iRobot: Colin Angle. How The Roomba Became a Household Icon

30:24And they were remarkable. I mean, iRobot still was a relatively small company. And you had all of these concurrent projects you had. You've got these robots, right, detecting these pack bots for the military. You've got working on an S.C. Johnson project. You're working on eventually with Hasbro. But let's dive into Roomba. I mean, up until this point, okay, you made these dolls for Hasbro. And so there were some consumer products. So you had learned about mass production and consumer marketing. But what's the origin of Roomba? How do you start talking about, hey, wait a minute, let's make this?

31:09You know, I told the story about how people would come and say, hey, Colin, when are you going to clean my floors? Yeah. And so we knew this was a good idea. And one of the early employees, a guy named Joe Jones, had actually built, while he was working at MIT, a little round robot that picked up some, it couldn't actually pick up dust, but if you crumpled up the right size little bits of ball. It could suck it up. I could suck it up. And then 12 years passed, and the toy contract was coming to an end. And Joe came up to me and said, hey, Colin, I think it's time to do the vacuum. Can we work on it two weeks?

31:53Give us 15 grand in parts, and I'll have a prototype. So they went and they made it round. And it was round so that it would never drive into anywhere, that it couldn't turn around in its own diameter and escape. And it dragged an electrostatic cloth, like a Swiffer cloth, behind it. It wasn't a vacuum. And it kind of worked. But it didn't have... No eyes. Now it's different. No camera for navigation, no... No, that came much later. Okay, gotcha. So we kept developing this idea. and we knew we needed a better navigation system. But at the time, there was no navigation system good enough to give you an actual position.

32:42Right, because if it was just randomly bumping, you couldn't guarantee that it was going to clean the entire floor of the room. Correct. You know, no one's going to die if you didn't. Right. But it had to do a good enough job. And then we had done research with customers around the product. One of the early problems with Roomba was if it was only dragging an electrostatic cloth, it was not valued by the consumer. Right. It's just dragging a piece of cloth on your floor. Right. I can do that. And so they would say, well, how much would you pay? And they're like, well, we pay$40,$50 for that. It's like the battery costs$40.

33:25I mean, come on. You know, this isn't going to work. It's like, well, what if it was a vacuum? It's like, oh, well, if it was a vacuum, then I'd pay hundreds of dollars for it. And it's like, OK, time to make a vacuum. And then we had to go invent the world's most efficient vacuum cleaner because we couldn't afford a lot of battery power. And so we said, well, what if we break this whole vacuuming problem down into two steps, where we have these counter-rotating brushes, just spinning brushes, that pick up all the big debris, and then have what we called a squeegee vac. it's it between two little rubber blades is a very narrow hole and because you're pulling the air through that narrow gap it moved faster it's kind of like putting your thumb on the end of a of a hose to make it squirt faster and the velocity of the air actually is what picks up the dust.

34:31And so that by breaking vacuuming into two pieces, one for doing large debris and one for doing small debris, we had invented a new way of vacuuming that was incredibly efficient. And so that, you know, it's, why didn't Roomba happen earlier? Well, it just needed to have a small desperate company that happened to be expert in mine hunting, toys, and industrial cleaning. To come along. And then it's kind of obvious that what you should do. And some of our biggest challenges had to do with how do we sell this thing? Because we had far less experience on that front. This is in 2002 when you finally had a product to launch.

35:18Finally had a product to launch. And we thought Sharper Image was going to do it. And then they backed out. And I called up Brookstone. Yeah, I was going to say, sharp image, no, then you call Brookstone. Right. And the Brookstone story was amazing because the only person who answered the phone, because we dialed everybody, was this woman who was in charge of the hard-to-find tool catalog. And it was her first day on the job. So she hadn't yet been trained that she shouldn't talk to people like us. And so she heard our pitch and said, okay, well, I guess you can come in. And so we brought, you know, we got in the car.

35:56We went down to New York City or wherever it was. And we showed her the Roomba. And she was like, oh, my God, this is amazing. Let me show it to my boss. And so she brought in her boss. And her boss said, oh, my God, that looks like it actually works. Let me show it to my boss. And you could demo this. You could say, here you go. Yeah, yeah. We had a working demo. Would you bring, like, Cheerios or something to, like, put on the ground? So my secret was to, I would, like a vacuum cleaner salesman, I would have a little Ziploc bag of Cheerios in my back pocket. You literally, I just said Cheerios because I think of kids and Cheerios.

