Craig Cummings 11:27
Well, they had a rough time tracking, that’s correct. And then and they never knew in real time anyway, where all of the cars were real cars. And then some of them don’t belong to the railroad, they belong to private industries. And so it is a really, really a nightmare booking bookkeeping nightmare. The good thing about real cars, so in tracking them was they stay on the tracks most of the time, so you know, you know where they’re going to be. And so it lends itself to radio frequency identification, technology, and RFID. And, of course, it is now the standard for the entire rail industry in North America. And we installed probably 98% of the systems that are out there, and they’re being used today, if you look at a rail car, going by a big rear freight rail car train, you’ll see these gray tags are about, oh, eight inches long, they’re really heavy duty plastic, because of the environment, eight inches long, maybe three inches wide. And there they’re bolted onto the side of a real car. And that’s one of these tags, and they go by our reader, and we read it and it’s the identification of that car at that time. And any other information we want to add to it allowed the industry to, to really, really kind of walk into the next generation and it really improved their profitability. And one of the things that the railroads measure constantly is the rail versus truck competition. And there’s usually the last 100 miles or 1000 miles, whatever it is, it depends on the location, but it’ll either be cheaper to go on the rail or on the truck that last bit and they measure it by if they’re more efficient than they can take it further, on average, then the truck and that’s always a good measure. And we’ve really upped that number. You said something in the beginning though, that was John, that was actually really true. After we really got into the middle of tracking the rail cars for all of the railroads, we realized we really should be tracking the freight as well, because the railroad sometimes doesn’t really either know or care what’s what’s on the rail car. And in particular that applied to what we call intermodal containers. These are those big boxes that you see most of the time. You see them on ships, maritime, transport ships, but they’re made to go directly from the ship to a rail car or to the better chassis of a truck and be delivered further on down the path. So how do you track those logically? We’d say, well, let’s take those same tags and put them on the container. And the problem was number one was a little look at that time, not now, but at that time it was too expensive to do that. And the other thing we learned is almost all of the containers the intermodal containers are owned by third party leasing companies. And these guys just you know, the box has like a seven year life at max and they just turn them over to financial transactions. They weren’t going to spend 20 bucks or whatever it was to put on something that tracks so what they do have to have though, is a 10 digit. Id is four for alpha and six numeric And if you’ll see that again, if you’re on the freeway and you see one of those containers, you know, we developed a system that could electronically read those, those numbers. Even when they’re beat up and dirty and covered with mud and middle of the night and all that, and that was phenomenally successful. So now we could track somebody’s container, all the way from when it leaves a factory, let’s say all the way to the final destination on the other side of the earth. So that was a, that was really the final sort of piece of the puzzle, if you will that really made an Indian freight tracking solution. And did you who ultimately paid for that additional
John Corcoran 15:26
tracking? Was it was whoever shipping? Whatever?
Craig Cummings 15:31
The shippers were happy to pay for that? Or was the incremental cost was very little the cost of the cameras basically in each location. But that’s a one time cost and it was really minimal.
John Corcoran 15:47
Sounds like you were benefiting from emerging technologies.
Craig Cummings 15:51
Oh, completely. At that time we had built a digital camera, there wasn’t anything available? Of course there.
John Corcoran 15:59
Do you remember what year it was? Oh, boy, the first one we built, probably the 80s 19. A long time before consumers started adopting them.
Craig Cummings 16:09
Oh, yeah. And the only one that came close to us was in terms of both the resolution and the speed. Sony had a digital camera. That was almost as good as ours. We didn’t continue to go down that path to make it better because it was getting the job done. And it would take some R&D dollars. And we did not want to be in the camera business. We want to be in the freight traffic business. So right. So that’s how that all went. And of course, now, digital, digital imaging is commonplace as you can,
John Corcoran 16:43
yeah, yeah. And a lot more cameras, a lot more sensors out there for sure. Now, another amazing thing is that not only the SAIC went from, you know, the size that it was under a million to 8 billion in the time you were there. But also there was another company that split off from it. You want to talk a little bit about that, which now is another publicly traded company. And what was the rationale behind splitting off that separate company?
