Pando

"People were questioning my sanity": The improbable comeback of Keller Rinaudo

By Sarah Lacy , written on November 10, 2016

From The Disruption Desk

It must have been the spring of 2012. Pando was a few months old. Eli wasn’t much older, and I wasn’t yet pregnant with Evie. This was back when our investors still invited me to their events. And I was in New York at Lerer Ventures CEO Summit.

Three up and coming companies were picked from their portfolio to present to the group: RapGenius, RebelMouse, and Romotive. It was early days and there were reasons to be excited by all three. I’ve detailed what I liked about RebelMouse here. I found RapGenius’s quirky founders entertaining in their strange irreverence. Boy, would I wind up being wrong about that.

And then there was Romotive. It made a piece of hardware that could turn your iPhone into an adorable robot, and it was about to start to be sold in the Apple Stores. It was riding a wave of so many of the startup beliefs of the time.

It came out of an accelerator, TechStars, billed as the newer, easier way to build a large company.

It had found success, traction and an audience via crowdfunding. The hope back then was this would avoid the uncertainty of hardware, and the need for early funding to get to a prototype.

It was part of a wave of “get kids interested in science and tech through fun!” optimism.

It was part of the belief that a mainstream consumer product you could rapidly get out to market with, was the way to push the model on technical innovation.

And, it was a company that bet against the echo-chamber, taking a chance on (Pando investor) Tony Hsieh’s Downtown Vegas experiment early on. My ex-husband worked on a DTP project at the time, so I spent a week of every month in Vegas during Romo’s early days. I was fascinated with the company and even spent times shadowing all-hands meetings, as a reporter. I got to know its CEO Keller Rinaudo and see him in a time of strength and time of struggle.

I watched as one-by-one, each of those bets on modern company building, each of those pillars were ripped out from under the company.

And yet, in what has to be one of the most superhuman feats of dogged refusal to die, this company has survived. Indeed, it is finally announcing its series B round of funding today. Some five years in. Companies typically die if they can’t get a Series B in 18 months. And in conversation after conversation over recent years, I was told by those closest to them they were essentially dead. They were left for dead, by many.

A company that should have gone under years ago now has $25 million at its disposal, not to mention a new name and mission. Romotive is now called Zipline. Cute robots are gone; it now uses drones to deliver life saving medication in Rwanda.

In the media, this may be described as an ordinary funding. Indeed, earlier this year I was talking to an investor in Zipline who described it as a star in their portfolio, given the good it was doing in the world, adding that it was a Sequoia company to boot. He didn’t acknowledge at any point the absolute shit this company went through to get to the point of being something you could brag about.

I interrupted him at one point, and said “Are you talking about Romotive?” He looked embarrassed that I knew the history, but he shouldn’t have. His telling did not give credit to what Rinaudo went through, what he pulled off as CEO over the last five years. “There was a rough patch where people were questioning my sanity,” Rinaudo admits.

It may be inconvenient for those wanting to spin Zipline as a hot, new, distinct thing with no baggage that I happen to have so many intersection points with this company. But it’s those intersection points that make me respect Rinaudo so much as a founder.

Five years of grind hasn’t killed his boyish love of robots, and now his robots are saving lives. And talking to him yesterday, he sounded giddy to have made it. With each drone that took off as we spoke, he giggled-- actually giggled-- saying “Can you hear that?” He switched to FaceTime at one point, to show me the take-offs and landings. There’s no runways where they operate so one challenge is to land these things without space. A drone kinda collapses on a big foam landing pad.

“Wow,” I say.

“It’s sort of a cross between an aircraft carrier and a bounce castle,” he says grinning.

That’s hardly the biggest challenge the company has faced. Delivering eight different kinds of red blood cells all requiring different storage elements, safely and quickly has been a puzzle. “We are trying to be as safe as Boeing but make software as fast as Facebook,” he says.