36:32No, no, Cheerios was the best. Because what I would do, you know, we'd be in their conference room and they would say, oh, that's neat. Does it actually work? And I said, well, of course it works. It's like, really? Prove it. And so I would take these Cheerios out of my back pocket. I would sprinkle them on their floor. And then I would, with great drama, I would stomp and crush and try to grind the Cheerios into the rug, at which point I had their complete attention because I just messed up their conference room. And then put Roomba down. Roomba was great at Cheerios. Great. The dust, the big chunks, everything.

37:11And, you know, Cheerios are bright, so on a dark carpet they show up really well. And it's like, oh, my God, it works. And we went to like from the lowest to the highest level at Brookstone in about 40 minutes. And then the head of product or merchandising came in. We showed them her. I was like, oh, that's pretty cool. But we couldn't possibly sell this for any price above$200. And we had planned on selling it for$199. Amazing. And so that we launched with Brookstone. And about two weeks later, I get this call from the woman managing her account, Pam Camelstein. I remember her name. And she's like, hey, Colin, how's it going?

37:53I was like, well, how's it going with you? And it's like, well, pretty good. You know, we'd like to order some more product. And I was like, really? Well, how much? And she said, well, how much can you build? Wow. How did that happen? I mean, Brookstone, of course, I remember we did an episode on the Tempur-Pedic mattress, and it started with a pillow, and they launched that at Brookstone. So, you know, Brookstone. But still, Brookstone is not Target. It's not Walmart. How did it do so well? Was it just because it was so weird and unusual it got press coverage? It was two things. First, Brookstone discovered that if they put it in front of the store and just threw down dirt and Cheerios and stuff and showed it working, it would draw traffic into the store.

38:48In the mall. In the mall. Right, in the shopping mall, yeah. So it demoed really well. But combine that with the press, because we had no money to advertise. We had$5 ,000 a month for PR, I think was our budget. But that whole shtick where I go into the conference room and throw Cheerios on the ground, no one believed this thing worked. And then when they saw it working, then if you were press, you had a secret. And nothing is better than taking a skeptic and flipping them into being a supporter. And we had 150 articles written about the Roomba immediately after launch. Everything from The Wall Street Journal to USA Today to Newsweek to it was amazing.

39:33We sold 70 ,000 Roombas in the first three months. That's incredible. So you guys were probably popping champagne bottles thinking, this is it. We finally struck gold here. Absolutely. It was validation after 12 years of beating our heads against the wall. 12 years of wondering whether we would ever find that robot that everyone could get. It's amazing. I read that by the end of that year, I mean, what a turnaround, 14, almost$15 million in revenue for iRobot, which is incredible given that the year started out not good. I read that on the strength of that amazing, those three months in 2002, you used very, well, very understandably ordered a ton of robots to be made for 2003 because you sell 70 ,000 in three months, you're going to need hundreds of thousands for 2003.

40:38Right. So that euphoria certainly turned around fast. I mean, you know, 70 ,000 in a quarter, we should sell 300 ,000 in 2003. and it almost didn't turn out that way. In fact, we had a commercial that we made which completely failed. I describe it as a commercial made by engineers for engineers. It was just a practical commercial showing what the thing did? Yeah, and it didn't resonate. I haven't seen that commercial. Was it just like a literally like, hey, our floor is messy. Why I got this room? It didn't show any people. It just showed the robot driving on the ground, picking up stuff, going under things.

41:24Oh, my God. You should have put a cat on it. We did have, you know, one of our most epic slogans in that first commercial, which was, if it's down there, we'll get it. But, you know, that didn't work either. No. No. But, you know, so we ended in 2003. It was after Black Friday, after Cyber Monday. and we had sold a grand total of 50 ,000 robots from that year, and we're sitting on 250 ,000 robots. That's not good. I mean, that's a lot of inventory. Yeah, that would be existential crisis time. When we come back in just a moment, Roomba gets a marketing makeover from a totally unexpected source, a Pepsi ad starring Dave Chappelle.

42:13Stay with us. I'm Guy Raz, and you're listening to How I Built This.

42:36Hey, welcome back to How I Built This. I'm Guy Raz. So it's the fall of 2003, and after an early boom in sales, Roomba is starting to flatline. And iRobot is sitting on a lot of inventory. But suddenly, and for a reason Colin never could have predicted, things turn around. We used to bring the whole company together for stand-up for a couple minutes at the beginning of every day, and just sort of, okay, how's it going, how's it going? So here we are. It's like, you know, Wednesday after Cyber Monday. And the guy running the e-commerce store said, hey, why did sales triple yesterday? And nobody knew.

