Gatik’s Gautam Narang on the importance of knowing your customer

Gatik is something of an outlier in the autonomous vehicle space. Whereas most companies are either trying to scale robotaxis or commercialize long-haul self-driving with Class 8 trucks, Gatik is more focused on smaller box trucks and middle-mile logistics.

Gatik CEO and co-founder Gautam Narang said there are two main reasons behind this go-to-market strategy. First, an autonomous solution for middle-mile logistics solves specific customer problems. Second, it’s a solution that can be deployed at scale, with no driver behind the wheel today — not in five years.

Gatik is the third company that Narang and his brother, Arjun, founded together. Their first company was in Delhi, India, a medical robotics startup that focused on the rehabilitation of stroke patients using robotic arms. The problem was that labor is cheap in India, and rehab centers and hospitals didn’t see the need for an expensive and unsociable robotic arm when they could hire nurses.

Narang said he and his brother took that lesson to heart and decided not to create technology for technology’s sake, but rather to focus on validating the real customer pain point.

The customers, in Gatik’s case, were grocers and retailers that were struggling to meet the expectations of the end consumer for same-day delivery. Those expectations have already created a shift in the logistics chain that Gatik has been able to grasp onto.

Gatik defines “middle mile” as distances or routes up to 300 miles. The company has around 40 trucks today that move goods in a hub-to-spoke model (rather than a hub-to-hub model) from a distribution center to microdistribution centers and from those centers to multiple retail locations.

Today, Gatik does daily driverless operations with Walmart and Georgia-Pacific in the U.S. and Loblaw in Canada.

We sat down with Narang to learn more about why Gatik doesn’t do free pilots or accept short-term partnerships, the importance of knowing your customer and what investors are looking for in today’s funding environment.

You and your co-founders have strong backgrounds in robotics. What made you want to pursue the box truck approach to self-driving technology?

Matching the customer needs to what was possible from a technology standpoint is how we started the company. When my co-founders and I decided to start Gatik, the criteria we had in mind was firstly starting with a real customer pain point. Back in 2015, 2016, many companies in our space were approaching this problem mainly from a technology angle, building technology for technology’s sake. The thinking was, we’ll figure out the tech and then worry about the use case and business model later. We wanted to do things differently.

Second, we wanted to focus on an application that was more near term, so that’s how we went after this middle-mile or B2B short-haul segment of the supply chain.

The insight we had was the world of supply chain logistics is moving closer to the end consumer. The online grocery segment was growing like crazy, but making that two-hour or three-hour delivery window was becoming more challenging for the grocers and retailers. In an effort to be able to meet that delivery window, they were moving their supply chain to the end consumer by building out microdistribution centers.

All this is to say the routes were getting shorter but more frequent, and the size of the trucks was getting smaller, as well. So that’s how we came up with the category of Class 3 to 6 vehicles going after this mid-mile. And the best part about this mid-mile was we had to operate the trucks back and forth on fixed and repeatable routes. The whole idea was, let’s not try to solve autonomy over a large geofenced area. Rather, let’s focus our efforts on these fixed and repeatable routes, overoptimize the technology for these routes and get to the point of driver-out faster and safer than the competition.

How fixed are these routes? Are your vehicles just driving from point to point?

We’re still operating Level 4 autonomy, but yes, the operational domain is narrower compared to a company that’s going after robotaxi or last-mile delivery. Instead of going after, let’s say, a large geofenced area like the city of San Francisco, we operate our trucks back and forth on these repeatable routes.

Today we are the only autonomous trucking company doing daily commercial deliveries on public roads without anyone on board. When we started out, we were doing shorter routes, like less than 10 miles point to point, so moving goods from one warehouse or distribution center to one retail location. Over the last few years, the technology has matured to a point where we can do pickups from multiple nodes and do deliveries to up to 50 retail locations as well as any combination in between.

