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The show features thought-provoking conversations with world-class technologists, thought leaders, executives, and others who are working to create a new ecosystem of organizations committed to growth with purpose.
From the Eric Ries Show:
How to Scale Trust Into a Billion Dollar Business | Ritu Narayan (Zum)
For this episode of The Eric Ries Show, I sat down with Ritu Narayan, founder and CEO of Zum, which has had incredible success in the field of student transportation.
The company began as a private service to tackle a problem Ritu was facing herself: how to function as a working parent dealing with erratic pickup and drop-off schedules. Before long, it became clear that there was a far larger opportunity to change pretty much everything about how all kids get to and from school.
Pivoting to working with school districts and a fleet of electric buses, the company set out to “modernize student transportation to make it safe, sustainable, and accessible for all.”
To say it’s been a success is an understatement. Zum now serves thousands of schools in multiple states, and in February 2024, it hit unicorn status with a valuation of over a billion dollars. As Ritu says in our conversation, “the service is for everybody.”
We also talked about everything from carbon-neutral buses to cracking the procurement system of public school districts, the invaluable asset of parental peace of mind, scaling care, and more, including:
• How Ritu came to entrepreneurship
• Scaling trust
• How coming from the outside allowed the company to transform the industry
• Shifting from a B2C company to a B2B company
• Zum’s values: customer obsession, doing things the right way, thinking big and executing meticulously, and building better communities.
• How a clear mission makes alignment easier
• Zum’s “Five Step People Program” to reinforce culture and behaviors
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Where to find Ritu Narayan:
• X: https://x.com/ritun
• LinkedIn: https://www.linkedin.com/in/ritunarayan/
• Zum: https://www.ridezum.com/
Where to find Eric:
• Newsletter: https://ericries.carrd.co/
• Podcast: https://ericriesshow.com/
• X: https://twitter.com/ericries
• LinkedIn: https://www.linkedin.com/in/eries/
• YouTube: https://www.youtube.com/@theericriesshow
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In This Episode We Cover:
(00:31) Welcome to the Eric Ries Show
(01:09) Meet our guest Ritu Narayan
(04:32) Ritu describes how Zum has reinvented the school transportation field
(06:50) The Zum origin story
(08:01) Zum’s pivot from private service to school district partner
(11:17) Scrambling to meet the demand and understand the RFP process
(13:17) Zum’s amazing growth from one contract to unicorn
(19:48) How Ritu got started as an entrepreneur
(21:09) Being a woman engineer in her family, college and the workforce.
(22:06) How being a working parent showed her the multi-generational problem she wanted to solve
(27:59) Establishing trust and placing it at the center of the company
(33:28) Being a child-centric company
(35:13) The deep care that transportation directors showed towards their students
(40:00) The Zum pivot
(41:43) Reconciling long-term vision with a flexible strategy
(44:28) Expanding from private to public schools as the result of raising a round
(47:20) Shifting from B2C to B2B
(51:54) How gaining clarity of mission brings the right people into alignment
(55:01) Zum’s four pillar values and the narrative they uphold
(57:05) The five steps to restructuring the company after the pivot
(58:58) The value of Zum from the parent perspective
(1:02:05) Zum’s climate impact
(1:06:19) Reconciling the vision of sustainable transportation and equality with profit
(1:09:34) The advantages of tackling a huge problem instead of a narrow one
(1:13:08) Working with mission-aligned investors
(1:15:02) Ritu’s advice for founders who want to build purpose-driven companies that are also for-profit
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Referenced:
• Zum: https://www.ridezum.com/
• Startup Garage at Stanford Business School: https://www.gsb.stanford.edu/experience/learning/entrepreneurship/courses/startup-garage
• Steve Blank’s Lean Launchpad: https://steveblank.com/category/lean-launchpad/
• W. Edwards Deming’s 14 Points for Management: https://deming.org/explore/fourteen-points/
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Eric may be an investor in the companies discussed.
Ritu Narayan (00:00:00):
In the early stage, when my co-founder and I would go to the district and pitch the solution, literally, they would take the glasses, keep on the table, they would have tears in their eyes and start hugging us. And they even had their own name of calling the solution like "Uber for school buses" or this and that, and they were like, "We always imagined the solution would come, but we didn't know that it'll actually [00:00:30] happen."
Eric Ries (00:00:31):
Welcome to the Eric Ries Show. We often say that children are the things we hold dearest in this world, and yet somehow, how much do we really know about the system that carries them to school every day? They get on a bus, the door closes, and they disappear from view. Do you know who's driving that day? Do you know what route they took?
(00:00:52):
How does it make any sense at all to put the people we love most in the world into that situation day after day and just hope that they arrive okay? [00:01:00] Not to mention that they often travel on buses that are unreliable and harmful to the environment that they're growing up.
(00:01:08):
In today's episode, I'm talking to Ritu Narayan founder and CEO of Zūm, not that Zoom, Zūm, a company that's tackling all of these issues at once by changing everything about how kids get to school. And because student transportation is the largest transportation system in this country, serving 27 million kids around the country, what she's doing has the potential [00:01:30] to make change on an even greater level. Zūm began as a private service for parents, but then they had a billion-dollar pivot to working with school district today.
(00:01:40):
Today, their electric bus fleets serve more than 4,000 schools in 13 states, with a contract backlog of more than $1.5 billion. They bring tremendous transparency to thousands and thousands of students and parents every day. The company recently passed unicorn status with a value of over $1 billion and has raised over $350 [00:02:00] million in its life. Ritu and Zūm have achieved all of this simply by placing trust at the center of everything they do. I hope you enjoy this conversation with Ritu Narayan.
(00:02:12):
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(00:03:28):
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(00:04:22):
Ritu, thank you so much for being here.
Ritu Narayan (00:04:23):
I'm excited. Thank you so much, Eric, for having me.
Eric Ries (00:04:24):
Founder and CEO of Zūm, not that Zoom but the other one. Just tell us what the company is and how's it going?
Ritu Narayan (00:04:30):
[00:04:30] Hi, Eric. So, Zūm is modernizing student transportation using technology and sustainability. Student transportation is the largest master transit system in the country, with 27 million kids commuting twice daily. But the system is highly antiquated. Kids today, pretty much, commute the same way you and I did, our grandparents did. Nothing much has changed and very little technology has touched this area. The end result [00:05:00] is there's no transparency, it's highly inefficient, and it's not sustainable.
(00:05:06):
Zūm is changing all of those things by building revolutionary end-to-end technology and backing that up with the modern infrastructure so that there's a full transparency, efficiency, and transition to electric vehicles that allows for sustainable infrastructure.
Eric Ries (00:05:25):
What is the product itself? Just describe what it does.
Ritu Narayan (00:05:29):
So, our product when [00:05:30] the districts adopt us is the combination of, we bring in the brand-new buses. These buses are carbon-neutral, 100% carbon-neutral, with the plan to transition them to electric within the duration of three to five years while we are working with the district. Immediately, the impact that we see is we provide an end-to-end technology or product, which is very easy to deploy. It designs the routes for the districts [00:06:00] and essentially reduces the number of buses, reduces the commute time for students, in terms of how we design the routes.
(00:06:08):
Every single stakeholder, whether it's a parent or a student, if they have mobile to the school districts, each school district can have hundreds of schools. For example, LA Unified has 1,000 school and each school needs to see their own data. All the drivers, all the operations, they're all operating on one single platform. They see the same single source of data, [00:06:30] which allows us to take actions in real time and create a very transparent and efficient platform for everybody, the services for everybody in the community.
Eric Ries (00:06:43):
You've been working on this company for a really long time, at least 10 years now. Tell us the origin story. How did the company get started?
