Eric Close says he doesn’t know how to start companies.
That may be true, but he certainly has a knack for restarting them. And a passion for it. Enough so that he moved back to Pittsburgh in early 2003 from Connecticut — where he and his wife had settled a couple of years before to be close to her family — to breathe life back into RedZone Robotics Inc. as an investor and its president and CEO.
As newly minted MBAs, Close and his former partner, Chris Farls, had acquired and turned around Proline Services, a failing McKees Rocks railcar maintenance business and sold it at a profit in 2000. Since then, Close has rehabbed and sold a Pittsburgh software company to Apple Computer Inc. and invested in a faltering Philadelphia aerial lift business that, with a partner, he has helped to revamp and revive as a replacement parts company.
RedZone Robotics Inc., a Homestead business that has its roots in the work of robotics guru and co-founder Red Whittaker, a Carnegie Mellon University professor, had slipped into bankruptcy. Whittaker persuaded Close to return to Pittsburgh to get the company upright.
Since Whittaker founded RedZone in 1987, it had carved out its niche doing custom robotics, mostly for government agencies and contractors. But changes in the way the government procured services and shifts to other technologies or methods had left RedZone disconnected from its traditional customer base.
Under Close, RedZone has changed its focus and its prospects. Today, it offers two basic robot products used to enter commercial sewer and water lines to inspect, clean and repair them. The robots, equipped with a variety of attachments and guided through pipelines with the assistance of a computer, take most of the danger and a chunk of the cost out of underground line work.
Close is convinced that the network of aging commercial sewer and water lines in the United States offers a lucrative market for robots that can do dirty and dangerous work, offering significant savings for municipal authorities. And he isn’t alone in his confidence in RedZone’s prospects; an investor group led by Smithfield Trust, a Pittsburgh wealth management firm, put $2 million into RedZone in October. That’s enough to create another 20 jobs over the next year and nearly double its current work force.
For now, Close seems content to take a break from rescuing other troubled companies. Robotics and RedZone, it seems, are where he plans to be for the long haul, perhaps because he sees tremendous potential for robotics technology.
Says Close: “My interest is to grow RedZone to be as big and successful as it can be, and we’re really well-positioned to take advantage of this nascent market.”
Smart Business sat down with Close to discuss his knack for turnarounds.
Why did you get involved with RedZone, a company that was in bankruptcy?
I’ve done a lot of turnarounds. One thing that’s unusual about me is that I love bankruptcies. There are a lot of opportunities when you go into bankruptcy situations or near-bankruptcy situations where there’s some hidden value.
You can get assets relatively cheaply. Usually, it involves remaking the business in some way. A lot of people like starting companies from scratch; I don’t know how to start a company. I only know how to start with something.
Were market issues involved in RedZone’s problems?
Yes. One of the big things that occurred was the Department of Defense got out of the business of buying robots. RedZone was very good at selling to the government directly and getting involved in these big research programs. That changed, and the government began outsourcing the servicing of these hazardous waste sites, like Hanford and Oak Ridge.
They now have outsourced to companies that will go in and clean these sites up. RedZone didn’t have good connections with the service providers, and in many cases, a lot of things RedZone was doing could be done less expensively using human labor or less expensive custom automation.
It (the company) just didn’t change with the times and the way the market changed. (It) stuck to the original, more academic model of getting big design and development and R&D projects. We made a transition to focus strictly on product. We look at a market and we make standard products for that market and address (its needs).
How have you changed the company since you took it over?
The money that we’ve raised to date, along with our revenues, has gone to make two standard products. One operates in 24-inch pipes or smaller, and the other operates in 24-inch pipes and larger.
We have contracts with the Allegheny County Sanitary Authority. We go in and see what kind of debris is down there, we go in and clean out blockages that are inaccessible. It saves significant amounts of money because otherwise they would have to dig, rather than just go through the pipes with a robot. It’s significantly less expensive to not have to dig.
How valuable was your experience with Proline?
Proline was the foundation. Frankly, when Chris (Farls) and I graduated, we didn’t know anything, we didn’t know what we were doing. We just really took the attitude where you go in and sink or swim.
And then you learn how to get tough, how to make the tough decisions and see your way through things.
What specific things did you learn?
Basically, it was being able to handle all the uncertainties that all business brings, like managing cash flow. Chris and I bought it and kept it from going into bankruptcy. It was running out of money. We actually brought in as little money as we could so we could retain as much equity as possible.
And then we saw the company through difficult cash flow times. We had times where we had a big sales drought. We had lost one of our big customers and had to scale down and see ourselves through a very, very difficult time. We learned how to use computers effectively to keep track of our costs and more effectively sell to our customers.
Does it make a difference that RedZone is more technology focused than the other companies you’ve tackled?
It doesn’t for me, only because I’m very technical at heart. I was a little more out of my element in the railcar business than I am now. What the railcar business did for me was to allow me to learn how to manage blue-collar labor, something I had never really done before.
I learned how to work on thinner margins and how to understand capacity constraints in manufacturing shops. So it gave me an area of expertise that I’m now using. Even though we’re in a high-tech business, we still have to build stuff.
A lot of that training at Proline is helping me every day. How to reach: RedZone Robotics Inc., www.redzone.com