To give you an example of a partnership where we’re doing exactly this is with Georgia-Pacific. So in Dallas, Gatik is moving Georgia-Pacific paper products from one of their distribution centers (DCs) to a network of 34 Sam’s Club locations. So on a daily basis, the exact route changes, and we are touching about five to seven stores. As long as the network is manageable and the routes are known and repeatable, we can handle those kinds of networks.

That’s how we think about our business as well. We focus on specific routes where the technology is solvable today, we get to the point of validation where we can take the driver out, and then we do that again across other markets.

Since you’re already operating without human drivers, have you been able to deliver your customers cost savings from not having to pay driver wages yet?

The way we think about the value proposition from a cost perspective is at scale. We can help save our customers up to 30% over a five-year window.

We have been doing daily driverless operations with Walmart in Arkansas since 2021 and commercial operations in Arkansas since 2019. So, on those sites, once we have whitelisted a route for unmanned operation, as long as we deploy two trucks, that route and that site is profitable for us.

It’s worth noting that when we think about our commercial partners, all the partnerships that we have on the commercial side are multiyear-long, meaning we stay away from doing short-term demos or pilots. Today, Gatik works with over 10 Fortune 500 customers, and each of these partnerships is at least two years or more.

Are you pulling in revenue from most of these customers yet, or are you still doing free pilots?

We have not done any free delivery ever. So we have been doing commercial deliveries since 2019, meaning every trip that we have made, we have been paid for. In terms of revenue, I would say we are close to double-digit million revenue now. We expect the revenue to increase significantly this year.

Taking a step back, as a company, we are at a point where we have proven that the technology works across multiple markets and multiple customers. Regulations for this particular use case are favorable, in part because we do not cross state boundaries. We also have crazy commercial demand. Each of our customers wants more trucks on the road, so we are at a point where the focus is very much on scale and growth.

How did not doing free deliveries change the nature of your partnerships?

We spent a lot of time with the potential customers early on, asking a lot of questions, not talking about our solution at all. The real test was, will our customers pay a premium to use our solution? So that’s why I made the comment that we have never done a free delivery. Rather, we charge extra. We were charging all our customers, even Walmart, a premium. They were paying more than the operating costs in 2019. That was a good way to test how serious our customers are.

The reason we don’t do demos or pilots is because we want to make sure they’re with us for the long run. We have never lost a customer, and we are careful and deliberate about who we partner up with both on the commercial and on the investment side.

How far do you think you are from profitability?

As long as we continue executing well, in the next three to four years, we’re targeting being cash-flow-positive. Given the kind of use case that we are going after and how structured this autonomy problem is, Gatik has been able to be very capital efficient.

You last raised $85 million in August 2021. Do you plan to close another funding round soon?

That’s the last one that we have shared publicly. We have done another round that we have not yet disclosed publicly, and that was done toward the end of last year. It was also a meaningful step up in valuation, and we onboarded some very strong institutional strategic investors. As a company, we have at least three to four years of runway to execute against the plan. The focus is very much on getting as many trucks as we can on the road. Today the fleet size is about 40 trucks. By the end of this year, we expect that number to be in the couple of hundreds of trucks, commercially deployed for our customers here in the U.S. and Canada.

This is a tough market to raise funds in. What have you found investors are looking for?

In our space, making sure that there is a business model where the economics are proven out is very important. Right now, that has become even more critical. I would also highlight that today we work with leading companies across different verticals — we started out with a focus on retailers and grocers, but then expanded that focus to e-commerce companies, logistics companies, CPGs. So having the right commercial traction tied to the fact that the technology works, that we’re able to do daily commercial operations without anybody on board, that’s the holy grail in our industry.

So on the investment front, our story, our numbers and our technology were proven. The regulations are favorable. The next challenge is proving that you can scale.

One of the main stories autonomous trucking companies tell is about the driver shortage — no one wants to drive long-haul routes anymore. That doesn’t seem like as much of a problem with the middle mile.

That’s one of the value propositions behind autonomous technology, and I agree that there is a need for that solution. What I’m challenging is, is the technology ready for prime time in the Class 8 sector just yet? Because for a very long time, the narrative was highway driving is easier for autonomy, which is true. From a purely software standpoint, highway driving is easier.

