I’ve Looked Death in the Eye

From Gimlet, this is The Pitch. I’m Josh Muccio.

A year and a half ago, a founder came on the show with a business that sounded pretty niche. The founder was Amado Guloy, and he wanted to revolutionize data in the farming industry. To be honest, I wasn’t sure the investors would go for it. But it turned out to be a fascinating conversation.

What’s even more striking, though, is what’s happened to Amado, since he came on the show. He’s had the highest of highs, and the lowest of lows happen at the exact same time. And yet, he and his business are still standing. 

So today, we’re going to play you a lightly edited version of Amado’s original pitch for Rex Animal Health. Then he and  I will catch up in the second half of the show.

OK, let’s get started.

Amado: How are you?

Jillian: Fantastic. How are you? What’s your name? 

Amado: Doing good! Umm.

Into the room has walked Amado Guloy, who’s here to ask for $2 million dollars for his company, Rex Animal Health, which is built on a simple theory about the health of livestock.

Amado: If things were more data driven, then veterinary care could be better.

These days you can’t hear about any startup without someone mentioning data. But when I think of rolling pastures and dairy cows, it doesn’t exactly scream tech startup to me. So I’m curious to see if Amado can make a case for why the humble farm is the next frontier for big data. 

Here’s who he needs to convince.

Daniel Gulati with Comcast Ventures. He’s joined by Jillian Manus who’s with Structure Capital, Phil Nadel of Forefront Venture Partners, and Charles Hudson with Precursor Ventures.

Now it’s all up to Amado to prove Rex is the next big thing in big data.

Amado: I’m Amado Guloy. I’m the CEO and founder of Rex Animal Health.

Phil: Well, nice to meet you. Tell us about Rex.

Amado: Yeah. So, umm, uhh, one of the things that we’re doing at Rex is we’re trying to answer fundamental questions about food sustainability, biosecurity and food safety, especially when it comes to the protein supply chain.

All right. Here’s the thing you need to understand about Amado: he’s not your typical entrepreneur. He doesn’t have a million business ideas and a passion for startup culture. He’s a scientist — specifically a chemist and physicist — who stumbled onto an idea that turned into a business.

And it shows in his pitch.

Amado: But we do our own primary fundamental research in our labs so that we can find genes that correlate with disease resistance. And I’m proud to say that we’ve actually found some genes after completing a few genomes in the white tail deer, and looking at the cow. And so we’re in the midst of publishing that in a peer reviewed scientific journal.

Alright. So here’s what Amado is not explaining — at least not in a way anyone is quite understanding: Rex is a tech company that is focused on improving the health of livestock — cows, pigs, chickens, etc — by relying on big data. 

Our investors are doing their best to follow along, but you can tell they’re a little bit lost.

Phil: Wait explain that please. What is the customer entering into the system? What data are they providing and what output are they getting?

Amado: So I guess to give a little bit of background on what happens during a run-through in the barn. Basically you have a vet tech or a farmer walk through their barn. And there’s hundreds if not thousands of animals. They’re checking each and every stall and scoring every single animal on a respiratory score and what’s called a scour score, which is basically the diarrhea score. They input that in on a semi, almost daily basis. And so that gets to us, and we can monitor these scores. And they can then look at it to be like, is there a trend? Is the respiratory score.

Phil: Okay. That makes sense.

Jillian: It’s a maintenance of the health of the animal.

Daniel: It’s Google Analytics for livestock.

Phil: So they’re monitoring. What you’re doing is you’re taking these daily scores, or almost daily scores, that the vet tech is giving the herd. And then you’re standardizing the data, and putting it up into the dashboard. So you can see it, they can see it. So all of a sudden you see trends in the scores change, and then you can go into action in terms of trying to figure out what’s causing that change. Is that accurate?

Amado: Yes sir.

Phil: Okay. I want to just make sure.

As Daniel said, it’s Google Analytics for livestock. Rex keeps track of the health of the herd, watches for trends, and helps farmers and pharmaceutical companies know which drugs are working, and which aren’t — all through the magic of data. 

Jillian: So I think I'm very dense, okay, on this. Is this to collect and create datasets to be able to inform higher production of protein sources, or animal protein sources?

Amado: Yes, ma'am. So you know our fundamental goal is really to take this data and develop all these analytics around it so that you can enhance your yield. Whether that's having better quality steak with marbling, or having targeted dairy, either high protein dairy for yoghurt applications and cheese applications, or high cream dairy for milk and ice cream. But also combining that to also better manage disease in the herd. Because when you look at animal health in general. The United States is one of the most advanced agricultural economics in the world. We still have at least one endemic or epidemic in the herd every year. And that grossly affects things to the GDP. If you look at 2015, there was a new emerging virus called PED - Porcine epidemic diarrhea. Never been seen before. It wiped out piglets like that.

