ccording to market researchers, the global home automation market will grow 17 percent a year to reach a total value of $48 billion in the next five years. If three intrepid Colorado entrepreneurs have anything to say about it, part of that bounty will be spent on an ingenious device they have designed to control your sprinkler system.
The “Iro,” an Internet-connected sprinkler control system that you can manipulate with your smartphone, is expected to ship its inaugural orders this spring. In the box, buyers will find a sleek apparatus designed to replace the cumbersome dials and gears currently featured in most sprinkler controllers.
The streamlined design, however, belies the substantial sweat equity invested by its inventors to bring the device to market. Their journey, of course, will not be over until the first orders are out the door, and perhaps for many years ahead as they seek the elusive prize of profitability. But a mid-term conversation with the men behind the machine draws an engrossing roadmap thus far.
Chris Klein is one of the founders of Rachio, the company formed to make the Iro a reality. He makes no bones about the commitment required to go from startup to stardom.
“If you do this,” warns Klein, “you are about to embark on the hardest journey you’ve ever made. It is going to require every waking hour of your life for the next two years, or however long it takes. So you better make sure you are passionate about it.”
As you probably guessed, passion is in ample supply among the Rachio trio.
Klein did not start out to become an entrepreneur. His original passion, he says, was for “building things.” He graduated from Ohio State University in 2005 with a degree in Construction Systems Management. He came to Denver the following year to earn an MBA degree in Innovation and Entrepreneurship at the University of Denver’s Daniels College of Business. At the same time, he worked as a project engineer for Haselden Construction, a regional builder.
After graduation, Klein worked for several different Colorado software firms. But the entrepreneurial bug was already biting hard. Between 2008 and 2012 he co-founded several technology-related firms that never quite panned out.
Then, in the fall of 2012, he met Matt Reisman during Denver Startup Weekend, an intensive three-day event in which hopeful entrepreneurs pitch ideas and form teams to develop potential business plans.
Together, Klein and Reisman, who would later become Rachio’s CEO, began fleshing out an idea initially germinated by Klein: how consumers might use technology to conserve water in Colorado’s infamously arid climate.
Like Klein, Reisman did not set out to become a businessman. In fact, with a B.S. in Animal Science from UMass Amherst, he was on track to become a veterinarian. It was only after graduation that he became interested in business while working in his parents’ apparel company. In 2009, he came to Boulder, where he earned both a master’s degree in Environmental Studies and an MBA at the University of Colorado.
He could not have scripted a better fit for his dual expertise in the environment and business than Klein’s water conservation proposition.
THE INCUBATION PERIOD
It took a long winter of percolation, though, before the Iro took a tangible form.
“We talked to everyone — water utilities, botanical gardens and many more,” Reisman recalls. “It became an obsession — to make an awesome product, to make a smart irrigation system.”
Meanwhile, Klein had begun working for IntelliReal, a Denver company that provides property valuation and real estate data to mortgage lenders. There he met Franz Garsombke, the company’s chief technology officer.
Garsombke is a veteran software developer with more than 20 years of experience at high profile Colorado technology companies, including Level 3 Communications and Rally Software. As his friendship with Klein grew, it wasn’t long before Rachio had found its crucial technology cornerstone. Though he still serves as CTO for IntelliReal (subsequently acquired by Equifax), Garsombke agreed to serve in the same role for Rachio.
“His passion is building software,” says Klein. The trio was complete.
In January 2012, Rachio was officially incorporated as a company and by mid-February, with Garsombke laying the technical groundwork, the three turned on Klein’s home sprinkler system with the first Iro prototype. It was a thrilling, yet sobering, moment.
“We knew it would work,” recalls Klein. “But all of us knew this was just the tip of the iceberg.” The real work was just beginning.
The success, though, was enough to propel Klein and Reisman over any lingering reservations. In March, Klein quit his job at IntelliReal and both he and Reisman turned their full attention to Rachio and the nascent Iro.
As spring turned to summer, the Rachio founders were steadily refining their product and building business relationships. By mid-summer, however, they began to feel the heat of every entrepreneur’s bane — money.
“February to August was a funny time for us,” says Klein. “We were thinking a lot about the hardware and the design, and we were getting advice from lots of people. But by August, we knew we couldn’t move forward without more money.”
Until then, the group’s funding was supplied primarily by family and friends. But now they needed real capital. So they entered the COIN Challenge.