Ritu Narayan (00:06:50):
The initial origin of the story, actually, my personal story is very tied to the origin story of the company. I, as a parent, I was working at eBay and facing this [00:07:00] real challenge of, how do you pick up and drop off your children while still at work? And I used to see a lot of parents around me facing the similar challenge. Interestingly, my mom who's an educator in India, left the job for exact same reason. It was an "aha" moment for me that this problem is universal, this problem is generational, and nothing has been built to solve it. That curiosity of why nothing has been built led [00:07:30] me to start the company and work on this problem.
(00:07:33):
So, Zūm today is serving 4,000-plus schools in 13 states across the country. We have one and $1.5 billion-plus contracts on the platform. And we've raised over $350 million. And with the last round, we are a unicorn. We're valued over $1 billion.
Eric Ries (00:07:54):
Congratulations.
Ritu Narayan (00:07:55):
Thank you.
Eric Ries (00:07:56):
Tell me what it was like to get your very first school district contract.
Ritu Narayan (00:08:00):
[00:08:00] Yeah. So, in 2019, Zūm decided that we would like to evolve a technology. It was working so well in terms of solving the problem for some use cases for the schools. And there was a unique insight we had, that when we have this platform and we can bring this kind of transformation, why not do it for the 100% of school district? But the challenge was that market and that whole setup was so different from what we were doing. We were still using [00:08:30] a network of small vehicles, similar to what you would see in Uber and Lyft, but with highly certified drivers, them owning their own vehicles. And suddenly, we had to now think about doing the setup, which is almost like a very big logistics setup for buses and other things.
(00:08:48):
But before that, before we even went there, the point was, would the school district want us? Because they have such entrenched people doing that work for them today. Given that, [00:09:00] I had this thing about get out of the building and understand from the districts what they're currently doing. So, we have very good relationship with Oakland Unified School District. Kim Raney is transportation director there. And me and my product designer, we went there to have the conversation with her in letting her know what we were thinking, what in our mind we were thinking about the solution, because she was using us in the other format, and learn [00:09:30] what are her challenges on a day-to-day basis. How does it go?
(00:09:34):
It was supposed to be an hour-long meeting. First of all, I was very surprised when I went into the district. It was so different from working at eBay and other private tech companies. This was my first time getting in and seeing the full thing. And during the conversation, she used to work at FedEx, she had every single information and data about how [00:10:00] to do her logistics. And here, she was transporting over 3,000 students daily. She had no idea where the kids were. She always hoped that everything went right. If it didn't go right, then people were calling on walkie-talkies. She literally took me to a room where there were her support people were sitting three or four people, and she showed me a fax machine.
(00:10:24):
And I had not seen fax machine in a long time. She said that, when parents call, "why [00:10:30] is the bus late," or, "has my child reached," literally, they take a call and they essentially fax the request. They call the driver on the walkie-talkie, even the driver reaches the yard, the driver calls back. So, by the time parent knows the child has already reached home in the evening. That's the delay.
(00:10:50):
So, it was so antiquated, surprisingly. It was so bad that we knew that we could transform that system. She spent [00:11:00] four hours with that us that day learning everything. And her response was, "Do you have this now? Can I start using it immediately?" And you know when that happens that you have something going on there in terms of what you're building.
(00:11:15):
We didn't have the solution ready. We had parts of it, but for enterprise we had to change it. And the other challenge was school district don't just give you the contract. They have a full-blown RFP process where [00:11:30] they come out with... it's a public money. So, they come out with RFPs and they have a full process around how they go about it. And they have to be super transparent about, what's their criteria, how did they select people, and all of that.
(00:11:46):
So, we had a discussion with her and we understood the RFP process, which we had never gone through before. And we realized that, currently, the way districts do RFP, it's very price-driven. They essentially come out with the RFP [00:12:00] and whoever's the lowest price, they win the bid. And in that process, they're obviously targeting for not-so-great service because they're not asking for anything in the RFP where the partners are presenting how they're solving for technology, how they're actually providing the user experience, how they're providing timeliness to the district. Everything was hearsay, since there was no technology and how they would move the system towards sustainability.
(00:12:27):
So, it was during the discussion process, actually, [00:12:30] the director realized that, "Wow, these are long-term five to 10 years contract and even longer, and I should be asking for these things if I want those services or if I want that level of service that I'm used to or I want in the system." So, they came out with RFP, and she had a value-based scoring for all of those things. Obviously, Zūm was head and shoulders above the existing players in the market, and we won the contract. And that was the beginning [00:13:00] of our journey towards serving many districts in the country.
Eric Ries (00:13:06):
It's a straight line from that first contract to where you are now. Do you want to say a little bit about the size of the company? You've just raised money at pretty significant valuation. It's pretty exciting. So, just give us a sense of where the company is now.
Ritu Narayan (00:13:19):
So, Oakland Unified contract was a first large contract where we were going to do the entire fleet of buses. At that time, [00:13:30] Oakland was using 103 buses. Part of the beauty of our value proposition is, maybe, we reduced the number of buses for the district. They're using the assets themselves very suboptimally. So, Zūm, given that it's a technology platform, we optimized that and we reduced it to 76 buses. And it meant a lot of significant reduction of the cost for the district and what they can do with that money in terms of solutions. [00:14:00] And the same money could flow in afterschool programs or providing transportation to more students.
(00:14:06):
That specific contract was $53 million, five-year contract. That first contract, actually, we didn't have any experience running the buses, so we decided to outsource to the number two player in the market, the actual yard, the actual buses and the entire infrastructure setup. But right after that, [00:14:30] San Francisco Unified, which is three times larger than the Oakland Unified School District, they had also been using us in a different format and they wanted to come... for 30 or 40 years, they had an income and player and they were very frustrated with the user experience, but they stuck to it because there was nobody else could do that scale of services for them.
(00:14:54):
But when they realized Zūm was the one who was doing for Oakland and they could potentially do [00:15:00] it for them, that was a second contract which was coming up. But this time, we decided that, for the long term, we need to be the owners of infrastructure, because in the absence of it, first of all, it was a constraint for our growth because we were relying on some partner getting the infrastructure at that scale, and why would they partner with us if they could get the infrastructure at that scale?
(00:15:24):
So, the decision for us after the Oakland experience, very quickly, this was not even six months [00:15:30] gap, was that we need to have our own set of infrastructure in terms of the distribution center or yard, what we call getting the buses. All of that was super challenge. A small startup at that time, with the finances that we had, who would lease out, who would give us the lease of the buses, who would lease out these massive yards? And in San Francisco there are 200-plus buses, so it's a pretty significant [00:16:00] amount of money.
(00:16:01):
So, the challenge for us, what the team did really well, was going across the board and solving for problems each time we had it. So, in Oakland, the first problem was getting into the RFP and convincing the district that, you need to be asking for things that you value so that you get things that you have. That's the challenge for the second one, was, how do we establish the infrastructure which allows us to scale fast?
(00:16:30):
[00:16:30] So, in San Francisco, essentially, we solve for it. Everybody in the industry was surprised. Where did this small startup come from and just started taking off San Francisco's $150 million five-year contract? It was a pretty significant win for us. And on the basis of all those success, we actually were able to raise our Series D round. And right [00:17:00] around the same time, LA Unified was coming through. An interesting thing is LA Unified is the second largest district in the country, and New York is the largest district in the country, but it's the second largest school district in the country.
(00:17:16):
And I had heard over the period of three, four years of working in Zūm and interacting this public school system that you could not even sell a pencil in LA [00:17:30] Unified. The procurement system was so hard, people used to say, yeah. So, that strength of our value proposition and what we were building was so strong that LA Unified came up with the four different pieces of RFP with an intention that they will evaluate since the contract was so large. And they ended up awarding us all the four pieces. And that was a [00:18:00] significant victory for us. And simultaneously, we got another one, Seattle Public School, around the same.