Craig Cummings 17:08
Sure. That’s, this split off company is Leidos. And it’s actually now bigger than SAIC, which is interesting. But we had a problem brought by success. And that is we were working for just almost countless number of government agencies when we were big like that. And the agencies would often have us work basically as their staff to help them prepare solicitation documents and drawings and specifications. And then, of course, we’d also want to do the job. But that would be a conflict of interest, right? If we’re going to write to the RFP, and then submit a proposal in response, that’s not fair. That’s not right. So we knew we could see where this was going. We know we mean, we there’s no sense trying that’s as blatant as it gets, you know. So we said we split the company and the former SAIC would continue to work mostly on the government side, while on the government side. And in that capacity of direct assistance to the agencies latos had a broader charter, including commercial and non government activities. So it went that way.
John Corcoran 18:28
Got it, got it. And eventually, there was actually a board coup, and Bob was removed from leaving the company. What was that like for you?
Craig Cummings 18:41
Personally, it was very sad. I know this is business, but I couldn’t even understand the business rationale. I mean, the only thing that made sense was if you’re just going to go on age and I honestly don’t remember exactly how old he was, but I would have been in his late 70s I think and he is for me I was like my office was next door it is I mean he did have not lost a step at that point. And I don’t think that the the reasons trumpeted for the for the coup so to speak had any merit whatsoever and you know, that was that he was old and he didn’t have a strong succession plan in place and but on the other hand, we’re still breaking revenue records every year, we’re increasing profit every year. So those are the things that I think really should drive decisions like that. Not some Phantom number. So for me personally, it was very hard. He was a mentor to me, he was like a second father to me. joyed The guy immensely. We did a lot of things together that had nothing to do with the company. He had a sailboat we sail over to Catalina in other places often so Yeah, it was like and you know, the hardest part is I could still see him all the time and everything, but it’s really hurting and watching somebody that you really care about being hurt like that. I was tough, very tough.
John Corcoran 20:12
On the one hand, the fact that he decided to make an employee owned company, I’m sure produced a lot of wealth for you. On the other hand, do you think if he hadn’t made that decision, if he’d held more of an ownership stake, he would have had more cards in his hand, and personally, would have been more likely to survive that?
Craig Cummings 20:32
Yeah, he’s been asked that very question. He was asked a great question right after the whole transition. And his answer was spot on, he said, Look, if I held more of the company, to the point where I could really control everything, then we wouldn’t have been able to hire the incredibly brilliant people we did. Because to hire them, I gave them a piece of the company, usually in the form of stock options. And if they hit their objectives, they got stock, which was extremely valuable. And he said, I never would have been able to hire the college caliber of people that we did hire, because that wouldn’t have been able to give them that. And they wouldn’t have come over if it was just for, you know, a straightforward salary. So he looks at it like that, that it was really, really an investment in growth to keep it spread out. But you’re right, when, at the end of the day, of course, now, if you don’t control everything, you can get it taken, taken away.
John Corcoran 21:34
So right now, today, you are an investor, co-founder of angel, Santa Barbara Angel Alliance. you’re evaluating companies and founders and CEOs as they come in and are seeking capital in order to grow their company. Let’s start with the funny thing if we talked about this beforehand, if someone came today with the idea of SAIC, saying that we’re going to grow this big, fundamentally consulting company. If he even came to you as an investor, what would your reaction be?
Craig Cummings 22:11
I say that’s not a good use of my investment dollar. I mean, I’m sure you know, if it wasn’t SAIC, I didn’t have that reference or that experience, I would say, Well, how are you going to grow this to any meaningful size, I mean, you’re going to go out, and you’re going to bid on these consulting contracts that, on average, have a profit built into them of about eight to 10%. You know, you just can’t grow it exponentially. I don’t know how you can, you can do that. And, you know, to this day, I think the only way that we were able to do that was just motivating people. Incredibly, the flattest organization of its size I’ve ever seen. I mean, there was a maximum of three levels of management between the lowest ranking manager and CEO, and it was just, you really had to perform. But if you did perform, you know, you made you make that well.
John Corcoran 23:08
Yeah. Talk to me about what is an angel alliance? For those who haven’t heard it before? And why put one together?