EYES ON THE PRIZE
The Colorado Innovation Network, or COIN, is a quasi-governmental organization that provides a network of leaders to encourage business development in the state. As a “catalyst for innovation,” the group propagates relationships that will hopefully help grow companies and create jobs. Last summer, the organization sponsored a contest called “Glorious Failure: In Search of Success Innovation Challenge.” Despite its oxymoronic title, the program invited fledgling entrepreneurs to pitch their projects to a panel of business leaders. First prize: a cool $50,000, plus another $25,000 of in-kind business services.
“We went into the COIN challenge planning on winning it,” says a self-assured Klein. And they did.
“The money allowed us to legitimately talk to people about developing hardware, enclosures — things like that,” he says. “It gave us the money to really get the ball rolling.” And roll it did.
Shortly after the COIN triumph, Reisman, now in the role of developing relationships and garnering resources, met Scott Mitchell, President of Intertech Plastics. It was a fortuitous match.
Intertech was founded in Denver in 1980 and has since grown into a mutli-faceted manufacturing resource, offering everything from plastic molds to product packaging and distribution. For Rachio, it was a marriage made in heaven. Intertech not only would provide the form factors for the Iro containers, but agreed to provide Rachio with office space and some business counseling as well.
“The relationship just made the most sense,” says Klein. “It felt like what we needed.”
In the months leading up to the COIN contest, the Rachio trio had already perfected the circuitry and electronic components for the Iro controller. Most of the components are commonplace parts, according to Klein. The more challenging work was figuring out the wi-fi aspects and choosing the right microprocessor, he says. Vergent Products, a Loveland-based manufacturing services firm, is now working on assembling the circuit boards.
“We had already worked with an industrial design artist to create the form factor for the (Iro) controller box,” says Klein. “Now we’re working with Intertech to make sure everything fits.”
By the fall, Rachio was continuing to gain traction ... and dollars. In September, the company took first place in the Colorado Technology Association’s APEX Challenge, a contest held to crown the state’s most promising startups. As a result, they pocketed another $15,000 in prize money.
In October, Rachio won yet another first place finish at the Mobilize 2013 conference Product Showcase competition in San Francisco, sponsored by GigaOM, a website focusing on the technology business. An enthusiastic Kevin McGinnis, one of the judges, said at the time he would be “willing to buy one today.”
PASSION TRUMPS DOUBT
That fall was a busy time for the Rachio partners.
“We spent a lot of time on creating the web site and creating the pre-order campaign,” says Klein. The company began offering pre-sales in August, at a price of $199 for an 8-zone unit and $249 for a 16-zone unit. Klein won’t say exactly how many orders have been placed to date, but his smile says it is a significant number.
The fall was also a time of self-doubt.
“There was a point in August that we believed it (the Iro) could be built, but now we had to prove that people would want to buy it,” Klein explains. “Is there really a market for this thing? What can we charge? What is the perceived value of this?”
Reisman, too, had his moments of doubt. “It was scary a lot of times,” he recalls. “There were moments of fear of not succeeding, that the wind would disappear. Sometimes, there seemed to be no light at the end of the tunnel.”
“Water scarcity is obvious here,” says Klein. “This is an easy product to sell here in Colorado. We didn’t think it would go over as well in San Francisco (at the Mobilize 2013 conference). But the response was amazing.
“That was really big for us,” he says of the Product Showcase victory, “to realize we could go out of the state and find people who wanted to buy it.”
Autumn 2013 was also the time the Rachio founders needed to get serious about substantial fundraising. Since then, they have secured a number of angel investors. The partners won’t say exactly how much has been invested, but they are satisfied it is enough to reach their immediate goals.
Those goals are fairly straightforward, according to Klein. The first is to deliver the product to pre-order buyers by this spring. He says they are currently working on final production prototypes and are on schedule to hit the delivery target.
The second goal is to begin adding much-needed human resources. The company has already hired two marketing/sales employees and is looking for someone who can design and build user interfaces, as well as contribute to web site design.
Passion was the critical ingredient to start Rachio in motion, and passion continues to be the engine that drives the company forward.
“There have been plenty of challenges,” says Reisman. “But our team has never given up. We keep moving forward.”
“Passion has helped us get through the hard times,” Klein adds. “We put our hearts and souls into this and we know people are going to love it. There are 13 and a half million sprinkler controllers out there that need to be replaced.”
Actually, there is one less that needs replacement; Klein reports that the original prototype installed at his house last February is still going strong.
There are surely more chapters to come in the Rachio adventure. As Reisman says, “There are still a lot of things we can screw up.” Somehow, though, it doesn’t seem likely that a group this passionate will trip over too many wires. Stay tuned.