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Wednesday, September 23, 2009
Born in the Recession
Change, efficiency and messaging drove iRobot's downturn survival
By Brendan Lynch
MHT's Jim Connolly: Pink slip parties make a comeback
How is the economic crisis affecting tech companies?
IRobot family tree
For Massachusetts robotics companies, launching during a recession might not be the end of the world — in fact, it can help.
Bedford-based iRobot Corp. was founded in Somerville in 1990, just in time for an economic downturn that would last the next couple of years. Today, iRobot is a profitable public company known for making robots that vacuum floors and help soldiers disarm bombs. Two of its co-founders are trying to repeat the trick with new robotics startups of their own — Rodney Brooks with Heartland Robotics Inc. and Helen Greiner with The Droid Works Inc.
Colin Angle, iRobot’s third co-founder and current CEO, said iRobot had to be break-even or better for its first eight years of existence — then it took on venture capital. The company returned to profitability in 2003 and has made more money than it has spent ever since.
Launching in a recession without external funding, as iRobot did, obviously has its drawbacks, but downturns can offer some benefits for a startup: Parts are cheap and high-quality labor is plentiful, among other things. For iRobot, office furniture and machine tools came cheap, Brooks said. Low-cost parts and tools were particularly important for a company like iRobot, which according to Brooks, was “building stuff.”
“At the time, I was piling stuff on my credit card, wondering how I was going to pay it off,” Brooks said.
Owing more to the young average age of the founders than to the economic climate, the startup wasn’t trying to become IBM overnight. Prior to founding iRobot, Angle and Greiner were Brooks’ graduate students at MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL).
“Colin and Helen were just out of school. They didn’t have high expectations,” said Brooks, named this year as a Mass High Tech All-Star.
Against such a challenging backdrop, necessity often gives birth to innovation.
“When there’s plenty of money, there’s less need to look for change and efficiency,” said iRobot CEO Angle.
Before iRobot, Brooks had been teaching at CSAIL and working on a startup called Lucid Software, which made lisp compilers. Brooks said he didn’t think about the recession, because he was convinced that the company had such great technology.
“We hadn’t figured out who would want to buy it. That was a mere detail,” he said.
A startup’s survival in a recession depends on what it’s trying to do, according to Angle.
“It just raises the bar for how unique or compelling your story has to be,” he said.
iRobot’s first business model was certainly unique, but it was abandoned early on. The company planned to use robots to carry out a private mission to the moon, which they would film and then sell the movie rights, Angle said. The recession didn’t necessarily kill the model, but the company turned its focus to a reliable stream of money — government contracts.
“In a recession, government increases, so that can often be a good place to be,” he said.
This time around, government contracts are still helping iRobot through the recession. Robotics contracts escaped recent military spending cuts. Angle said the company’s consumer business has been affected negatively, but iRobot is compensating by diversifying into Europe, where demand is growing.
Brooks, meanwhile, is working on Heartland Robotics. He said the general expectation that the recession will, in fact, end, helps the startup’s planning.
“We’ve got time to develop the product,” he said.
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