(00:18:09):
And the reason for these fast victories was also the focus on really serving the customers, really being hand in hand when we were deploying a technology. They could see the elevated level of user experience right there. I mean, parents and districts used to tell us, "We can track [00:18:30] a pizza, we can track our packages, but we have no idea where our children are once they're on the bus." So, getting the entire ecosystem, every single stakeholder involved in that integrated ecosystem, was a big win, instant win for the districts in terms of what they were able to provide to all the stakeholders. And since then, today we are in 13 states. [00:19:00] We have one over $1.5 billion worth of contracts, and it has been an amazing journey for us.
Eric Ries (00:19:09):
Well, congratulations. It's been terrific to watch. And I've known this company for a long time. I remember it from its very, very early days. I actually rode in one of your Rideshare vehicles, free pivot long, long ago. And it's been remarkable to see the company grow and flourish.
(00:19:28):
I think what you're describing is really interesting. [00:19:30] It's an example of the strength, the power of being an outsider and really being able to think from first principles, how should this industry work? Not paying attention to what the legacy players have done. And yet, also, getting out of the building, as you said, and going to the customer and meeting them where they are, rather than talking whiz-bang, techno babble. So, take us back. This overnight success has been a lot of years in the making. How did you come into entrepreneurship, in the first place?
Ritu Narayan (00:19:57):
I would say a little bit accidental. I was a product [00:20:00] manager at Oracle, and then I was at Yahoo! and then moved to eBay. eBay was the most transformational experience for me, because here I was leading a large seller platform. And for the first time, I saw how you could have mission and impact hundreds of millions of people across the country using a platform.
(00:20:24):
When I was working at Oracle, I enjoyed the products I knew, but I couldn't see the direct impact [00:20:30] on the users. So, this was the first time at eBay when I actually saw the impact of a platform and how it can very quickly grow and make a difference in lives of hundreds of millions of people on the customer side. And there were over 4 million sellers who could be anywhere in the world and making money on eBay.
(00:20:50):
And plus, this was also the first time, I have to say, I am undergrad in computer engineering from India. And [00:21:00] growing up, being in very, I would say, areas where nobody expected you to go in at that time, I was a first engineer and first computer engineer in my extended family. And there were six women out of 300 students in the college.
(00:21:18):
And when I started working in technology, that was the same story everywhere. And I thought that this is what is to be expected. But when I came into eBay, an amazing thing was 42% of [00:21:30] the workforce was women. And one day, they used to have a lot of things. And one day, there was an event where somebody had written a book that 50% of the world is women, so women should be designing the products more. And that was the first time a realization that, wow, you could pick any product and design it and there's a need, that connection, that was earlier not there for me. This was just a background thing and the learning [00:22:00] that was happening.
(00:22:01):
At the same time, I was super entrepreneurial and resources throughout. I always was looking for new products to work in, where is the gap? How should I fill the gap? And simultaneously, in my personal life, my younger one transitioned to preschool and I was putting together all these arrangements to make sure that the two kids in different schools can be picked up. And how do I pick them up when I'm still at work? [00:22:30] And when that arrangement fell apart, it felt like everything fell apart and I would have to drop my career. And I'm not somebody who would do that.
(00:22:38):
And interestingly, my mom who is an educator in India, she left the job for the exact same reason, to raise me and my three siblings, because of this problem. So, that was an "aha" moment for me, that this system or this problem is generational. It is universal. Everybody, no matter where in the world, they face the [00:23:00] same exact problem of this, prior to morning hours and afternoon hours for the children, how do they provide the care while they adjust to the working times that they have to deal with in the workplace?
(00:23:15):
And the desire to solve that problem became so strong that I left eBay. I joined a one-year program at Stanford Business School. And that was a transformational part. The idea at that time was broad. [00:23:30] I was thinking of building a trusted marketplace for working parents. That was my initial... I have professional working parents. That was the user set I was looking at. And the clarity of the entire product wasn't there, that this would be for transportation. I was thinking there will be many services, but my imagination was it's almost like a button. I didn't want that there's a marketplace and I'm trying to interview people, get the best people, [00:24:00] and those people leave. My point was, no matter when I have the need, I press a button and somebody reliable comes, does the job, and goes away.
(00:24:08):
Those parts were super clear in my mind and rest of the parts were not so clear. So, as I would do, I enrolled into a class called Startup Garage and essentially started refining the idea. And somewhere during the journey of doing the user interviews and [00:24:30] refining different ways, the clarity come with the team that, somebody said that what you really need is an Uber for kids, because that's the most difficult piece that parents find harder to outsource.
(00:24:47):
And with that clarity, I actually went into another class called Lean LaunchPad, which is run by Steve Blank. And in fact, when I came into GSB, that was my decision. I'm going to [00:25:00] do Lean LaunchPad with Steve Blank. And I had done lots of hoops in terms of inviting him into a very large CEMEX Auditorium talk and things so that he was familiar with me and I could actually get into the class of all of the things actually unknowingly. I was being resourceful and doing those entrepreneurial things.
(00:25:21):
And that Lean LaunchPad class was the transformational for refining the idea and the product. We would [00:25:30] essentially define every single aspect. Who are the drivers? Who are the users? Who's paying? How much should be the pricing? Who are the suppliers and revenue model?
(00:25:42):
And along the journey, it was pretty stressful, because every week we were trying to interview at least 10 people or so and had some hypothesis whether employers would provide it as a benefit, whether parents would pay, why would they pay? Some parents would think [00:26:00] that their time is more free than paying for a service like that. So, it really helped us refine a solution and come up with, what would be the right target for us as we come out of it?
(00:26:13):
I still remember, as I was exiting the class, there was a temperature thermometer to say, where in the stage are you? And I rated myself six out of 10, saying I have a product market fit. And going back I find it so funny [00:26:30] because I didn't know what was a product market fit at that time. I thought, "Hey, I know that people need the solution. I know who are the drivers. I know how to basically design the solution using an app," because we had done, my team, and I was the first driver, actually, I was picking up strangers' kids and learning, what would it take for people to trust a solution like that? How would a child verify or know the driver? We were resolving all those trust issue. And the most critical [00:27:00] thing was, how do we establish a trust in the system so parents can be at complete ease when they're using our services?
(00:27:08):
But I didn't realize what really product market fit was at that time. I even got feedback, "Wow, this team is super confident about what they think of their capabilities." And also, another interesting thing to say is I was so sure about the idea. No matter how many people said no, I was like, "I know there is a need [00:27:30] for this idea because my kids were traveling very far off in private school." And I knew the parents and the school were, actually, one parent was leaving the job and all they were doing was dropping their kids in the morning and then waiting for a few hours and coming back to pick them up. So, the clarity that this idea is needed was so much. I could have dropped it any point with that feedback. But because of that clarity, it kept going.
Eric Ries (00:27:59):
Let's talk about the trustworthiness [00:28:00] aspect, because I think that is one of the most interesting things for the whole life of this company. Ultimately, if you're asking parents to trust you with their most precious cargo, their own children, I can relate to that feeling that, it's risky, it's frightening to turn over your kids to a private company for any length of time, let alone one that you're interacting with through an app, or you may not have a long-term relationship with an individual person. Talk about how you [00:28:30] were able to establish that trust in the early days and even now how you think about trustworthiness as an asset.
Ritu Narayan (00:28:36):
In the early days, essentially, I was going on the dry runs, picking the children. So, I have to mention here, the first time when I picked somebody's child, there was no doubt of the demand in this company ever. So, first thing I want to clarify is the need is so big that there was never... parents would literally not take no for an answer. We were a project [00:29:00] at school and people would say, maybe, would be willing to pay, willing to use our service, and do all that, and all that because the need of the service is so high.
(00:29:10):
When I used to do this dry runs, we never focused on building a technology. For us, the first part of the thing was completely understanding, what were the various components? How would you build a trust? Where would the trust be lost in the system? And when the parents would talk to us [00:29:30] and we were trying to recruit them, they would spend 30 minutes to an hour just understanding, who your drivers are, and is the same driver going to pick my child every single day? Or, are you going to send a different driver? How would my child know that this is the right car?