But as a business, long-haul trucking is facing two challenges. The first one is safety. The second one is regulation. Safety because it’s a mass and velocity problem, right? You have an 80,000-pound truck driving down the highway at 85 miles per hour. You have to be damn sure that the system is perfect before you can pull the driver out. So even though the development of the technology is easier, the validation of the technology is still going to be a challenge for Class 8.

Tied to that safety concern, regulations are also a big bottleneck for the Class 8 players because if you’re trying to make that inter-coast or interstate trip happen, you have to work with multiple state regulators and policymakers, and it’s going to take awhile. I’ve spent close to 15 years in this industry, so I’m a believer, but I’m not a believer in the timelines that have been promised over the last few years. Whatever is happening in the industry with consolidation and companies folding, it’s not a surprise. It’s healthy for the industry, and investors are asking the right questions, as well.

You came out of stealth with a Walmart partnership. Any plans to expand that partnership soon?

Phase one of the partnership has been very successful, where we were able to validate and prove out the technology and the use case. Phase two of the partnership is very much focused on scaling our solution across Walmart’s network nationwide. We’ll be sharing more details on this partnership and other partnerships in the coming months.

We’re coming into a recession, and people might not want to pay extra for two-hour delivery. Also, AV companies are falling down around us. Would Gatik consider being acquired by another company?

First off, I don’t think we are going to go back to the expectation where you and I would not want our orders as fast as possible and as cheap as possible, right? We have been pampered even before COVID. I don’t personally believe that’s going to change, so our solution will continue to be relevant.

Answering your question more directly, I would say, being an immigrant in the country, my dream is to take this company public. I strongly believe that Gatik can be a long-standing, independent company in our space. Long term, we see ourselves as a logistics company with autonomous driving as a secret weapon. We’re not licensing our technology so we can maintain a direct relationship with the customer, which allows us to have the right margins and growth and use that insight from customers to inform product decisions.

Frankly, the way the company has executed over the last few years, I’m very bullish on the future. If anything, I would say we are exploring opportunities where we can acquire companies, because our industry is going through this consolidation phase. There’s a lot of good talent and exciting technology out there that will allow us to accelerate our road map toward the vision that we have.

What kind of companies would you be interested in acquiring?

I would say mostly talent, which is hard to come by in our space. So we are looking for those unicorns of folks that have the right technical and subject matter expertise, who come from a robotics background and can write good production code, have scaled safety critical systems. If we can onboard teams that have worked together, shipped together, that becomes very exciting.

There are three co-founders at Gatik. You, Apeksha Kumavat, and your brother, Arjun. It’s pretty special to do this with a family member. Any advice for other young founders thinking of going into business with a sibling?

I get that a lot. It’s unique, being able to work with family, but I think across the three of us, it’s very important that we have complementary expertise and personalities. So I’m the typical hustler that likes moving fast, likes getting things done, is outward-facing. Arjun, who is the CTO, he’s very detail-oriented, deep into technology and a perfectionist. He focuses on all things internally. Apeksha, she’s our Swiss Army knife. She’s deep into the code stack, adds that machine learning element that is critical for an application like ours.

So I would say, find co-founders that have complementary skill sets and personalities to work on the founding team. Yes, there is overlap, but each one of us has our special superpower. This is a complex business, and it’s not easy, so having founders who can cover every aspect of the business makes it easier.

What is something that you wish someone had told you before starting this business?

How long the journey is. We are six years into the journey, and I still feel we are in the early stages. Scaling is hard. It takes time. You don’t have to do everything on your own. Like we decided not to build any custom hardware in-house, and instead, we partnered up with the right companies that can help us expedite our part.

Good advice that I got early on was to be close to the customer. I believe in founder-led sales. Even today, for some of our strategic and important accounts, I sit in on the commercial meetings and business development meetings. Coming from a technical background, this has also given me conviction that we were on the right path.