Amado: And when you look at how fast bird flu is mutating in all different regions.

Jillian: Yes. And mad cow disease. Years ago. Do you remember that?

Daniel: I remember mad cow disease. 

Amado is starting to speak the investors’ language. He’s saying: Livestock farms are businesses and these health epidemics — mad cow disease or bird flu or whatever — they threaten these businesses. By gathering data on the health of these animals, Rex can reduce the risk of disease, improve the treatment of health problems, and ultimately deliver more of those animals from farm to table.

Amado: I’ll just give you a use case that we did. So there were chickens. Right? And they had, there was a high incidence of really bad bacterial infection that they basically had to kill these chickens and turkey. And they were looking at the different drugs, and unfortunately a lot of these drugs weren’t working because these were antibiotic resistant bacteria. So we took a step back and looked at the data in total. We were like, wait a minute, this population is not really having bad these infections, but this population is. What else was different? Then we kind of realized that the ones that did, the ones that got infection, got infection through basically a skin lesion. Long story short, we basically found out it was a genetic effect. And those chickens that had it, that had those deficiency were prone to this skin condition and that’s what got infected.

Charles: I wish we'd started with that story. I wish we had started with this story.

Amado: I'm sorry.

Charles: I totally get it. Now I feel like I totally get it.

Whew! Don’t ever underestimate the power of a story—even if the story has to do with bacterial infections in chickens. 

Phil: How much are you charging for the product?

Amado: So our, so, when it comes to our business model, we do two things. So we're a data company that builds data products. So for a livestock producer that only wants to look at their data, they don't care about understanding anyone else's, we actually only charge them up-front costs on the server.

Jillian: Which is?

Amado: It depends on how much data there is.

Jillian: Give me a sort of a range.

Amado: It's basically $1000 or less.

Daniel: And that's a cost recovery? There's no margin on that?

Amado: There's no margin on that. The reason we do that though, is because when we take in the raw data, our contract turns that raw data and any derivative product of that data is ours, and we can do whatever we want with it.

Daniel: Yeah.

Amado: Now, all that data is really valuable to other verticals in the animal health industry, particularly bio pharma. They need that data because they don't have it. And that's where we make a lot more of our money. Because they'll try to get it from the livestock producers, but even when they do get it, they can't make sense of it.

Daniel: And are you working with those guys today?

Amado: Yes. We're working with some very large pharmaceutical companies. For us, it was bang for our buck to go for the biggest players first, and then kind of trickle down all the smaller ones, because really data is our currency.

Phil: Okay. And their access is different than the local farmers access, right? So they're getting data across the board.

Amado: Because they're paying far more.

Phil: Of course.

Daniel: They've got to be seven figure deals. That’s great. 

Jillian: It’s just like, fu...

The wows you’re hearing in the room is it dawning on investors that the two clients Amado is targeting with Rex are farmers and pharma. AKA pharmaceutical companies known for their deep pockets. 

Phil: You don't think those big companies have data scientists?

Amado: No. That's how we got some of our first customers.

Daniel: I think that's the exit.

Phil: How much revenue are you generating currently?

Amado: So in terms of revenue generated to date, about $3 million from when we started.

Phil: When was that?

Amado: From 2015. We’ve been mostly a bootstrap company. 

Phil: Okay. So let’s talk quarterly, this year.

Amado: So this year we, how do I put it this way? We’ve had some stumbles in 2017 and late 2016, so our average revenue per month is about $85k to $95k.

Phil: What have the stumbles been?

Amado: The stumbles were, we had people not paying. And that was kind of. We weren’t aggressive enough in trying to make them pay. We actually did some studies where they never paid us because they were like, well, you never told us pay you. I thought that was a given. 

Phil: So that brings up a point. Sort of, you’re the scientist guy. Who’s running the business end of it? Who’s in charge of collections and doing the invoicing and all of that stuff?

Amado: Yeah. So since that stumble we’ve actually hired a COO who’s really the main business guy.

Jillian: What’s his name?

Amado: His name’s Eric.

Jillian: Okay.

Amado: So we did realize like, hey, I know I’m a scientist, I know I’m more the technical guy, which is why we brought that in. Before we were all over the place. And that’s primarily because as a very technical scientific CEO, obviously we were very intrigued by the science and we kind of got lost in the science. Now I have that person who whenever one of us gets an idea he’ll usually be like, Amado, are we going to make money off this? 