(00:29:49):
So, there was an evolution of the solutions, like, for every problem that we heard, we wanted to solve this end to end. So, right from the beginning of how [00:30:00] would they identify the Zūm car, how would they identify the driver, are the appropriate checks done at the level that a care provider your babysitter would have, that level of checks are being done on the driver so that you have peace of mind. So, we, right from the beginning, doing a fingerprinted background check was super critical for this company.
(00:30:21):
The trust also came with knowing the right information at the right time, who's picking your child? So, one thing we realized early on is, this [00:30:30] is a scheduled service. This is not an on-demand, on the fly, on the driver service. So, parents would book their rides in advance. They wanted to know who was my assigned driver so that they could communicate to the child even if the child didn't have a mobile phone that who the driver was. And a child knew, okay, Anna is picking me.
(00:30:50):
Then, we realized kids wanted a comfort of who the driver is. So, we came up with this concept of small pool of drivers, [00:31:00] that you have a primary driver and the other drivers who would allow you to basically keep that familiarity. It was a very relationship-based service. At the same time, to scale up, we could not rely on just one driver to be doing the service for one family. So, our concept was that there would be a small pool of drivers.
(00:31:20):
So, essentially, what I would say is establishing a trust is knowing where the trust would drop and where the issues would happen [00:31:30] and resolving them. Then, scaling that using technology. That was our core thing. And that core product that was built was so good in terms of booking the ride, executing on the ride, taking parents' feedback after the ride, and ensuring that it happens for scheduled environment and it also happens in a repeated and recurring environment because parents would book rides for six months, for entire [00:32:00] year. They wanted to be sure they had somebody assigned to us.
(00:32:04):
That component, actually, when we started working with school districts, we scaled that up for enterprise. The basic that the order flow remained the same. And I would say that is one of the reasons Zūm has been super successful, because we had the DNA of consumer, scale of consumer, and we had saw the trust at the consumer level. And when we had to translate it to [00:32:30] a different infrastructure, we had such amazing insight already to scale it up at the enterprise level.
Eric Ries (00:32:38):
That's such a counterintuitive insight, because people think, "Oh, when you do a consumer to enterprise pivot because the buyer is fundamentally changing, you have to throw everything away." And of course, everybody knows that school districts, the municipal governments with their RFP process procurement is such a nightmare. It's so difficult. I think a lot of people would naively say, how trustworthy you are with the parents, [00:33:00] how can that even possibly matter? You've got to win the deal. And it's going to be a totally different set of criteria.
(00:33:06):
And I feel like your story really illustrates this point that trustworthiness is this asset. It's not just about the relationship with the customer, it's about the whole organization having an understanding of what the product is really for, what is its purpose. And that's a competitive advantage in all kinds of unexpected ways.
Ritu Narayan (00:33:25):
That's so well said, because one of the key differentiation for Zūm [00:33:30] is we are student-centric or child-centric company. For us, the first and foremost thing is the safety, reliability, and trust for the child. Are they having a great experience, or are they having a fearful experience? Are they being picked up on time, or are they getting late to a class and feeling embarrassed, they're the last one to enter? So, since everything was designed with such a student-centric approach, which was [00:34:00] completely something that districts had not heard of, none of the existing...
Eric Ries (00:34:06):
I don't think any school buses were designed for the student-centric approach yet [inaudible 00:34:10].
Ritu Narayan (00:34:10):
That's right. They were designed for exactly what you said, was RFP contracting process, just interact with the school district, deliver. And everything was hearsay. Basically, districts didn't know if the school buses were coming on time, which driver was late, what the driver's driving.
Eric Ries (00:34:28):
Sure. Well, it's such... I mean Deming talked about [00:34:30] this almost 100 years ago now, that if you go with the low-cost provider, you squeeze quality right out of your on product. And yet, I think it's really interesting, a lot of people have told me that you can't get... people who are up for price-obsessed buyers who have a bad procurement process, you can never get them to focus on value. It's all they care about. We make the fundamental attribution error with individuals, but we also make it with organizations. We assume it's a bad organization, they don't care.
(00:34:55):
And I just think, like you've shown, put the right to that idea, that, when given [00:35:00] the opportunity, you can get even school districts to care about the child experience. You can get them to be willing to pay a premium in order to deliver a premium experience for their stakeholders. And I think that's incredibly powerful.
Ritu Narayan (00:35:12):
Mm-hmm. The transportation directors or school districts are extremely caring for students. They work long hours, and they are the first people to start the day and the last people to end until the last kid was dropped. The issue is they had no technology to be able to see this [00:35:30] to make their lives easier and make things more reliable and predictable for them.
(00:35:35):
So, that transformation, making the lives of every single stakeholders, no matter whether that's school districts or drivers or parents or students, was super transformational for the school districts. In fact, you wouldn't believe, I have to tell you this, in the early stage, when my co-founder and I would go to the district and [00:36:00] pitch the solution, literally, they would take the glasses, keep on the table, they would have tears in their eyes and start hugging us. And they even had their own name of calling the solution like "Uber for school buses" or this and that. And they were like, "We always imagined the solution would come, but we didn't know that it'll actually happen."
(00:36:24):
So, this was the kind of thing, because people use technology in their personal lives, and when [00:36:30] they came to the districts, it was still in the dark ages. And usually, in industries, people do a cut, copy, paste. The innovation never hits, unless somebody who has, in a way, you know the solution would work, but we don't know deeply about the industry of what doesn't work. That combination together allowed us to design something completely coming from outside and knowing various industries and what has transformed [00:37:00] lives in other industries and take that and apply to a very old and antiquated industry here.
Eric Ries (00:37:06):
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I've done so many talks over the years to industry trade groups and I've spent a lot of time with very old legacy industries, and I can tell you how many times I've had to do this demonstration, where, sitting with a bunch of product managers or executives who are telling me how technology's not going to touch their industry and everyone's going to be fine. [00:38:30] And I always tell them, "Take out your phone right now." Anyone using an antiquated phone? Everyone's got an iPhone. Any of you use Uber. All have used Uber, you've all used Lyft. Okay, so you have an expectation that's a consumer. Would you go back to not transparent company that wouldn't tell you where the car is?
(00:38:48):
Of course, you're not going to do that once you've experienced the technology that makes that possible, that's the new table stake standard. And then we would have them apply that thinking to some aspect of their current products customer experience. [00:39:00] And just doing the exercise, they'd have their head in their hands, like, "Oh, no, we're sitting here so blithely saying it's not coming for us. And yet, it's just a matter of time before someone has the courage to do what you've done here and really hold to a new standard and say, 'Look, this is what people deserve. This is what technology makes possible.'"
(00:39:19):
And I think it's such a great example of being an outsider. You didn't come from the school transportation world. Each of these pivots you had to learn from first principles, what does the customer want? And you could [00:39:30] see the mark of Lean LaunchPad all over this. I'm curious, do you know, I think this must be the most successful Lean LaunchPad graduating company, right?
Ritu Narayan (00:39:38):
That's what I'm being told.
Eric Ries (00:39:39):
Yeah, it has to be. Listen. And for those that don't know, Lean LaunchPad is an awesome program. It's developed by Steve Blank. It's in many, many universities, teaching entrepreneurship in a totally different way than the conventional MBA style classes used to be. Although, now, some MBA programs have adopted this way of thinking, taking customer development and lead startup and putting it right into the curriculum.
(00:39:59):
And [00:40:00] I think Zūm is one of my favorite pivot stories, honestly, because you have two pivots. You have the Zūm in pivot, no pun intended, of going from the general purpose marketplace for parents into transportation, and then having real success with that, and then, nonetheless, deciding to pivot again to go from the direct-to-consumer into the school district product and to have just... you could see the hockey stick shake of these pivots.