Craig Cummings 23:16
Yeah, there’s a very, there’s a lot of different structures, but it’s basically the coming together of angel investors, that is individual investors, and tend to be focused on the startup part of the world, and will soon have some degree of technology associate but not all, but most. And so one of the benefits of an alliance like that is number one, you can put more money together, and therefore have more of an influence with your investment, if you’re going in by yourself, and you’re going to put some amount of money in or if you go in with a group, and you can put 10 times that amount, and you’re going to be able to control and drive the ship a little bit. So. So there’s that advantage. There’s also the diversification aspect to it and that now you can probably invest in more companies, and you have the opportunity to spread the wealth, so does your investment well, so to speak. And then I think the third reason would be the diversification of the town. When you’re evaluating a startup investment. Wow, there’s an awful lot. If it’s a technology driven company, you have to figure out technology, make sure you understand it, hopefully, as well as a startup company. You have to be able to vet all the people, make sure that they make sense and that they have the right personalities, let alone the right experience. accounting, finance, all of those, those areas are incredibly important. Do they set up their stock program in a manner that will allow us to invest responsibly, sometimes they don’t. And so there’s just a whole wide spectrum of things that need to be addressed and As a group, especially a diverse group, you can address them much better that way.
John Corcoran 25:04
Yeah. You said that, when you’re evaluating investments, 80% of your efforts go into evaluating the person, the founder and the startup team, the passion that they have, and talk a little bit about how you evaluate founders and startup teams.
Craig Cummings 25:24
Um, well, I think one thing that’s very important is, and this is especially true of technology, people, they can fall in love with an idea. And guy comes up or gal comes up with this idea for a company and, and that’s a cool idea, and you get real throughs. And you fall in love with the idea and so on. And it’s never the idea that is a home run, it’s the people. And I’ve used this, this phrase too often, perhaps, but you can have an A student. And see idea, and it’s never going to happen. But I’m sorry, it will work. I said it backwards. Very the right person can take a crappy idea and actually make it successful, but the reverse or the inverse, never happens. And so it’s very important to put more of an effort on evaluating the team, the people than the idea. And how do you do that? I think your original question is not easy or straightforward. We tend to evaluate or meet with them several times with different people from our team, from the alliance, and each of us will go at it from a different angle, there is our founder, our main, our leader is very interested in for instance, the founders family. Are you the first of the family to go to college, for instance, if you could you come from a wealthy family, you know, not that neither of these are good or bad. But in revealing himself or herself, you do learn about whether you think they’ll be the right fit to take this thing all the way. The other reason I think that a lot of people don’t realize this is that when you do a startup, the chances are, you’re not going to hit it perfectly, right out of the park on day one, you’re going to make a lot of pivots, at least a couple. And that’s basically changes as changes in strategic direction, either the technology or the market or whatever it might be. And in a certain kind of person, you have to have a certain you have to have a certain ability as a person to be able to make those changes very often. They’re, they’re jolting, you know, they’re the right turns when you’re going 100 miles an hour. So making sure that the kind of people that you’re investing in can handle that sort of environment is critical. Now, there’s no easy way to do that, of course, but that’s kind of the thing that’s in the back of your mind all the time is, Will they be able to handle a rapid change? Of course, you know, with COVID meaning, what happens when all of a sudden, your market dies? What can you do? Are you the kind of can we’ll all figure this out and dive in and figure it out? Or either kind of just throw your hands up, say, Well, I’m done. Yeah. So, you know, figuring all that out is Yeah.
John Corcoran 28:27
Tell us a story about any examples of some of the startups that have come through that you’ve invested in that you know, where you’ve evaluated the founders, or you’ve seen them execute interesting pivots?
Craig Cummings 28:41
Yeah, there’s one in particular that stands out. It’s called Apeel. Yeah.
John Corcoran 28:51
You know, Jason Spievak and right about that. Yeah. Tell us about for those who didn’t hear that episode about they’re doing some fascinating work.