“Are we going to make money off this?” That is the question. The fact that Amado knew enough to know he needed someone else to run the business side of things is a good sign. Investors like to hear someone is thinking about the dollars and cents behind the big idea. But Amado is the one here pitching—and so it’s unclear what the biggest priority is: the science of Rex or the business of Rex.

Amado: One of the things we’ve realized over the past two years is the United States is not a fertile market for agriculture tech. And that’s primarily because the USDA gives so many subsidies that it’s still cheaper for a farmer to cull their animals because they’re going to be insured. We’re taking this raise to really focus on the APAC region, particularly Australia, New Zealand and China. So the reason that is is because one, China with its growing population, they also have the biggest growing demand for meat. Australia is one of the leaders in beef, and the largest producer of dairy is, believe it or not, based in New Zealand.

Jillian: No way.

Amado: Fonterra. They produce 35% of dairy in the world. And they sell it on to China. So a lot of this is to hire teams based there, so that we can really take advantage of the opportunity we’ve been presented with because a lot of our advisors.

Charles: Is $2 million enough? I was going to say, country market entry strategies tend to be notoriously expensive and slow. Because you've got to find the people, you've got to build the relationship. Even if they have the relationships, you got to get up to speed, and then you've got to have some results. Is $2 million enough to get you to results? 

Amado: We already have relationships with some of these really big customers. And they've already pretty much put in LOIs to say, hey, if you can do this, this is how much we'll pay.  Based on the LOIs that we have, should take us to another level in terms of revenue. And then we can raise again in a Series A. And that's why it's at $2 million.

Jillian: Okay. Well I've digested a lot. Has everybody?

Phil: Yes. I've learned a lot.

Jillian: I’ve learned a lot.

Phil: So, um. I like what you’re doing. I think it’s very interesting. I don’t have any background in this and so this is challenging for me to wrap my head around. I don’t know the space, I don’t know the competition.

Amado: May I say something?

Phil: No. No, go ahead. All right.

Amado: When it comes to investors, what we’re looking for is not people who understand ag, or intimately familiar with it.

Phil: Oh then I’m perfect.

Amado: We have ag families that are currently investors, and that’s kind of how we’ve gotten a lot of our early traction. What we’re looking for is people who know how to build an enterprise SAAS company. Because that’s fundamentally what we are.

Phil: Okay, but the reason I was bringing that up was not in terms of potential value add, but more in terms of coming to my investment decision. It’s more challenging for me than with some other companies because this is a space about which I’m unfamiliar. For instance, I don’t have a really good handle on the competition. I don’t know, I’m taking your word for it, and that’s fine. But having said that, you know, I’m really intrigued by what I’ve heard, and the progress that you’ve made. And I’d like to invest $250,000.

Amado: Awesome!

Daniel: Didn’t see that coming! Geez.

Amado: Neither did I! Whoa.

Phil: Yeah. I like it. I like it. I think it has huge potential.

Amado: Thank you.

Phil: Anyone else care to join me?

Daniel: So, um. By the way, I think it’s actually a great deal, in terms of the 2 on 8. I think it’s an awesome deal.

Jillian: Yeah.

Daniel: I think to get comfortable with this investment, or for me to get comfortable with this investment, I’ve got to believe in the scientific innovation here, essentially. And that’s the bit that I would just need to educate myself on. So, I’m a like neither yes or a no. I’d love to diligence this further if you’re up for it.

Amado: Oh yeah. I mean.

Daniel: And I will say if we’re a yes, then I think we’ll want to do, we’ll want to own 10% of the company. Or more.

So Daniel’s not ready to take Amado’s word for it on the science and so he’s a solid maybe. 

Phil: Jillian?

Jillian: I’m so confused. I’m confusing myself, because I keep going back and forth, back and forth. So I actually do know a little bit about genomics, I do very, very little, and I put that into a thimble, but it’s an area that I’m very fascinated with. And I also like the fact that you were like, you know what? I don’t know the business side. Money is being left on the table. I have to figure out what makes sense. I like the fact that you were developing and developing products that would make money, and there are a lot of scientists that are like, forget that. I’m going to do what I’m going to do. So I like the fact that you have that business sense, even if you don’t have the business intelligence around it. But you did hire Eric to do that. Um. I want to commit to this round. I’m going to say just of my personal money, I’m going to commit $100,000. 

So Jillian is throwing her hat into the ring as well with a $100,000 personal investment. That’s $350K already.

What does Charles have to say?

Charles: I have a really good feeling about you. I think you understand your customer and their pain points. And you know, our model at Precursor is really about people first, and I just have a really good sense that you really understand what you’re building, and you really understand your customers’ pain points, and that’s rare to find. So I would like to invest a small amount in the company. Which to me would be below $100,000.