43:19There was no new press. There was no new anything. And then I think it was an intern who raised his hand and said, you know, it's funny. I saw a commercial. And sure enough, Pepsi had made a commercial with Dave Chappelle, the comedian, where, you know, Dave walks into this beautiful house and he looks over and there's a kitchen table with Pepsis and bowls of snacks and chips and so forth. And he goes over and grabs his Pepsi and grabs a potato chip and a Roomba comes out. And he looks down at the Roomba and he says, a vacuum. It's like, God, the whole world didn't know Roomba was a vacuum, but he knew it was a vacuum.

44:04And he throws the potato chip on the ground and the Roomba goes and cleans up the potato chip. And then the Roomba locks onto the Pepsi and starts chasing Dave to try to get the Pepsi. and there's a cut screen and now he's on his back. His pants are ripped off. He stands up, a beautiful woman appears, and he says, your vacuum cleaner ate my pants. There was nothing I could do. And it's nothing Chase's thirst like a Pepsi. And we sold 250 ,000 Roombas in six weeks. After that ad. After that ad hit. I mean, Pepsi basically made an ad for you without even telling you. With celebrity endorsement, with, you know, and it was funny.

44:54And we kind of realized we knew nothing about marketing and started hiring people into the company that could help tell our story better. And so it's a huge epiphany for me. It was 2004. Suddenly we tripled our sales from 2003. and we're starting to feel like we knew what we were doing other than the fact that we had another crisis, which was the fact that we had designed Roomba to last 150 hours, which was the European standard for upright vacuum cleaners. To last before it needed to be recharged. To last before it died. Oh, before it died. Right? Oh. But upright vacuum cleaners don't get used very often, And so 150 hours is a really long time for an upright vacuum cleaner, but it's a really short time for a robot that might be used half hour at a time, half hour at a time, an hour a day kind of thing.

45:52And so that we were having a huge crisis where people were having their Roombas break very early after six months of use. And so that we had to make a decision as a company to just ship them a new robot. You had just a free replacement? Free replacement. That must have cost you a fortune. It did, but this was a moment to preserve the brand. And, you know, another wonderful truth is if a company stands behind its product, you generate more customer loyalty than if that customer never had a problem with their product at all. So by investing in the brand, iRobot became a trusted, respected, and beloved brand.

46:46And presumably you were making, I mean, you had learned about mass production while you had worked with Hasbro a few years earlier. So I'm assuming you were producing these in China, right? I mean, that was the only way to make them affordable. Yes. So they were manufactured in China for many years until much later in the game, we moved it to Malaysia. Malaysia. Okay. So within two years, I think the iRobot is doing$100 million, almost$100 million in revenue. You still have the PacBot, which is still an important product. But in 2005, you guys go public. You become a publicly traded company on the NASDAQ.

47:23And help me understand, when you filed for an IPO in 2005, because in 1990, it was three people. Do you remember by that point how many employees iRobot had? Probably 250 employees by that time. But, you know, I think it was 2008, 2009. We plateaued for a little while. And part of it was the economy. And part of it was the fact that we were running out of early adopters. and it exposed a pretty significant fallacy in our technical direction, right? Because if you asked me at the time, what's the perfect Roomba? I would tell you, well, the perfect Roomba is the Roomba you never see, you never touch, and you just come home.

48:12And your house is clean. Right. I mean, it sounds pretty compelling. Unless you put that in the context of actually hiring someone to clean your home. Right? Because if you remove Roomba and you insert cleaning person and you say, imagine a cleaning person coming in to interview for a job and the cleaning person says, you can't talk to me. You can't really give me any guidance. You just have to trust me that I'm going to do a great job. Am I hired? Well, that sounds a little creepy. And the innovator and the early adopter are willing to believe that this technological solution is going to be cool.

48:55But the early majority, which we needed to continue growth, absolutely did not. And that's the customer you need to actually scale. Right. So that early majority is where companies go from being interesting to being valuable. Okay. You start to plateau. Yep. And you've got to convince people that this is something they need. What do you do? I mean, is that the technology is getting better so you as the consumer can actually have more agency over the machine? We needed to change how we talked about the Roomba. We needed to change the technology. And that's where navigation became important. We need systematic navigation.