(00:40:27):
And one of the things that people who have not been around real startups before [00:40:30] do not understand about a pivot is it seems from the outside like you're abandoning the thing you did before in order to do something new. And of course, the metaphor of the pivot was always meant to be one foot planted in what you have learned and one some other aspect of the product, changing. So, here, changing from B2C to B2B. But keeping so many of the other learnings that you took with you.
(00:40:51):
So, talk about what that's like. It's very easy for me to say, "Look, a pivot is a change in strategy without a change in vision." From the inside, there's always this through [00:41:00] line of connectivity, or else it's not a pivot. That's the essential element of it. And you already said the critical thing, which is that you, as the visionary, really, you're the person who was not willing to give up. You could have given up on this. You've been working on this for a really long time. It's been 10 years now, right, at least?
Ritu Narayan (00:41:17):
Yes.
Eric Ries (00:41:18):
I mean, when you work on something for a long time, you have to have that determination and perseverance. But I think a lot of people who are new to entrepreneurship, they misunderstand perseverance, they misunderstand having [00:41:30] a vision, being committed to it, thinking for the long term. A stubbornness, and therefore, I don't have to pivot because that's an abandonment of my vision. So, as you were going through this process... I've been there, it's really painful, I found. How do you reconcile the permanence of the long-term vision with the need to be flexible about the strategy?
Ritu Narayan (00:41:52):
Yeah, that's such a great question and very dear to my heart. I still remember that period when we had that moment of clarity, [00:42:00] that we had to make a decision. So, roots of Zūm and the starting point were definitely my own problem and looking at other parents' problem. We launched as completely B2C product. It was super successful in the Bay Area where we launched, and parents would not take a no for an answer. Everybody wanted the solution. But in early stages in 2016, when we were launching, we went to... my kids, actually, private [00:42:30] school is a very well-known private school in the area and said, "Hey, we know your parents are facing a situation. And would you please promote the solution to your parents?" And they said, "We are a nonprofit. We cannot promote anything. But listening to the solution, this is the most thoughtful transportation solution we've ever heard of. Would you be willing to do certain use cases for us, though?"
(00:42:56):
And we were surprised, we were not even thinking about [00:43:00] serving schools or having schools as a go-to market strategy. And we said, "What are those?" They said, we have multiple campuses. And to provide convenience to the parents, we would to have intercampus services. And they gave us a $50,000 contract. And we were surprised. Suddenly, instead of chasing $25 rides, $30 rides, we had a $50,000 contract and all the predictability of the number of rides we would have.
(00:43:30):
[00:43:30] So, it was not in that moment, but that moment of insight was there is a different way and different user and yet solving the same problem. Original thought was, "Wow, we are using the same infrastructure." These are the same drivers doing the same as assignments, same order booking, a similar process. It's just some components of it would change, that the demand is coming from the [00:44:00] school districts who have already given us a contract. But rest of the components were going to be pretty much the same. We didn't change much of the solution, but we applied it to this go-to market in school.
(00:44:14):
So, like any good Lean LaunchPad entrepreneurs would do, we said, "Wow, one district took it. Should we go and ask other private schools whether they have need?" And you wouldn't believe, Eric, we pretty much, in very short period [00:44:30] of time, had many private schools between San Francisco and Peninsula quickly adopting us. And then, in 2017, when we were raising a Series A, there was a question on the table. Sequoia was a lead investor who was investing in us. And they said, "This is an amazing solution, but is it only a rich-people solution that private schools and these parents would use it?"
(00:45:00):
[00:45:00] And even though that was not a limitation to do, the funding at that time, that stuck with us, that, wow, should we be evaluating public school districts? And that was a very new thing. And the same thing, we applied the Lean LaunchPad thing and treated it as a new thing we had to do. And the moral of the story is we were doing the service for the school. So, very early on, like 2016, we started serving schools and started becoming [00:45:30] bigger and bigger. And we realized, in public school districts, there are specialized programs and children are commuting to different schools to get different programs. And there was a need for this kind of a transportation to use our vehicles and apply that.
(00:45:46):
And we became so successful at it, that 30% of the resources that were working on B2B were getting 70% of the revenue for the company. And in 2019, [00:46:00] in one of the board meetings, the insight was, "You guys need to make a decision. Either you could be okay in both or you could be great at one thing. You need to pick which one is that thing going to be." And it meant that we would have to either shut down B2B and focus on B2C or shut down B2C and focus on B2B, which was working so great, and optimize our skillset, because the skillset required [00:46:30] for marketing and customer support, everything is very different for the two sets of users. And it was stretching the company very thin because we were so successful.
(00:46:40):
Actually, it was result for that, the decision was super hard, because no matter where I went, Eric, incidentally, I spoke with you for the first time, you said, "I had used Zūm. I used to hear, 'Wow, Zūm has transformed our life. We use Zūm for our kids all the time. Now, I can go to [00:47:00] any meetings and not worry about rushing back in the time.'" So, this feedback was kind of an ego booster that you are onto something and very deeply associated with my own personal stories because my kids were using Zūm two times a day every single day. And that was a reason I was able to build a company.
(00:47:20):
So, it was a very tough moment. For six months almost, I tried my best to see in my mind, how could I keep B2C and [00:47:30] still have B2B? But more the reflection, more the thing went into it, it was super clear that B2B was the right way to approach because you could create a network density by going to the districts very quickly. These were very large and recurring contracts. And Zūm could be making a bigger impact because student transportation is actually the largest mass transit system [00:48:00] in the country. So, we could be using our system that we have built and providing very direct impact.
(00:48:08):
And it was getting super clear that B2C would not scale the same way unless you threw billions of dollars, like Uber and Lyft had done. And interestingly, Uber and Lyft had also gone public, and there it was clear from the unit economics and everything that you had to build a stronger company. So, what [00:48:30] was right for the company to do was, definitely, to do the pivot in the moment and go for B2B.
(00:48:37):
What helped me internalize and make the decision was that, ultimately, you were really solving the problem for children and parents, no matter which way I went through. And it's not saying no to B2C, but in the future sometime you would come back to it. And by doing those two things, the decision became [00:49:00] very easy for me, that it was not never. It was not now, because timing is not right for it. And you can make the bigger impact and make a larger company and much more impactful and sustainable, profitable company by doing the B2B solution.
Eric Ries (00:49:17):
That's a rare story, I have to say. I have worked with so many founders over the years, and from a business strategy point of view, everything you're saying, of course, makes perfect sense. And in retrospect, it was [00:49:30] a key decision that allowed you to hit this inflection point, and now you're leading a multi-billion-dollar company. But I just think about the ego side of it. The B2C product was so intimately connected to your personal story, the official founding story of the company, which you must have told 10,000 times at that point. You were using the product yourself with your own kids. Your integration of that specific version of the product into your life and to your sense of self must [00:50:00] have been really profound. I've totally been there. And I won't speak for you, but for me, when I've had to make decisions like you're describing, it feels a little bit like dying. It's like an ego death. There's a version of yourself that is expiring as you make this goal.
(00:50:14):
And of course, you didn't know then what you know now. You didn't know it would be successful. I'm sure you had plenty of team members who were upset about it. They had invested so much time and energy in their lives into this thing. I think it's such a beautiful example how the vision has to be bigger than that. Your commitment [00:50:30] has to be not to yourself and your self-identity and your sense of success and the positive feedback. It can't be about the financials and the money because you're giving up revenue. It can't be about what your investors may or may not want. I'm sure investors have very mixed feelings about giving up something they're really positive. It has to be about something that is beyond all those surface concerns.
(00:50:48):
And so, I admire that story so much. It's such a difficult thing to do. And I feel like you're able to talk about it in such a calm way now, but it couldn't have been calm. It must have been really difficult in that [00:51:00] moment. I appreciate you being honest about the fact that you had to reflect on it for six months and really sit with it until you really felt that it was the right thing to do. And then you were all in it from that point.