Craig Cummings 29:00
Oh, it’s incredible. I meant the team, James Rogers, right is James Rogers, the CEO and founder, a very, very strong guy, when I say strong, I mean, in every way. He’s very brilliant. I met him when he was finishing up his PhD at UC Santa Barbara, and just just an incredibly smart guy. So he’s also very strong, mentally, and physically. And he, he’s just, he’s like the perfect, the perfect CEO, the perfect founder. Myself and probably five or six others in our group invested on day one, literally the very first dollar of investment. He may have put some of his own money in the very beginning, but we were close behind. And it was kind of almost an act of faith because we had no proof that this would work. There was absolutely no proof. His idea of preserving fruits, vegetables, even flowers with an organic coating that’s really made from the waste material of fruits, vegetables, flowers, or whatever it might be. The concoction is proprietary, but it’s totally, it’s organic, it’s safe. It’s everything.
John Corcoran 30:20
So he had no prototype or anything like that, at that nothing
Craig Cummings 30:23
he had. Yeah, exactly. I mean, he had his thesis on something completely different in his PhD thesis. So it was something he’d been working on. And so it wasn’t really in a way, or at least for me, I won’t speak for the other investors, it was an act of faith. I mean, this guy was smart, he was good. He really had everything it would take. And we just sort of had to take it in faith, that his postulation is his hypothesis that this concept of an organic coating that could be sprayed onto the fruits and vegetables would work and would preserve those fruits and vegetables for much, much longer than the normal shelf life.
John Corcoran 31:07
Yeah. Now, I don’t know about James’s background. I don’t know if he had founded other companies before. But you know, something like that comes in who probably spent his head down getting his PhD, that’s no small feat. So they’re probably spending their time in the book, you know, on campus, studying for many years. How do you know they have the potential to execute as a founder of a business after having spent so much time in academia?
Craig Cummings 31:33
Yeah, I think that’s a very important point. And, in James’ case, this was his first startup. But I think an indication is, is everything you said is exactly true about almost every PhD I know, anyway, if they’re finishing up their studies, they haven’t done anything other than read books, and maybe do some experiments, right? That has nothing, no relationship to the world of business, right. So in James’ case, he was already working on this idea, while he was finishing up his thesis, his PhD. And in fact, he graduated or finished it up much later than he could have if he wasn’t pursuing Apeel in parallel. So here’s somebody that’s that driven, right? From the business side, they’re willing to, in effect, delay the gratification of that sheepskin, in order to get this business going. I mean, that’s, that’s passion to the max. And that’s exactly what we look for. Yeah.
John Corcoran 32:33
That’s great. Um, after you made an investment, how do you figure out where you fit as an investor, especially if you don’t take a board seat, but if you just want to deliver value, deliver some wisdom, some expertise? How do you know when to step in, when to help, and how to be of most utility to the founders of the companies that you’ve invested in?
Craig Cummings 32:55
Yeah, Apeel’s probably not a good example for that, because it just went to the moon right away. And
John Corcoran 33:02
you can still create and claim credit for it if you’d like.
Craig Cummings 33:05
But what I mean is, there was no option for board seats for us. I mean, we’re talking about people putting, you know, $100 million into the company or something like that. So we did have, I think, Jason, a board seat, I think, for a while, yeah, yeah. But the reality of it is when you get to the size that they are now and you’re in, you’re playing in that league, you know, we’re minor players compared to, to the big VCs of the world. But when you consider the more typical startup would be a case where we really want to implement a startup, because we have all this experience, presumably, they haven’t done it very many times, if at all. And, and so we can help with an awful lot of things that crop up and want to help them do that. You can do that with the right people, other people, you can determine they don’t want you looking over their shoulder, quote, helping and so on, which is really sad. Because we want the same thing. We want them to be incredibly successful. It’s our money in there, we’re not going to give them advice that would be counter to our investment. So it’s really sad, but we do get that a fair amount. And it’s one of those head scratchers, but a lot of the time, it’s exactly the opposite. And it works out very well.
John Corcoran 34:20
Now, everything’s not always rosy in business and tell us about spectra fluidics.
Craig Cummings 34:27
Well, um, I have to be kind of careful here, because I don’t want to get sued. If I tell you that it obviously it’s one with a bad ending, at least I think it’s a bad ending, but
John Corcoran 34:40
it’s a company that didn’t last.
