Zūm’s mission is simple — to introduce student transportation that is reliable, efficient, sustainable and transparent.
To achieve the feat of modernizing an incredibly outdated, stuck-in-the-mud system, Zūm relies on cloud-based analytics software to create an agile bus routing system with real-time visibility for schools and parents. The startup also uses a diverse fleet that includes buses, vans and cars that it distributes based on specific use cases. For example, kids who live on busier routes will be assigned to school buses, and those who are slightly more remote will be sent vans or cars to increase overall efficiency.
When we last talked to Ritu Narayan, Zūm’s founder, the startup had just won a $150 million contract to modernize student transportation at the San Francisco Unified School District and was working on a plan to transform its fleet of electric school buses into a virtual power plant to provide backup energy to the grid.
“Zūm is a very recession-proof business. No matter what, kids are going to go to school every day, whether there’s a recession or inflation.” Zūm founder Ritu Narayan
Since then, Zūm has signed a $68 million contract with Seattle Public Schools and a $400 million contract with the Los Angeles Unified School District to bring their outdated busing systems into 2022 and beyond. The company also closed a $130 million Series D led by Softbank Vision Fund 2, bringing its total funding to more than $200 million and set a goal to have a 100% electrified fleet of buses, vans and cars by 2025.
We sat down with Narayan to catch up on the past year and talk about how to bring on top tech talent, how growth-stage startups can attract next-level investors and how to pick a recession-proof business.
Editor’s note: The following interview, part of an ongoing series with founders who are building transportation companies, has been edited for length and clarity.
TechCrunch: Zūm has had some impressive new executive hires lately — it looks like you’ve poached from the likes of Amazon, Microsoft, Uber and Netflix. Do you have any tips for other startups looking to attract top tech talent?
Ritu Narayan: The No. 1 thing is the focus on the mission and the purpose. The business that we are disrupting is a pretty old business. It has been around for 80 to 100 years with not much change. So when looking for potential hires, we just map out very clearly what change Zūm is bringing. We believe everybody has faced some kind of school bus story, whether they got bullied on the bus or maybe didn’t have access to one and had to walk. It’s such a part of people’s lives that when we actually explain our mission and founding story, people are very much able to relate.
The second thing is about our business momentum. Zūm is at that inflection point of scale where certain types of talent really want to be part of and take a company through that upward trajectory. And the third aspect of it is actually pure culture. We focus a lot on the culture match, being very open about our culture values. Often it ends up being a self-selection process for people because we’re really transparent about what it looks like to work at Zūm, what the collaboration across teams would look like, etc.
Would you say that something as essential as transporting students will be more immune to the effects of a recession?
Yeah, Zūm is a very recession-proof business. No matter what, kids are going to go to school every day, whether there’s a recession or inflation. And the biggest barrier to getting a wholesome experience of education is actually transportation. Can they actually go to school, and what does that experience look like? Is it a long commute where they spend hours consuming fumes or sitting in an environment that is actually not conducive to learning or can you make it in a way that’s very safe, clean, transparent and friendly to them?
We’re also experiencing some tailwinds that are really attracting that upward trajectory. School districts realized two things during the pandemic: One is that physical infrastructure is super critical for kids’ education and the virtual thing doesn’t work, so kids have to come back to school. And the second thing they realized when the whole system stopped was that their existing infrastructure is not flexible, not digitized and not what they need. So school districts are very open to modernizing and bringing in that change.
Climate has become front and center during the pandemic and post-pandemic, also. Districts really want to transition to sustainable systems. And that’s where, again, our business really fits in, because in the first act, we actually modernize the system using the technology, and in the second act, we transition a sustainable system into electric vehicles and actually will give energy back to the grid.
As a growth-stage company with some big funding rounds and large contracts coming in, how do you think about VC funding today?
The funding environment has changed significantly in the past few months, especially for growth rounds, where investors are more careful. They are looking for more metrics in terms of sustainable and profitable growth. That’s where companies like Zūm truly stand out because, first of all, we are recession-proof and growing 3x year over year. On top of that, we have very large contracts and predictable revenue that is coming in. So all of those conditions combined together make us a very good candidate for continued investment.
What does sustainable and profitable growth look like generally?
Sustainable and profitable growth is that your value proposition and product-market fit is so good that customers need your solution. You don’t need to do a lot of discounts or anything to get people to buy the product. Your product is an essential thing for them that they would actually buy as long as they know about it and the awareness is there.