Ritu Narayan (00:51:10):
Yeah, absolutely. And the entire company was divided because we were always hiring people for both. We were hiring people. And people said, "Wow, the original mission seemed very altruistic, helping moms, helping thing. And now, you're talking about school districts." People had different skill set. Some people had more B2C or consumer [00:51:30] skill set. Some people had B2B skill sets.
(00:51:32):
So, the impact was, after I was able to settle with my story, then the next thing was, how do you settle the bigger ecosystem around it on a running company where you've hired so many people, you have one investor who's very consumer driven and another investors who's very open and can be doing either of the things? And I'm very narrative-focused person. I have this thing about, if the narrative is correct, [00:52:00] you can get everybody aligned.
(00:52:02):
So, the hardest part for me to get the narrative down for myself, my personal story, because I had to evolve my personal story, I did not go to public school districts in this country. I did not know about the system. My kids were not going to the public school districts at the time. And just relating it to a brand-new set of users, your personal story, which was very different.
(00:52:28):
And then it became so easy. [00:52:30] Now, when I go to investors, looking back when you say I'm able to talk about it so calmly, I just say, "Hey, this is the origin story." And somewhere along the line, we realized that the school districts are the right customers for us based on multiple sets of insights. And most of the time, people's reaction is, "Wow, that's so smart." But in the moment, it didn't feel that way because we were fundamentally changing the... it's almost like rebooting your entire [00:53:00] system and now putting a different thing.
(00:53:04):
But once the decision was made, it is surprising, the moment of clarity. Everybody gets along whoever doesn't want to work and they get on the bus, who wants to work. They're aligned with you. There's a new energy. By chance, we also hit at that time, 2020 was coming, and surprisingly COVID hit. So, the operations automatically stopped. Always, it would be there, like, "Did [00:53:30] you yet stop B2C in that six-month period? Did the stop happen?" And I didn't want to face the parents and tell them the services stopped, you're no longer going to have it.
(00:53:40):
So, somehow, we were also fortunate that automatic transition was happening and we made use of those six months to really build our solution at the enterprise grade level win contracts in that area. And there was no looking back. The more the success we had, like, I had in terms [00:54:00] of wins by the team, the better I felt about it. Today, it's super natural to me as if this was the company forever.
Eric Ries (00:54:09):
One of the things that I've observed with companies that have done a pivot is everyone always thinks the hard part of the pivot is deciding what to do next. But actually, that's the easiest part. The hardest part is to get the clarity and get the team aligned that a change is needed and get everyone to agree to adopt the new story. Once you clear the decks [00:54:30] and say, "Look, we're not going to do what we were doing before," and doing two things. That's such a classic. I've noticed so many times you want to keep the old thing and the new thing, even with no problem, we'll do two things at once. But focus is such a scarce resource. It's so difficult to do even one thing, well, let alone multiple things. So, it's very common to have to live in that hybrid state for a while.
(00:54:48):
And then the release of energy you feel after you face your fear and take it out of your identity and go to the new thing is such a rush. And again, people haven't been through that. [00:55:00] Talk a little bit about how you were able to get the culture aligned around changes really needed and we're really going to do it.
Ritu Narayan (00:55:11):
As I said, it was almost like rebooting and rewriting many of the things while, fundamentally, the core culture values for the company... we had four values that were built into the company early days, they remained the same, where the four values are customer obsession, doing things right way. We [00:55:30] always used to say, would you be proud to tell your kids you did think this way? Thinking big, executing meticulously, and building better communities.
(00:55:39):
Nothing changed about it, but we needed a new set of principles of how the behaviors that are needed from the employees and how they should be working in this new environment. So, it was writing, first of all, the narrative. What's the narrative of the company now? What is the new value proposition? Who are the customers [00:56:00] that we are serving? What is the solution? Designing the product and the solution around that. But for exciting the team, that this is what we are building, what change in the metrics would it do? What impact would it do? Why is it meaningful now?
(00:56:16):
One of the things that even today people are so surprised, including the investors, when we raise money is it is the mass transit system in the U.S. 27 million students commute twice daily, even on airlines, [00:56:30] which is second largest mass transit system, only 9 million people travel on a given day. And when you throw that number, people are surprised, just by the scale of the thing.
(00:56:41):
So, getting the story right, getting the product vision and product roadmap right, getting the culture and the behaviors that you need. And it was a program, I literally was calling it Five Step People Program and repeating, repeating every time to people, "These [00:57:00] are the culture. These are the behaviors."
Eric Ries (00:57:02):
What are the five steps? What are the five steps?
Ritu Narayan (00:57:03):
The five steps for us was, gradually, first thing was building the principles, new principles. So, for each one of the values, we built three principles of, what makes you successful at Zūm and what are the behaviors that don't make you successful at Zūm? So, we would repeat those principles with people. We started doing what we used to call Collective Mind Series, so that was a Zoom era. [00:57:30] We would do breakout sessions. So, on various topic like radical candor, giving and receiving feedback, doing things with always having a context in mind, seeking truth, doing continuous improvements.
(00:57:44):
So, essentially, doing things in a way that people internalized this across the board. Those values and principles were internalized for people everywhere. And then, we focus a [00:58:00] lot on transparency. Somewhere, when the pivot was happening, people had a thing, like, "Did you know about it, or did you not know about it? Were we being transparent?" We had to re-establish the trust on the transparency side and do things in a way that people felt like you're transparent. So, there was a new order in place, like, how do you collaborate? How do you communicate with each other? And a lot of it happened over the documentation.
(00:58:28):
Today, if you ask the [00:58:30] company, it's very written documentation. Everything, collaboration happens through writing and giving people very honest, quick feedback, following the principles of disagree and commit. You'll give your ideas because you care. But in the end, everybody... and then having the systems and processes in place for onboarding and performance management and all of those areas.
Eric Ries (00:58:58):
I'm realizing that we never talked about the [00:59:00] product from the parents' point of view after the pivot, and you talked about some of the problems with the conventional schooling transportation systems that, fundamentally, nobody knows where your kid is at any given time, which is, like I said, as a parent, it's such a profound problem. And yet, because those systems are so old, we've taken for granted that that's just how it is. You put your kid on the school bus and you hope for the best. Talk about how Zūm is different from conventional transportation from the parents' perspective.
Ritu Narayan (00:59:27):
Zūm is the only system [00:59:30] and the modern system where parents know directly the brand and they're interacting with it. So, every single parent, when we go to a district, so for example, let me take an example. In San Francisco School District, there are 7,000 parents who are, every day, taking this service. Every single of them have access to our app. And first of all, they onboard through the app and they check the information. So, no errors are made when back [01:00:00] to school happens and no back and forth. Things happen so smoothly that people think positive in the first day of school that happened. In an ongoing basis, parents feel like they have control over rights, so, in the sense that they have full information of when the child will be picked up, who's the driver, what kind of checks have been made, is the driver on the way, how far it is.
(01:00:23):
So, they have complete information. And when the child is not coming or they're on vacation, they can actually cancel the ride. [01:00:30] Our system will automatically redesign things so the driver doesn't even show up on that stop if their child is the only child on that stop. And it's rerouted, instead of everybody wondering in the system what happened.
(01:00:44):
School districts have the powerful technology. They have the entire dashboards where they can see all the buses and their status, whether they're on time, they're running late, or they're going to be about run significantly late. And the [01:01:00] impact of it is, instead of hearsay, they have real information on timeliness. 98% plus of a bus is on time, and they have this information on hand. The reason system is so good is metrics are transparent. After every ride, parent is providing the feedback, school district is able to see, are the other parents happy, what is the feedback they have in the system?
(01:01:26):
We're also a feedback-driven company. If the rating is three or below, [01:01:30] we call the parent, we call the driver. And we not only solve the problem for that parent, we solve the problem for entire system to make sure, is this is something in system? So, when people are surprised, how come the Zūm took over the school district market so fast and they evolve the solution and the customer satisfaction so fast, one of the reasons is that feedback-driven culture of acting on the problems consistently, continuously improving [01:02:00] based on the direct customer feedback.