You wanted an uplifting story of an against-all-odds comeback that’s actually saving lives in our over-funded, mercenary unicorn era? Here is an edited excerpt of our conversation yesterday.

Sarah Lacy: My guess is you are focusing press interviews today on the funding and what the company is now and not the past, but the reason I wanted to write about this round is because of the things you aren’t talking about. That’s what impresses me.

Keller Rinaudo: I appreciate that and no I haven’t been talking about it. I think you probably understand it better than anyone on the planet. When entrepreneurs come to me for advice on… well anything, my advice is usually if you are willing to endure any amount of pain and not give up, it’s really hard for someone else to kill you. It is almost always the founder who kills the company. That’s the most depressing message ever in some ways.

We went through just all kinds of shit. When we were getting started we had a lot of things that really went wrong. We had plenty of scary moments. We were really unclear about what we were going to do. We certianly have a huge amount more to do. But I spent the last two months in Rwanda operating at national scale delivering blood for moms suffering from post-pardem hemorrhaging and for kids under five suffering from severe malaria. When you get to go out and see that in person...it’s been kind of crazy.

SL: What you are describing sounds so different from what Romotive was when I first met you. What is the common thread? What makes this the same company?

KR: The two things that made me want to start Romotive were that we thought there was this scale of smart phone components making new things possible in robotics and all this amazing new technology and no one was building something important with it for people’s lives.

Those two things are the guiding principles for everything we do here. What I’ve learned is we should set our sights higher and we should focus on things that would have a profound impact on people’s lives.

The value you can provide by seeing that someone is dying and they can’t get access to basic medical products and you can deliver it fast is so direct. Robots are really efficient at doing repetitive tasks. I’ve really sought out some of the most boring repetitive tasks on the planet and picked the ones I thought were the most important.

SL: It sounds like your learnings are the kind we hear from second time CEOs. The companies are so distinct, why not close Romotive and start again. Why keep pushing as the same company?

KR: I was 23 when I started this company and whole bunch of people believed in me. And you know, they believed in a very zany idea. Many people didn’t think a robotics company could be valuable at all. And when we decided we needed to build a very different product, it seemed the right thing to do to stay as the same company and double down and survive and prove that faith was well founded.

SL: How much of the team is actually the same as those days when I met with you guys in Vegas?

KR: We were pretty small then, there were just twelve of us and there are three of us still on the team five years later, but we’ve grown a lot now. We’re about 45 people.

SL: I think of the things you represented-- the hope of crowdfunding, the bet on Vegas-- those were all pulled out from under you. Did you make mistakes? What were you wrong about?

KR: I have certainly thought a lot about that, and I guess a couple things. While the company was better off when I decided we can’t be in Vegas, Tony [Hsieh] was out here the other day at our headquarters and it aint that different. We are not in Downtown San Francisco. We work from a compound in an empty field an hour outside of the city. We work out of shipping containers, which is something we got from Tony. We learned quite a bit from him. One of the things Tony did best was building his own culture, not living in an echo chamber.

When it comes to crowdfunding…. When we started this we had no money and no credibility and nothing. If not for crowdfunding, we would not have survived as a company. For us to make a bet like the one we’ve made now required two years of really focused development and hard work building autonomous airplanes from scratch. We wouldn’t have had the time and resources if not from what we got from crowdfunding early on. We wouldn’t be where we are.

We were lucky. Investors on the whole have been pretty incredible through the whole process.

This guy Bharat Shyam wrote us a $50,000 check, which seemed like a huge amount of money at the time. When he gave it to me he said, “You are super young and I am expecting you to fail. I marking this as a zero. All I ask is that you swing for the fences. And if you fail, I will invest twice as much in the next company, because you will be an experienced entrepreneur then.” He told me that. At 23. So when you ask if I should have closed this company and created a new one, I think of him.

I just got an email from him after this B round, saying, he sort of couldn’t believe the turnaround. We are still alive and still fighting to build something.

