Voice of the Modern Manufacturing Economy Since 2013

Rachio

by Brad Smith on April 4, 2017, 06:42 am MDT

www.rachio.com

Denver

Founded: 2013

Privately owned

Employees: 48

Industry: Aerospace & Electronics

Product: Smart sprinkler controls

Founder and CEO Chris Klein's brainchild is making intelligent sprinkler systems that conserve water by plugging into the weather forecast.

This summer, Americans will pump billions of gallons of water onto their lawns and landscaping every day. Rachio wants to help homeowners save a lot of that water by using the company's smart irrigation controllers.

As much as half of all water used for lawns is wasted because of evaporation, wind, or runoff caused by inefficient irrigation methods and systems, the Environmental Protection Agency says. The agency says replacing a standard clock timer on a sprinkler system with an approved WaterSense smart controller can save the average homeowner about 8,800 gallons of water every year. That would save Americans a yearly total of $435 million and 120 billion gallons of water, enough for 1.3 million homes, according to EPA data.

Rachio is on its way to providing that savings. Installations of its controllers has saved nearly 3 billion gallons of water since the company was formed in 2013. That was near the end of a severe drought in Colorado, a drought that focused Klein's attention on ways to improve urban watering.

With a background in business as well as software engineering, Klein's initial interest in water savings, prompted by the waste he saw, was on how to better use the standard sprinkler systems. "I wasn't thinking about the smart controller," he says, but he quickly discovered how difficult it was to make adjustments that factored in weather conditions.

Then one day in October 2012 he was walking his dog in his neighborhood during a drought-quenching rainstorm and saw all the sprinkler systems running. That got him to thinking about using computing tools to make sprinklers smarter.

The Rachio system, now in its second generation, allows users to control water to their landscaping by making the sprinkler system part of a smart home, using the home's Wi-Fi network to analyze recent and upcoming weather trends. Users can let the system take care of the irrigation by monitoring the weather or they can use a smartphone, tablet, or laptop to manage it themselves while they are away.

Rachio's controllers are compatible with leading smart home brands like Nest, Xfinity, Alarm.com, Control4, Creston, IFTTT, Nexia, and Wink. The year-old second generation integrates with the Amazon Echo and Alexa so users can operate the irrigation system using their voice; Amazon is an investor in Rachio.

Rachio's smart controllers are all manufactured by contractors in the United States, with most of them coming from Vergent Products in Loveland. Sales have grown rapidly in an expanding market and Klein anticipates a third generation as well as an IPO, although the latter is well in the future. Klein wants to keep Rachio's manufacturing in the U.S. because "our manufacturers are an extension of our team."

"Could we go overseas and get it cheaper? Maybe," he says, "but the cost of shipping the product back here is a problem. And now if we have a problem we drive to Loveland and solve the problem. That would be an issue if it was overseas."

Rachio also is building an ecosystem that includes utility companies and sprinkler providers. Water utilities, Klein says, "have peak demand issues just like electrical utilities." He says Rachio recently completed a pilot study with the largest water utility in the country, American Water, that saved the utility millions of gallons of water while generating great customer satisfaction.

Klein says working with utilities like American Water gives Rachio access to the utility's customers as well as to landscapers who install systems and professionals who winterize or repair systems. Rachio's systems can also let landscapers and others know if there is a problem with the irrigation. The creation of this ecosystem gives Rachio another sales opportunity.

The future for Rachio looks bright. A 2016 study by Research and Markets found the smart irrigation market is expected to have a compound annual growth rate of 17.2 percent through 2022, with sales of controllers and components reaching $1.51 billion worldwide that year.

Weather-based controllers, such as Rachio's, are the leading segment in the industry because they use weather conditions, soil type, slope and soil moisture to curtail water waste, Research and Markets said.

Of Rachio's 48 employees, about a quarter are engineers and the rest are in product development, customer relations, sales and marketing, operations, and finance.  Klein says the company has a long-term business plan but the current focus is now on its products.

Challenges: "It's really just about managing growth," says Klein. "This is a high-growth company and a lot of challenges come with that." Key areas include organizational structure, helping employees and "not losing focus on what got us here."

Opportunities: Cementing Rachio's position as the industry standard, says Klein. "The one immediately in front of us is to take our category leadership and continue leading it and defining it. We want to take it from the digital controller to a platform that ties together users, utilities, and professionals."

Needs: "Continuing to find great people to come to work and buy into our mission," says Klein.

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