49:44We need object recognition. We need to be able to go and clean around objects that are specified. And then we need to communicate it to the customer in a way that allows them to feel control, right? Because that's what was missing. The Roomba works for you, not the other way around. The customer wanted confidence that they could control where the Roomba cleaned and the Roomba would be safe and wasn't going to go and knock over the precious vase or what have you. so that it was efficacy, control, and safety. And it opened up the marketplace to the next phase of growth when iRobot and robot vacuum cleaners as a category really started eating vacuum cleaner sales.

50:40All right. So, I mean, I think eventually, by, I don't know, maybe 2016 or 2014, I think you'd already sold 10 million Roombas. But I have to imagine that in your mind, at least, and certainly in the mind of others, if the company is really going to grow, you had to grow the consumer business side, but you couldn't just have the Roomba as your sort of hero product, right? Like, I imagine you're starting to think, well, we got to come up with other things that we can sell. Right. You know, we needed to diversify. And, you know, the obvious second act to us was wet floor care or mopping. So we developed a robot called Scuba, which was a wet mopping robot.

51:26We also looked at, we thought lawn mowing was going to be our big second act, if not mopping robots. And so that we invested tremendous amount in a robot called Terra. You know, should we be working on a dishwashing robot? Should we work on a laundry folding robot or a bed-changing robot? And, you know, the answer is no. But what we did do is started realizing that Roomba was an amazing smart home device because we could figure out where your rooms were. We could figure out where your other smart devices were. that idea that if I could only have a Roomba figured out where things were and what should happen and have a voice interface like Alexa, suddenly you have a new solution for the smart home.

52:25And really that was what led me to saying, hey, iRobot and Amazon might have some pretty interesting synergies. And because Scuba hadn't succeeded, because Terra hadn't succeeded, then when Amazon started to be interested in iRobot, it felt like a good idea. Yeah, because by 2020, you'd sold 30 million robots, mainly Roombas around the world, and we're entering COVID and, you know, there's a lot of challenges. But I think 2021 was the year where your revenue peaked, you hit over$1.5 billion in revenue. But also, from what I understand, you really start to see sales drop. I mean, you can see what's where things are headed in part, because there are cheap knockoffs that are coming out, right?

53:24And there are competitors that are making robot vacuum cleaners that may not have been as good, but that's cutting into your market share. Right. So there was a period of real disruption starting in 2020 with the first round of tariffs. And then you have COVID, which shut everything down. So that was boom, boom. That was really rugged. Then people stuck at home started thinking, hey, I'm stuck at home. I should buy a Roomba. So that sort of started to make things better. But we weren't able to fully enjoy that upside because at the same time, shipping costs went through the roof and components started becoming unavailable because there was such demand.

54:11And so that, you know, we were spending$22 on a half a cent resistor so that we could actually build a Roomba. And foreign competition, particularly the Chinese fast follower business model, finally started to put product on the marketplace, which customers liked. And we saw our market share starting to drop. There was a perfect storm of just challenges. And this is going to lead to the Amazon acquisition offer and also why it made sense. It certainly did make sense because you could see, I imagine you as the CEO of the company could see that Amazon coming in and acquiring iRobot could be a great result, right?

54:57And they were probably going to – they were excited about integrating this with the smart home and also building other products maybe or developing other products. Absolutely. It was like a win-win. Our investors were going to win. The consumer wins. And the employees of iRobot get to be innovative again. Amazon 2022 makes a bid to acquire iRobot for$1.7 billion. Amazing. What an incredible close to, at that point, 32 years of iRobot, right? I mean, what a cool result. And so now, of course, an acquisition like this has to go through the regulatory agencies, both in the United States and in Europe because Amazon is a global company.

55:44There's the FTC in the US, the European Trade Commission, I think is what Cameron was called. EC, European Commission. Commission, right. And as the FTC had conducted an antitrust investigation, essentially saying, or their argument, or what seemed like their argument was, this would be a monopoly, that Amazon already had a bunch of different robotics companies. This was going to be a monopoly. Amazon acquiring another robotics company is a problem. I mean, that doesn't make sense. But yes, that was the argument, as you described. And so at some point in 2024, iRobot and Amazon announced that you guys would abandon the acquisition plans.

56:30But from what I understand, the FTC had not made a decision yet. So why did you guys make that decision? We made the decision when it was clear that the European Commission and the FTC were blocking this deal. And the FTC blocked this deal knowing that they were effectively putting iRobot in a box and handing it to somebody else. In other words, you're saying they knew that if they blocked this deal, you guys had to sell at some point because your business wouldn't survive. and you'd be forced to do that. They just didn't want Amazon buying it. That was their position. Now we're into the land of speculation, but it does seem that way.

