regulation became an obstacle

During personal interrogations at FTC hearings, Engel made an observation that outraged him as an entrepreneur. On the doors of agency offices, printouts of blocked deals were hung — as trophies. The symbolism of this gesture is striking: the authorities seemed to celebrate blocking deals as if they were military victories.

For the founder, who dedicated decades to building the company from scratch and achieving significant heights, this approach seemed like a disdain for entrepreneurial spirit. He offered a simple argument: the deal was positive for consumers because it would stimulate innovation and expand choices. However, the reaction of regulatory bodies was skeptical — they asked, “Why should we allow them to do this?” instead of considering the benefits for the end user.

Chain reaction: how signals from regulators influence the startup ecosystem

Engel does not hide that this case creates a chilling effect for the entire entrepreneurial ecosystem. Founders seeking strategic exits through sales to larger companies now have to consider regulatory uncertainty in their risk calculations. This affects how venture capitalists evaluate startup potential, what goals they set, and the pace of company development.

The number of new startups and expected exits may decrease by not just a percentage. The precedent creates the danger of repetition, and only positive examples help reduce anxiety about whether the anticipated hot spots for growth will occur.

The story of iRobot: from a scientific lab to global fame

Talking about the company’s origins, Engel recalls that iRobot was born from an academic environment. A group of scientists in a lab kept asking each other: if robots were promised, where are they? One of the founders, Professor Rod Brooks, developed artificial intelligence technology that allowed embedding machine intelligence into accessible robot devices.

The first commercial plan sounded like madness: a private mission to the Moon to sell rights to a film. It didn’t happen, but the developed technologies found their place in the Mars Pathfinder mission — Engel’s name is actually on Mars. iRobot created combat robots for the US Army, enabling soldiers to disarm homemade explosive devices. At Fukushima, robots from this company were the first to study reactor radiation contamination.

In the twelfth year of the company’s existence, a young engineer proposed creating a robot vacuum cleaner. The story of this is heroic: with a budget of $15,000 and two weeks, the team created a prototype that convinced investors of the possibility of mass production. After a year and a half, the first Roomba was released.

How Pepsi advertising with Dov Chappell saved the company

At that time, the company had no money for marketing, so journalists saw in Roomba an exciting story. The first three months sold 70,000 devices. Engineers were overwhelmed with optimism and decided to produce 300,000 the following year. At the same time, they launched a TV campaign, which proved ineffective.

Before Cyber Monday, 250,000 unsold robots remained in warehouses. It seemed like the end. But unexpectedly, sales sharply increased — this happened thanks to Pepsi advertising featuring Dov Chappell, where the actor joked about how Roomba drops his chips, he panics and loses his pants. This humorous moment was decisive — within two weeks, all 250,000 robots were sold.

Technological strategy: star versus lasers

In developing Roomba’s technology, Engel chose a strategy that distinguished him from Chinese competitors. Unlike Roborock and Ecovacs, which implemented lidar navigation, iRobot remained committed to vision-based navigation sensors. Engel justifies this decision by saying that laser systems are a simple but superficial solution.

He believes that a true home robot should understand its environment on a deeper level. This position echoes Elon Musk’s approach to Tesla’s autopilot development, which also avoids lasers. However, Chinese companies, releasing cheaper alternatives with two functions (mopping and cleaning), captured part of the market. Engel admits that the company was late in developing such a format.

Lessons for the new generation of robotics engineers

The first and main lesson Engel gives to other robotics entrepreneurs is: deeply understand your market. Robotics as a sphere has a magical effect on imagination. It’s very easy to fall in love with the technology and forget about commercial justification. The main trap is the desire to create a humanoid robot when the real problem can be solved with a much simpler device.

When the first Roomba was created, people asked: is this a robot? Most answered: no, a robot should have arms, legs, a head. But the first Roomba cost 10,000 times less than a humanoid version with a vacuum cleaner.

Next chapter: the secret of the new project

Regarding the new company Engel founded after the collapse of iRobot, he speaks under confidentiality. The project focuses on a consumer robot that would have enough emotional complexity to become a constant rival to the user in the context of health and well-being.

This direction rekindled his enthusiasm. Engel claims that he has not really changed since graduate school, when he said: “They promised us robots, but I still don’t see them.” He spent three decades creating the best robot in the world for floor cleaning, and now he has a chance to start a new chapter in his mission to change the world through robotics.