Craig Cummings 34:42
It’s a company that didn’t last but if you are honest, and you say that, you know, if I give you my honest opinion, I probably won’t get sued. So, but I can tell you the technical reasons why it didn’t work out. The attraction was that some Very bright people, physicists primarily at UCSB, had come up with an idea that involved a technique for measuring extremely low levels of volatile compounds. And I mean, we’re talking the parts per trillion level, which is something that just as you, normally you can’t do it. And this was especially important for things that are mostly crystalline and have a very low vapor pressure. So we could detect for it’s almost single molecules of TNT or dynamite. And almost single molecules of certain narcotics cocaine, for instance. And in particular, explosives, like plastic, are really dangerous and don’t have much of a vapor signature. So the idea was, if we could really do it in the field, the way we were doing it in the lab, in other words, being able to get to that parts per trillion level, it would be a very effective tool for locating IED, improvised explosive devices in the field in Iraq, and Afghanistan, for detecting, smuggled explosives onto an airplane, for instance, things like that. And it would have been by far the best technology, but we were never able to get it down to something smaller than a tabletop. And even the tabletop was a bit of an extreme thing. It’s just, we could never figure out how to harden it, how to make it smaller, how to make it less temperature dependent, work in harsh environments, that sort of thing. So unfortunately, it was not successful as a company. And, you know, that’s kind of the business, you know, you go for some of these and they were by some of them are, you know, really a long shot. Yeah. And they don’t work at least
John Corcoran 36:54
take swings at the fences. Right? You know? Yes, yeah. Yeah. It’s funny, it was 11 years ago, now that you shut it down. And yet it feels like just listening to you like it was yesterday or still still feels a little raw in other successes that you’ve had?
Craig Cummings 37:11
Well, they say, and this Well, I think this is completely true. You learn more from your failures than you ever do from your successes. And I think it’s because a lot of us anyway, will stew over that failure for a long time. And you’ll say, I should have done this, I should have done that. And you’ll go back, and you’ll rethink it 1000 times, and I guarantee you won’t make the same mistake again. You know, so I think that there’s a lot of truth to that. And instead of just walking away from a failure, you know, or something, it didn’t work out like you wanted. Boy, there’s some really good lessons there. But you have to be willing to look yourself in the mirror and say, Yeah, I screwed up.
John Corcoran 37:48
Yeah. Now, you taught the entrepreneurship class at UCSB that my other fellow guest, John Greathouse, taught, as well. And talk a little bit about what that experience was like, and also, why later in your career go into teaching.
Craig Cummings 38:05
And when the two of those were related, I mean, that the entrepreneurship and, and the teaching, they’re there, to me, they’re almost one in the same. I get to take everything I’ve learned in starting up companies and entrepreneurship and innovation, especially in the in the technical world, and apply it to a class and have students and this there’s the students take these classes, as electives, and you know, they’re not majoring in it, you don’t major in in entrepreneurship. But yeah, you tend to have a self selecting passionate, driven student body, and that’s fine. That’s really fun. Nobody wants to teach somebody that is there because they have to be there or they hate the subject, but it’s required. That’s no fun at all, from a teaching standpoint, and it was just the opposite there. We had the only time we could ever get a meeting room in the beginning days, where we had always oversaw over subscribed, we were allowed 90 slots, and they would fill up on day one in the registration process, and then we had to find a room that would have powers, 90 students and we could never get one except 7am. And if anybody’s ever been to Isla Vista, you know, 7am might as well be 4am. Right? There it was, it was filled with time and it was something that the students just craved, and they still do.
John Corcoran 39:44
Well, entrepreneurship is hot. You know, it’s been kind of a hot field. In recent years, did you sense that there’s so much interest in the class?
Craig Cummings 39:56
It’s kind of sexy and everybody thinks they want to, you know, be in it. Or make a gazillion dollar. Yeah, I think it’s way oversold. I mean, it’s not for everybody. And that’s nothing wrong with that. I mean, that’s just the way it is. And I’m not everybody’s cut out for every job or every position or every lifestyle. So I think it’s been way overhyped, you know, I mean, Shark Tank and all of the hoopla. Yeah.
John Corcoran 40:23
How did you disabuse people of the notion that it was going to be easy in that class?