Eric Ries (01:02:02):
That's such a great expression of your values in action. One thing we haven't talked about yet is the climate impact of what you're doing. Also, we've been talking so much about the impact on parents and on students on children and working families and how important that is, but as you've gotten more into the school district part of the business, I've heard you said on a number of occasions that there's a significant ecological consequence. And I just wonder if you could talk a little bit about the green impact.
Ritu Narayan (01:02:28):
Thank you for bringing that. That was one [01:02:30] of the reasons which, behind the scene contributed to the pivot also. While this whole thing about the impact was there of what you could do to such a large industry and antiquated industry, the other early insight in 2019 for us was there are 800,000 commercial vehicles in the country. 500,000 of them are school buses.
Eric Ries (01:02:53):
Oh, my god.
Ritu Narayan (01:02:54):
School bus is the largest fleet in any given city. In San Francisco, 236 [01:03:00] buses you will see going around. So, the thing early on for us was all of these school buses are going to be electrified. They have such a harmful impact on the health of children through the fumes, through remissions, and everything. And secondly, they have impact on the climate. So, all of these are going to be electrified in the next few years. And we were talking about it way back in 2019, even before IRA came in, our [01:03:30] Clean School Bus Act came in, but that vision was very clear, that energy and the electrification would be a big part of our ethos. Sustainability is going to be a big part of our ethos and how we are going to build the communities.
(01:03:46):
And the second aspect was the insight. The unique insight that we had was, and this is again because we came from the background, we had knowledge of the energy and sustainability, to some extent, that school buses have [01:04:00] very predictable commute. They're a very unique asset which travels the predictable commute towers. And they are not used for transportation in the peak demand of energy. And they're the best assets to be electrified because school buses are like the largest battery on wheels. They're four to six times Tesla batteries with a predictable commute, not useful transportation, and peak demand of energy.
(01:04:26):
So, bigger vision for us, even at that time, was we are going to use [01:04:30] them to give energy back to the grid to do B2G. And today, it's so obvious. In a way, you are adding to the grid resiliency in all the local areas. We are providing the energy back to the grid, so, directly to the grid for the grid resiliency or to the buildings. And people are surprised when we talk about that, that the goodness never ends. Your solutions keep giving more and more [01:05:00] to the community. And so, this whole sustainability thing is really big for us. Our goal is, in the next three years, we will be 100% electrified.
Eric Ries (01:05:12):
In the next three years?
Ritu Narayan (01:05:13):
Next three years.
Eric Ries (01:05:13):
That's terrific, wow. How many buses, total?
Ritu Narayan (01:05:18):
It'll be around 10,000 buses at that time. And we are actually working in the ecosystem because it is a very complicated system. Electric buses not just get a bus and [01:05:30] fill the fuel and get running. You have to establish the charging infrastructure. You have to work with the utilities to get the integration done. You have to ensure that the electric school buses are charged at the right time and they're up and running.
(01:05:44):
So, whole thing about availability, reliability, and there is essentially a lot of time lag. These systems are developing, still. They're still in the new stages. And we have been part of actually working with ecosystem and bringing [01:06:00] it to the stage where we feel good about actually launching with the district in the next few years. And we are actively working on the electrification of the districts that we work with. Sustainability is one of the reasons that districts get very excited about Zūm now.
Eric Ries (01:06:16):
One of the recurring themes through every aspect of your story is the focus on impact. And I think a skeptic might hear the story and say, "Then, why are you a for-profit company? If you're so focused on impact, [01:06:30] and here, especially after you've made this pivot, you are making money off public dollars, you're part of a nonprofit government, public sector community, why should you be a for-profit company?" I'm curious, why did you choose to create the company that way? And how do you feel about it now that it's grown so large? How do you feel you can reconcile your desire for impact in the vision, really, I think about impact with the company being structured as a for-profit?
Ritu Narayan (01:06:55):
So, when I was incubating the company at Stanford, [01:07:00] they also have a social innovation research component where you could actually incubate the company as a social innovation company and go from there. And I did spend time in understanding what kind of companies were coming from there versus if I went to normal approach of eBay. eBay is also a very altruistic company where people generally felt like, in the beginning stages, they were making such an impact and they had similar evolution. Looking back, if you see, [01:07:30] they started doing bigger and bigger sellers and all of that. But the impact never changed.
(01:07:36):
So, insight for me was, by building a for-profit company, you can bring the best of the ideas, the best of the funding and investment to build a very large scale impact. I had not seen any of the social innovation companies that could scale and bring the similar level of impact for me. The funding sources that you would rely [01:08:00] on, typically, foundations and donations and other things and versus attracting the talent right talent that would be needed to build the infrastructure at that scale. It was super clear to me that it is more closer to I would say eBay or Airbnb than the other kind of infrastructure.
(01:08:19):
So, it was a very conscious decision. That doesn't change the motive of the impact for us, how you structure the company. We also believe in bringing [01:08:30] financial success to all the stakeholders, including our employees and teams and investors. And that's how I believe you can create a system that people would solve social problems by bringing in everything, by bringing in scale, right investment, right financial success for the company.
Eric Ries (01:08:51):
There's also something very contrarian about how you've done this. We've gone through many industry fads to do asset-like companies to... particulalry, on software, we want to have high margin. So, a [01:09:00] lot of people think that means doing something simple, easy, small, find the high leverage point in the industry, suck out the high margin bit, leave the low margin bits for everybody else. But you've consciously made an effort to tackle something really difficult. You're not just doing bus scheduling, you're actually financing the conversion of fleets from diesel to electric. You're working on charging infrastructure. You're selling electricity back into the grid, going through procurement.
(01:09:21):
I mean, you've chosen a really ambitious mission. You've defined the purpose of the company very broadly to do something very difficult. There's obviously [01:09:30] a downside to that, which is everything's harder. It's taken you a really long time. But talk about the advantages that you've seen in trying to tackle the problem in a full stack deep way to set that north star to be something really big and ambitious.
Ritu Narayan (01:09:43):
That was a very conscious decision when we were pivoting, because earlier we were asset-light and we were using network of vehicles, which was orchestrated on our platform. And then it turned into you would need physical assets to be able to do it.
(01:10:00):
[01:10:00] And part of the decision of there was an option on the table, should you be just doing the software aspect for all these existing players who already have the physical infrastructure? Should you be establishing your new physical infrastructure? It was super clear to us that we would not be solving the real problem if we did not get involved in the physical infrastructure space.
(01:10:25):
And that is absolutely true, even more because of sustainability and [01:10:30] electrification inflection that's there on the table now. To be able to transition these old infrastructure into the electrification, you need that kind of innovation, that kind of scale, that what we can bring to the customers from our side working on a company. So, we decided that we are similar to many other companies like Amazon. They decided that they had to have their own infrastructure. That was a very conscious [01:11:00] decision for us. And then we solved the problems to see, what would be the best ways for us to get that infrastructure so that we have a asset-like model, which looks like an asset-like model to it, but at the same time we can have the speed and scale of software companies? And that is a surprising thing about Zūm, of how we have been able to scale as a physical company so fast.
Eric Ries (01:11:23):
Must give you a tremendous talent advantage, too. Talk about how the mission allows you to recruit folks that may be, otherwise, you wouldn't be able to.
Ritu Narayan (01:11:30):
[01:11:30] Absolutely. The first thing, everybody, no matter whether they're executives to down to a school bus driver's level, they talk the same story like me. Their story is the same. And sustainability has been such a big attractor of the talent for us. People really care about the climate. So, both the things combined together, you're making impact on education, you're making impact on people's personal lives, you're making impact [01:12:00] on the climate and sustainability, just makes it... a lot of people say purple unicorn, very hard to find in the same thing.