Then the unit economics of the product has to work well. You need to consistently show that you can be a large, profitable, sustainable company in the early days. Every startup has to spend on growth, but are they spending on growth in a sustainable way that at some point they will be profitable?
Last October, Zūm had a goal of adding 10,000 new electric buses, vans and cars to the platform and getting to 100% EVs by 2025. How’s that going?
Earlier this year, we announced 10 EVs in the Bay Area that are running in SFUSD, Oakland and a couple of private schools. Starting later this year, we expect to transition 100% of the Oakland fleet, so around 75 of them. In two to three years we do see the transition ramping up.
Has Zūm yet tried to tap any government funds for this?
Yes, so the price of the electric school buses is still really high. It’s going down but not fast enough for 100% adoption. So we have partnered with the California grant program to get the subsidies for the transition as part of our first phase. But our goal is to not rely on the subsidy in the long run and make the whole process very viable and sustainable. Part of that comes back to Zūm creating efficiencies in routing and how many vehicles are actually needed.
Your last raise was back in October. How have you spent the money? Does it go toward the purchasing of these electric vehicles?
Most of our money is actually toward the operational expenditures of hiring the tech and product teams and sales and marketing people. We don’t own the assets on the balance sheet. We lease out the vehicles and those are paid to the actual contracts that we have. So essentially, it’s in the growing of the business and improving the product and selling the product into the districts.
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What’s the hardest tech problem that you’re solving right now?
It’s really about making the tech accessible to a wide variety of people on an ongoing basis while also creating a massive logistics infrastructure and ensuring that everything behind the scenes is running smoothly and is transparent and visible in terms of where the bus is, which kids have boarded and gotten off, the routing and navigation that accounts for traffic and can be rerouted.
I’ll give you a recent example. LAUSD just went live, meaning more than 10,000 parents instantly came on the platform, as well as over 400 buses and drivers. It’s a massive operation that we set up. Three weeks before launch, we found out that LAUSD doesn’t have emails for their parents — they only have phone numbers. Well, the login for the Zūm app was through emails. So our team really quickly came up with a login that is tied to the phone number instead. So there was a lot of transition to make sure everything can happen through phone numbers rather than emails, but we realized it will actually help a lot in terms of equity across the public school districts given the broad demographics there.
Refresh my memory. Are your drivers employees or independent contractors?
The school bus drivers are employees of the company, but we also have a pool of 1099 drivers for smaller vehicles that do less busy routes or after-school runs.
How do you ensure then that there’s safety and consistency? Like if there’s an accident, who’s at fault? This is some hot water that Uber and other ride-hail companies face with gig workers, so I’m wondering how Zūm combats that.
Safety and risk mitigation is a very big part of the company. Our drivers go through very extensive training outside of standard school bus certification training. They learn things like social and emotional learning and conflict resolution, how to report abuse, how to give a delightful customer experience to the kids. All of those trainings really helped us in terms of safety. We also have cameras in the school bus, which we use to help coach drivers and give them ongoing training, for example, if there was a hard brake or they ran through a stop sign.
Also, parents provide us with feedback after every single ride and we are rated 4.9 over hundreds and thousands of ratings. But anytime there is a three or below rating, we reach out to the parent and reach out to the driver to learn more and improve.
How does that sort of training given by Zūm work for your gig workers, though, since that seems like it would put your company in a position of controlling how the job gets done? Also, per the ABC rules, it seems like the gig workers are a vital part of the business, not an ancillary service.
To clarify, those training programs and things that I talked about were for our school bus drivers, who are employees.
So the other drivers don’t get training?
The other drivers have training videos that they can watch. But for school bus drivers absolutely we pay them for the time they spend training.
Seems like a potentially sticky situation given the current gig worker fights happening in California. Does Zūm have a runway to bring on its contractors as part-time employees?
We constantly look at it and we know what’s needed in that direction and we are very prepared.
Final question. Can you share some guidance for Zūm for the rest of the year?
We grew 3x in revenue from 2021. Our goal is to more than double our revenue in the next year, and we are very much on track for doing that.
We’ve launched in Seattle and expect to grow our presence throughout the Pacific Northwest and bring the same changes across Washington and hopefully into Portland. We are also looking at expanding to other states outside the four states that we currently serve. We will invest in the East Coast in a big way.
In terms of electrification, we are still looking to go into electrification and our plan is to continue to strive for 100% electrification by 2025. Right now we’re at around 8% to 10%.