Craig Cummings 40:29
Well, they figured it out pretty early. You know, because we did a lot of stand up presentations. elevator pitches, you know, I don’t know if you heard of that phrase. But you know, three minutes or five minutes, whatever an elevator takes to go from the ground floor up to 30th floor or something. And a lot of people suddenly realize, man, this is what you’re going to be doing most of the time. Yeah, that’s exactly what you’re going to be doing. Yeah. And across the table, you’re going to be peppered with hard questions. You know, I mean, really tough questions. Are you going to break out in a sweat or maybe even worse, break down crying in the middle of it? You know, I mean, you know, you, you really have to be the right person. And they usually figure that out, you know, early enough in the class that they can drop without penalty. So
John Corcoran 41:17
yeah, yeah. We’re running out of time. So I want to wrap up. I’m a big fan of gratitude. So if you look around at your peers and contemporaries, however you want to define that perhaps some of the other investors that you’ve been investing with, who do you respect? Who do you admire that’s doing good, interesting work these days? Well, I mean, boy, by name. Sure. Yeah. Can we mention them by name? Yeah.
Craig Cummings 41:42
Okay. I’ll mention a couple by name. My next door neighbor, who you mentioned earlier, John Greathouse is just a fascinatingly interesting guy to me. And maybe because he sings my song, he does everything right. He really went to get an MBA at Casper, it was a really prestigious school. And he said, that was the biggest waste of time and is sloppy. And I thought that was kind of funny, you know, I mean, but he was being honest. And he started up. God, I can’t begin to tell you how many companies he started. Borden was where
John Corcoran 42:19
he went. Wharton School is where he went,
Craig Cummings 42:22
Wharton, that was it. Yeah. I mean, you can’t do better support you if, if it’s an MBA you’re after, and he just sailed right through that. And he loves to. He’s in Hawaii right now, by the way surfing. And he loves paddleboarding and bike riding. And I mean, we’ve got a beautiful area behind us. It’s wide open. I know both of us like hiking back there. So he said, I’d like to thank you so well rounded and needs a lot of fun. great sense of humor. So I would say he is certainly a fun guy and could really get up in the morning if you’re going to be working with people like that. The other one is the fact it’s actually the leader, the founder, leading founder, if you will, of Santa Barbara Angel Alliance, as John Petote. And he’s an interesting guy. He never went to college and he was born and raised and as he calls with the wrong part of Pittsburgh and came out, I’m not really sure what drove him but he he came out to California ended up settling an ILO VISTA and turned his kitchen into a workshop and began building a company from nothing built CIO Solutions which is a basically a what we used to call him is company or information technology company and it’s been pretty successfully acquired a new another company I love this parking is in San Luis Obispo and they’re doing they’re doing great. And he It was a lot of work on his part to put this central alliance together I know that and it’s a lot of work to keep it going we we review about four companies a month and he has to get them all lined up and make sure the logistics are down which is incredibly hard with with the COVID situation or has been so any very understated. It is very modest. I have no idea how much he’s worth. But it’s an I know what you pick number and he’s just he’s just easy going guy.
John Corcoran 44:35
Yeah, that’s great. Craig, it’s such a pleasure talking with you. I know you don’t have a business you’re promoting or anything like that now but if people are interested in following up with you or connecting with you, can they go to LinkedIn? Where can they go connect with you
Craig Cummings 44:50
on LinkedIn is probably the easiest, if that’s, I think most everybody’s that to you is LinkedIn. So LinkedIn, Craig are coming And I’m the one in Santa Barbara.
John Corcoran 45:02
There’s a few credit coming CES but as a couple Craig R Cummings. Yeah. Put the R in there.
Craig Cummings 45:06
Yeah. Good put the R in there. That’s the reason I do it because there are too many. Yeah, exactly. Yeah. If anybody wants to take any of the securities that we’ve discussed here, I’d love to run with him. It’s no, no problem at all. I love it. Great, Craig.
John Corcoran 45:21
Thanks so much. Thank you, John.
Outro 45:23
Thank you for listening to the Smart Business Revolution Podcast with John Corcoran. Find out more at smartbusinessrevolution.com and while you’re there, sign up for our email list and join the revolution. And be listening for the next episode of the Smart Business Revolution Podcast.