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Moving past robotics – it’s all about the market

Posted on July 24, 2012 at 9:00 am

Eric Close, CEO, RedZoneEric Close, CEO of RedZone Robotics is adamant: “It’s not about robotics; it’s about business!” RedZone is proving that there is a market for what robots can do. It has taken a long time to get there, but the future of this Pittsburgh-based company looks rosy. Robotics is not an industry. But robotics can be an approach to solving problems using innovative tools and processes. Like going into places that people can’t go. Two weeks ago, I wrote about hard-to-reach places in the human body with Medrobotics. This week, it’s sewers with RedZone!

This article is part of a series on robotics and entrepreneurship.

Robotics’ time in entrepreneurship has come. Robots are found at the base of many applications that provide real value to the market and customers.

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Origins.  In its first incarnation, RedZone used robots to perform tasks that people couldn’t do, wouldn’t do, or it was just too damn dangerous to do. Like go into the 3 Mile Island nuclear site for clean up. The RedZone robots were the brainchildren of William L. “Red” Whittaker, from whom the company gets its name. Red is the grandfather of robotics in industry, having played a key role in developing robots involved in all kinds of activities such as helping with the Chernobyl and Fukushima plant disasters. Red’s involvement in robotics stems from his PhD work at Carnegie Mellon University, where he remains today as Fredkin Professor of Robotics for The Robotics Institute, Director of the Field Robotics Center, and Chief Scientist at the Robotics Engineering Consortium. Along with technology lead Christopher Urmson, Red led the team “Tartan Racing” to its 1st place victory in the 2007 DARPA Grand Challenge and brought home to CMU the $2M prize. Red is currently leading the CMU team which is competing for the Google Lunar X Prize. And, as CEO and CSO of Astrobotic Technology, Red will play an instrumental role in further lunar development.

For the company, one-off contracts was not a sustainable strategy. In the downturn after the dot.com crash, RedZone was forced into bankruptcy. In 2003 Eric Close came along – one smart guy who was committed to using robotics as the basis for a viable business – and he and a group of investors bought the company. Under new leadership, RedZone searched for a killer app – what problems did these robots solve?

RedZone robotReinvention.  Finding the right market, the right customers, the right problem to solve is difficult for any startup. For a robotics company, it’s even more challenging because you have to integrate hardware with software. This adds a whole layer of complexity. It’s expensive to develop a solution, it takes a long time to build products, and it’s hard to fund. That said, there are massive needs out there for solutions that only robotics can solve. Eric discovered that his robots could enter pipes and see things that couldn’t be seen otherwise. What’s the need for that? Water and sewer pipes – they are critical to society and they are expensive to repair. They are also part of an aging infrastructure that pervades the US. The market is gigantic. The need is critical.

But the realization of the need brought its own set of problems. Early investor Jonathan King states it like this: “Based on market research, the product thesis was a robotic de novo platform that was like a torpedo which could go into 8” sewer pipes, conduct an inspection, and do some repairs. That turned out to be an insurmountable technical challenge.”

RedZone pivoted to larger diameter sewer pipes. The robots worked in this environment, and the need was as critical and the market as large as water. The company’s robots could spot corrosion, cracks, and other problems. Wilson Farmerie, a RedZone investor and ex-Chairman of the Board, tells me, “This is really dirty and dangerous work. Some pipes are really scary and had never been inspected.”

RedZone was able to raise money and sell products. But the company struggled as it realized that it needed to offer a complete solution. The market itself presents enormous challenges: “Selling to cities and municipalities is a hard sale in the best of times; sales cycles are long, budgets are short, managers are not incentivized, and long-term needs are superseded by short-term political considerations,” Eric summarizes.

Over time and with a couple of acquisitions, RedZone developed technology to map the pipes in very specific and rich ways. This meant no repairs and only inspections. This worked because the federal government was forcing municipalities to ensure reliability of their systems. Cities were worried that they couldn’t afford the mandate. That created a driver for a cost-effective way to assess the extent of the problem: “We give customers the infrastructure of data – what is the 5% worst pipe? When was it inspected last? When was it last worked on? What needs to be cleaned?  This is the first time that municipalities have an understanding of what their system is. They can budget for it and now they know what has to be and what doesn’t have to be maintained.”Solo, the autonomous RedZone robot

The company also began to focus on small diameter pipes. They could make cheaper robots for these sizes and that meant that they could train others to use them. The smaller robots were also up to four times more productive: “Two guys can put this robot in the sewer, leave and collect it later. So they can do several inspections simultaneously. What used to take years can now be done in a month.”

Today, RedZone’s robot enters a sewer pipe and reports back the data that it finds about age, condition, problems, etc: “It’s more about visualization and data than anything else,” Eric reports. It’s not about the robot doing something about the pipes, it’s about the information that the robot sees as it travels through the pipes, enters the couplings, and pokes around the bends. RedZone employs new technology that enables it to see down to the millimeter, at a zillion angles and in 3D – very data rich.

Growth and change.  Morphing a company is not easy. It takes a true leader to do this, particularly to do it multiple times. Eric is tenacious. He has the “sticktoitiveness” to guide RedZone to its best business application. Jonathan King lauds him, “Eric has pulled the chestnuts out of the fire over and over again.”

The company recently raised almost $35M in its Series C round of financing, led by Baltimore-based ABS Capital Partners, a private equity firm that specializes in late-stage growth companies, and also including European-based FourWinds Capital Management and Pittsburgh-based Smithfield Trust Co. Previously, the company raised $10M in its first two rounds.

View from Solo the autonomous inspection robotToday, RedZone sells product in 250 cities worldwide, in 30 countries. The company has the working capital to advance product and business development. It has made two acquisitions which have enabled RedZone to offer better and more comprehensive solutions to its customers.

Final thoughts.  Eric is an engineer, but he is a businessman first and foremost. That’s what it takes to commercialize robotics technologies. It’s not about the robot: “If a robot is doing something useful, then it’s not a robot; it’s all about the task. The robot is merely a tool behind the scenes. The advantage of using a robot is that you can build in some intelligence.”

Robotics has lots of opportunities in the future because the cost curves have come down to the point where robots can help solve real marketplace problems. There are big markets to attack and the technology can provide big barriers to competition. In spite of the challenges of building a business with robotics technologies, I believe that we will see multiple startups enter the entrepreneurial arena with innovative solutions to customer problems. Behind many of them will lurk a robot!