Eric Ries (01:12:09):
You've also had tremendous fundraising success. You've had some of the top names in venture capital invest in the company, both in the old version and the new version. Do you feel like having this intent and long-term purpose at the heart of the company has led you to attract better... has allowed you to attract more [01:12:30] powerful resources into your ecosystem?
Ritu Narayan (01:12:34):
Having the mission-driven scale and the for-profit, this desire to make a sustainable, large, profitable public company has definitely allowed us to attract the best of the investors. These are the very long-term investors who look from idea to IPO. And every stage, we look for who would be the right investors for the next stage of the things. And I would say [01:13:00] the story, the narrative, the success, financial success of the company, business success of the company has all contributed towards those investments.
Eric Ries (01:13:08):
As you look ahead to raising more capital to maybe eventually becoming a public company, do you worry sometimes about investors gaining too much control and being able to interfere with this mission? Because to me, one of the saddest possible outcomes for a company like this would be for it to transition from being this value-add really generative mission-controlled company to one [01:13:30] that's being extractive and exploited it. Think about how many government contractors are out there that exist only to serve themselves, had become bureaucratic. Do you ever have fear of that happening to you someday on the suture?
Ritu Narayan (01:13:40):
So, far we have washed out for that by, every stage, aligning the values and looking at the values of not just the fund and the investor, but also the people who we would be directly working with. For example, in a last Series A fundraise, we were definitely looking for the same value and sovereign [01:14:00] investor, very long-term thinking, interested in both the infrastructure and technology, very deep-rooted in sustainability.
(01:14:10):
When you actually look for not just money and you're every stage looking for the right investor, similarly, when we were raising Series A, I have to say we rejected the term sheets and company was almost going to run out of the money. But we kept at it because the Sequoia process was closed but not [01:14:30] closed, that if you would want to build a company, you would want to build with the best investor. And that decision paid off. It could have been... so, that conscious decision of choosing the right investors who are aligned with your values and mission has been successful, so far, and something we need to continue to work on in the future as we attract new investment.
Eric Ries (01:14:55):
What advice would you give to a founder who's thinking about following in [01:15:00] your footsteps who says, "I want to build a purpose-driven, mission-driven company to make a social impact, but I want to try to do it as a for-profit company?" What should they do?
Ritu Narayan (01:15:10):
My unique insight working on Zūm was you should pick a problem that you are deeply passionate about. Ideally, you are facing yourself or you've seen people around you facing, and no matter what, you would get up in the morning and keep at it for a very, very long time. It is [01:15:30] super easy to just drop out of the idea. There's so many nos at each stage, whether it's early customers or when you do the market development to investors, people saying this would not work, or some of the company would come and take over you. Unless you have that commitment to that mission and passion and curiosity that you are the only one who's going to solve this problem, if you don't solve, nobody else will solve it, that's the only way to continue. So, my [01:16:00] advisors start with the problem that you're deeply committed to and passionate about.
Eric Ries (01:16:05):
Amen to that. That's definitely the only thing that can keep you going through the very, very long nights that this kind of entrepreneurship requires.
Ritu Narayan (01:16:14):
Mm-hmm.
Eric Ries (01:16:15):
Ritu Narayan, thank you so much. On behalf of so many parents, thousands upon thousands of parents who feel a sense of trust and safety when you're moving their kids around, I just want to say thanks for all that you're doing. And I think this is just the beginning. So, very excited for all of us to be your allies [01:16:30] and to cheer you on, as we see what comes next for Zūm. Thanks for having this conversation.
Ritu Narayan (01:16:34):
Thank you for having me. Thank you.
Eric Ries (01:16:37):
You've been listening to the Eric Ries Show. Special thanks to the sponsors for this episode, DigitalOcean, Mercury, and Neo4j. The Eric Ries Show is produced by Jordan Bernstein and Kiki Garthwaite, researched by Tom White and Melanie Bijack. Visual Design by Reform Collective, title theme by DB Music.
(01:16:57):
I'm your host, Eric Ries. Thanks for listening and watching. See you next time.
For this episode of The Eric Ries Show, I sat down with Ritu Narayan, founder and CEO of Zum, which has had incredible success in the field of student transportation.
The company began as a private service to tackle a problem Ritu was facing herself: how to function as a working parent dealing with erratic pickup and drop-off schedules. Before long, it became clear that there was a far larger opportunity to change pretty much everything about how all kids get to and from school.
Pivoting to working with school districts and a fleet of electric buses, the company set out to “modernize student transportation to make it safe, sustainable, and accessible for all.”
To say it’s been a success is an understatement. Zum now serves thousands of schools in multiple states, and in February 2024, it hit unicorn status with a valuation of over a billion dollars. As Ritu says in our conversation, “the service is for everybody.”
We also talked about everything from carbon-neutral buses to cracking the procurement system of public school districts, the invaluable asset of parental peace of mind, scaling care, and more, including:
• How Ritu came to entrepreneurship
• Scaling trust
• How coming from the outside allowed the company to transform the industry
• Shifting from a B2C company to a B2B company
• Zum’s values: customer obsession, doing things the right way, thinking big and executing meticulously, and building better communities.
• How a clear mission makes alignment easier
• Zum’s “Five Step People Program” to reinforce culture and behaviors
—
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Where to find Ritu Narayan:
• X: https://x.com/ritun
• LinkedIn: https://www.linkedin.com/in/ritunarayan/
• Zum: https://www.ridezum.com/
Where to find Eric:
• Newsletter: https://ericries.carrd.co/
• Podcast: https://ericriesshow.com/
• X: https://twitter.com/ericries
• LinkedIn: https://www.linkedin.com/in/eries/
• YouTube: https://www.youtube.com/@theericriesshow
—
In This Episode We Cover:
(00:31) Welcome to the Eric Ries Show
(01:09) Meet our guest Ritu Narayan
(04:32) Ritu describes how Zum has reinvented the school transportation field
(06:50) The Zum origin story
(08:01) Zum’s pivot from private service to school district partner
(11:17) Scrambling to meet the demand and understand the RFP process
(13:17) Zum’s amazing growth from one contract to unicorn
(19:48) How Ritu got started as an entrepreneur
(21:09) Being a woman engineer in her family, college and the workforce.
(22:06) How being a working parent showed her the multi-generational problem she wanted to solve
(27:59) Establishing trust and placing it at the center of the company
(33:28) Being a child-centric company
(35:13) The deep care that transportation directors showed towards their students
(40:00) The Zum pivot
(41:43) Reconciling long-term vision with a flexible strategy
(44:28) Expanding from private to public schools as the result of raising a round
(47:20) Shifting from B2C to B2B
(51:54) How gaining clarity of mission brings the right people into alignment
(55:01) Zum’s four pillar values and the narrative they uphold
(57:05) The five steps to restructuring the company after the pivot
(58:58) The value of Zum from the parent perspective
(1:02:05) Zum’s climate impact
(1:06:19) Reconciling the vision of sustainable transportation and equality with profit
(1:09:34) The advantages of tackling a huge problem instead of a narrow one
(1:13:08) Working with mission-aligned investors
(1:15:02) Ritu’s advice for founders who want to build purpose-driven companies that are also for-profit
—
Referenced:
• Zum: https://www.ridezum.com/
• Startup Garage at Stanford Business School: https://www.gsb.stanford.edu/experience/learning/entrepreneurship/courses/startup-garage
• Steve Blank’s Lean Launchpad: https://steveblank.com/category/lean-launchpad/
• W. Edwards Deming’s 14 Points for Management: https://deming.org/explore/fourteen-points/
—
Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email jordan@penname.co
Eric may be an investor in the companies discussed.
Disclaimer
The information is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Information about the company is provided by the company, or comes from the companies’ public filings and is not independently verified by LTSE. Neither LTSE nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding LTSE-listed companies are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. Advice from a securities professional is strongly advised.