57:15It's, I know, you know, I understand why the FTC exists and why they want to block monopolies to protect consumers. But sometimes it seems like they're not actually operating in the interest of American consumers, Because, and also, it's like you guys were offered$1.7 billion. I mean, that's a lot of money and a lot of lives that were going to be changed. And they can say, no, you can't do that. You can't sell it. I mean, it doesn't make sense, right? I believe the FTC is there to prevent abuse and serves a very valuable role. But it's been taken too far. In fact, I had to testify. I was deposed as part of this process.

58:02and I was walking between sessions, walking the facility. And on the doors of the agents at the FTC, the employees, like badges of honor on the doors were deals blocked. Like people would put on their doors like, blocked this merger, blocked that acquisition. I mean, the biggest loser was the consumer in this deal, right? Certainly, I certainly lost. A robot lost. Amazon lost. But the biggest loser was the hundreds of products, innovative products, that could have come out as a result of this merger. Yeah, Colin, you, shortly after this unravels, you stepped down. 34 years at the company as CEO, and eventually, within a year, I think it was sold to a Chinese company, which now owns all the technology and all of the products that you guys built.

59:01Yes. We used to, past tense, lead the consumer robotic floor care industry. We don't anymore. China does. And we chose to give it to them. It was a choice. We didn't have to. And to me, that's frustrating. Yeah, it's wild. I mean, especially when you think about sort of the geopolitical context here, right? The reality is that if there's a U.S. company that spends 35 years developing technology in the U.S. and then that technology goes to another country, does that make sense? In other words, if that happened in Germany or if it happened in China and it was the opposite, ended the opposite way, I think it would also be people in China would sort of be asking the same questions, right?

59:55Like how is it that we spent 30 years developing this technology and now it's in the U.S. or now it's in Germany? So it is – yeah, I mean it is what it is, I guess. When you stepped down, you went off on to create a new company. I know you're still kind of in… Stealth mode. Stealth mode, yes, right, stealth mode. So you can't really talk about what you're doing, but it is, we can sort of assume broadly, it's in robotics. Absolutely. It is in robotics. It's in consumer robots. It's taking advantage of this amazing new toolkit, generative AI, and using these generative tools to control robots. Because I'm still who I am.

1:00:41I'm still this builder. And so when I left iRobot after, you know, the last decade was a little tough. I felt like I wasn't building. I was reacting. I was protecting. So, you know, all we can do is move forward. I mean, I think every time I write an email, I sign it onward because the things that drive my passion still drive my passions. And when I go in now to talk to a venture capitalist or to talk to a factory, it's a much easier conversation than when I did it before I had done iRobot. Sure. You know, it's a journey. And the journey is not done yet. But when you think about, you know, this journey, I mean, it's an amazing journey.

1:01:28And of course, you know, it didn't end in the way that you wanted it to end. But you still had incredible success with this product and the brand. How much of where you got it to and what happened with your career do you attribute to the work and the grind? And how much do you think had to do with being lucky in the right place at the right time with some of these products? You know, the journey, you know, had some amazing serendipitous moments, but they were enabled by sitting back and actually doing the work. I had one of my early mentors when I presented in one of my first board meetings a 12-year plan where the revenue in year 12th was presented to the second decimal point.

1:02:16He said, Colin, never show me a chart like this again. Try to make your next quarter. Try to make your next two quarters. And then let's talk. And we don't have to have it fully planned out. in order to embark on the journey of entrepreneurship. We just need to have a North Star we're heading towards. And I would say that, you know, here we are 35 years in. I've got one big disappointment and thousands of bright shining moments of innovation and steps forward. And I like those odds. That's Colin Engel, co-founder of iRobot. You know the robot I want is the one who drags my ass out of bed in the morning and makes me go down and work out.

1:03:07That's the robot I want. I might have something that... I want that robot. Go work out now. I know it's warm in bed. I know you're comfy. But get out of bed. I will hold you to that and we'll see what the future brings. Hey, thanks so much for listening to the show this week. please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at gyros.com or on Substack. This episode was produced by Catherine Seifer with music composed by Ramtina Ablui.

1:03:45It was edited by Neva Grant with research help from Noor Gill. Our engineers are Patrick Murray and Kwasi Lee. Our production staff also include Sam Paulson, Chris Messini, John Isabella, Alex Chung, Kerry Thompson, Casey Herman, Rommel Wood, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.