SL: What was the moment when you knew the original product, Romo, wasn’t working?

KR: Honestly, we probably knew it really early. You just think, how long do you want to just stick with it as opposed to doing something else? We worked for several years trying to make a robotic toy better and better, and it took me a year and a half to realize we were fooling ourselves about what the competition was. We were thinking the competition was other toys when it was a game like Minecraft and apps on phones. If we’d compared ourselves to true competition-- competition for a 12-year-old’s time-- this is not a battle that robotics was going to win.

Robotic’s big category is probably not going to be in toys, because toys as a category is going away. Once I started think of it that way, I saw this is not where we’re going to add value in the world. We decided: Let’s take what we are good at and a place to add a lot of value.

SL: How did that wind up being delivering healthcare in Rwanda?

KR: We said, let’s really go to a place that will allow us to build something way better than the status quo. That’s when I really got started to get interested in logistics. You want boring with robotics because you want repetitive. We looked for places where logistics breaks down because that’s a good place to start.

In East Africa 85% of the roads are unpaved. Rwanda is better, but it’s still impossible to get around. You’ve been here.

SL: I did a lot of reporting in Rwanda for my second book, I’ve had to dig cars out of the mud in the rainy season in those hills.

KR: We chose Rwanda over other countries because it is unique. It has a lot of the same logistical challenges, but a stable government that is investing heavily in healthcare and technology.

I can’t speak enough about the Rwandan government. Sadly, it’s different than our own government. More than 50% of the cabinet are women. It is filled with young people who make decisions fast and are willing to take risk. As a result, now Rwanda is the first country in the world that has a national drone delivery service saving lives and it did it with no resources, compared to the US.

SL: I’ve had so many debates with people in the West about the government in Rwanda. Because I, too, have seen a lot that’s inspired me there, but the view here is it’s an authoritarian and oppressive regime. How do you process it from a Western point of view doing businesss there?

KR: I am so not an expert. We spend the majority of the time working with people on the ground all the way up to the minister of health. In general, what I’ve seen is the people we work with, they really work hard to get on calls with us on a Saturday evening to resolve problems and move things forward.

Beyond that, these moms we are serving, whose lives we are saving, they don’t chose their government. If these people need access to medical products and don’t have it, it’s something I’m happy to spend my life working on.

SL: Ok, let’s talk about fundraising. I don’t know if this is how you would characterize it, but I have spoken to investors that essentially admitted they left you for dead.

KR: That’s probably a fair characterization. Yep.

SL: And that was after your A round. This is only your B! How did you even survive long enough to get to this place?

KR: What we proved with Romo was we can build things fast and ship product and actually that’s a pretty rare thing. There are hardly any startups in hardware that do that, and in robotics and aerospace, they for sure, can’t say that.

We proved that. We made a bunch of mistakes early on that were painful to correct. The biggest of which was me not being honest about where we could have the most value and what product we should be building. And, I think, we have been very frugal. We don’t waste money where it’s not needed. We have been very frugal in terms of our office space. I am calling you from an active farm. That’s where our offices are. That should tell you something.

Also, another thing we’ve been very focused on was product and customer and sales. That’s rare in aerospace and robotics as well. It’s all “it’s a moonshot!” and they don’t even talk to customers until they are completely done. I think that’s a big mistake, and we took the opposite approach.

We made some difficult decisions.

What it really comes down to is really great products get built by teams that really trust each other. We don’t talk much about relationships and trust-- not just with investors-- but the team. What I’ve been through with other members of the team…. Should we get acquihired? For me, the answer was so obvious. I just really trusted this small group of people. It seemed such a shame not to spend our lives building products together. That’s the most valuable thing we have: The core team really trusts each other and that allows us to take risks when we are building things.

You know as well as anyone, so much of the Valley is very mercenary. I live in a bubble. I know almost nothing, but when I find myself going to parties in Silicon Valley every so often I think, “Man, I wouldn’t really trust these people so much either. They focus on money and status.”

In a lot of ways the fact that we worked hard and kept our heads down. That gave us a lot of leeway with the investors who stuck with us.

Now we’ve raised this new financing round. I feel like we have this credibility having launched the product in Rwanda. Investors saw us say we were going to do it and then we went and did it. It just comes down to trust.

SL: When did you start raising the round? How long did it take?

KR: It took us three weeks. We started last May and closed it in late June. We just did it really fast. We’d done two bridge rounds in between that that were really stressful. This was the easiest round the company has raised.

SL: I can’t believe you stretched your A round this long! What does it feel like to have money in the bank again? I mean $25 million….

KR: I mean, more money; more problems. For me the big question is what it felt like spending the last two months in Rwanda. There was a little bit of crying involved. It really feels awesome having a product in the world that people understand the value of. You don’t understand it until you go to Rwanda and talk to the doctors and the patients. You go from it takes a three hour drive each way and they may not even have the blood type you need. Sometimes you don’t even make the drive, because by the time you get there the patient would have died or would be stable. To go from that to drones, is a sign that the future can be weirder and maybe more exciting than we think.

We have a big Rwandan team of engineers and Americans all living in houses outside Kigali, running the system. Every day there are 200 Rwandans lined up cheering every single launch and every landing. Most of these people have never been in airplanes. Hundreds of people line up on the fence every day. One morning I got in at 5:30 am, because I was jetlagged and twelve people were already lined up to get good spots.

[Rwandan President Paul] Kagame was at our launch ceremony and we were watching them and he said, “Those kids are all going to grow up and be scientists and engineers.” The bar has been reset in terms of what is possible for them. We were really worried about community acceptance, and it turns out they get it a lot more than a lot of our investors in the US>

The paradigm is shifting. We’ve been conditioned to believe the most innovation is happening in the US, that technology starts by serving rich, white people and eventually it trickles out to everyone else. But in spaces where there is a lot of regulation, the US has to move a lot slower. It’s easier for a country like Rwanda, which has a higher willingness to try new things than the US. Companies that want to push the envelope more and more will be starting in Africa than the US.

What the FAA is always asking for is data. You have to show that it’s safe but you need the data of flights to show that. It’s a catch 22. But I’m very optimistic the FAA is figuring out how to bring this to the US. The same healthcare problems in Rwanda are the same as with rural healthcare in the US. There’s a lot of desire to say we don’t want to fall behind.

We are working with the White House to do the same thing we are doing in Rwanda in three different geographies in the US. We are still working with the FAA to get waivers. We hope to in 2017.

SL: What can you tell me about your scale in Rwanda right now?

KR: We are still scaling up. The official launch was less than a month ago. Right now we are serving three hospitals and we are scaling up to 21 hospitals in the next few months. That’s a little less than half of all facilities in Rwanda. There are five to six million Rwandan citizens served by those hospitals.

A lot of people think this is technologically impossible, but we can’t say more emphatically, it’s not impossible; it is happening at national scale in Rwanda. Kagame has been pushing to expand this to the rest of the country and other medical products. He wants every single citizen within 15 minutes delivery time of any essential medical product.

SL: And do you get paid for this?

KR: Yep, we make money. Our distribution center in Rwanda is profitable. We are like UPS if UPS build vehicles. We are paid for every delivery and it saves the government money and it’s profitable for us to do. And this is even given the fact that it’s still more expensive than it will be. We expect costs to come down over the next year. We design everything here. The flight computer, we write the algorithms, we write the air traffic control software, we do everything from scratch. And we build a new system every five months. And every five months, the cost has halved. It’s really exciting in terms of the cost trajectory.

Today it is practical when someone’s life is on the line. It’ll be more practical tomorrow for a wide range of health delivery use cases and in three years it’ll be practical for a wide range of use cases.