Amado: That's fine.

Charles: I don’t know exactly how much. But I would love the opportunity to get to know you better, and understand the business better, and see if I can be a value add.

Amado: Okay!

“Okay — I’ll take your money” — after racking up three yeses and one strong maybe, Amado looks pretty pleased!

Jillian: Okay. Fantastic.

After Amado walks out of the room, investors dig in to why this deal seemed like a no brainer.  

Daniel: Wow, we’re just writing checks.

Jillian: You know. You know if that.

Charles: Just writing checks.

Daniel: Writing checks, hey!

Jillian: I have to say that if.

Charles: I really liked him.

Jillian: Yeah. If what he is communicating is true, and I’ve no doubt that it is - 

Daniel: Then it’s great.

Jillian: It’s huge!

Phil: That’s the thing.

Jillian: And by the way, I would, and that’s another, as an investor, would be to talk to him about the exit of this. Because I think that he is going to get to a point where people are going to want to buy this.

Daniel: But at a 10 post? You could see a very clear path to.

Phil: I’m okay with that. He gets a 10x exit in 18 months, I’m okay with that.

Jillian: That’s a SAAS.

Phil: I’ll take that all day. I would not have said yes if he had not hired Eric already. Because you made that point, and I think it’s very important. I mean, he acknowledges, he’s a scientist. He’s not the guy to run the business. And when he said he was having problems, okay, he did something to rectify it.

When we come back a year and a half has gone by. And in that time, a tonhas happened to Amado and his company. 

Including, it turns out, one of the scariest moments of his entire life. That’s after the break.

[BREAK]

Welcome back to the show. A few weeks ago I sat down with Amado to catch up on all things Rex.

Josh: Hey Amado.

Amado: Hi.

Josh: Welcome back.

Amado: I know. It's nice to be back.

Josh: Now do you remember when you first came on our show?

Amado: You mean when I flew in on the red eye, barely had any sleep and then it was like, all right time to pitch? You mean that?

Josh: Yeah.

Amado: Yeah, very vividly. Very vividly still.

And then after everyone left the room, where Amado nabbed commitments from three of the investors. And a “maybe” from the fourth. Things started to play out differently. Jillian and Daniel, dropped out during due diligence, Amado said what the reason was, simply that they didn’t understand the market well enough to invest.

Amado: But on the bright side during that time Charles increased the amount from that initial, ummm.

Josh: Yeah, on the show he said he was going to invest something less than 100k.

Amado: Yeah, he ended up doing 250.

Josh: Oh, wow that's fantastic.

Amado: Yes, so it was really good.

So Charles came through in a big way, but then with Phil, well that didn’t work out. Their communications fell off. And Amado, says he’s to blame for not staying in touch.

Amado: I'll admit it was my fault. I wasn't kind of pushing hard on everything as I should have. I wasn't keeping on top of everything.  2018 was very hard umm from an operational standpoint, from a morale standpoint, from even a physical wellbeing standpoint. And it was near.

Josh: Why?

Amado: I almost died last year.

Josh: What happened?

Amado: So ate last year, so remember how I sort of said it was my fault kind of not keeping up on everything. In November I actually got a really bad infection. I had sepsis and I went to the ER and they were like, "Okay, you need to be admitted right now." Then I was there and the doctor was like, "You have about a 30% chance of dying right now just because it's at-"

Josh: Oh, my gosh.

Amado: "It's at a certain stage. You're starting to show signs of organ failure, umm things like that." I was like, "Okay." What was really hard was.

Josh: Okay.

Amado: Well, it was a very surreal experience right, and so I was in and out of the hospital November till the end of the year and what was most difficult was like, how do I tell my parents? I lied to them first and kind of said it wasn't as bad.

Josh: Why did you do that?

Amado: I just didn't want them to worry because I didn't want to worry. I was actually thinking, "It can't be this bad. I still have a company to run. I still have things that I need to do. Who's going to take care of my dog?"

Josh: Right. People need me. I can't die. I'm not going to die.

Amado: Yeah, I mean right? Like I am in my early 30s. You still have very much this, "I am invincible” kind of Goldeneye Boris thing going on," but when it actually hits you right and you're like, "No, this is real. My body really feels like crap right now," umm and they said this is going to be a long recovery. I was really scared that with me not being there pretty much physically for two months I thought like, "Oh, shit. We're going to die. I'm not going to have anything to come back to," but.

Josh: You thought the company would fall apart?

Amado: Yeah. And so imagine being on a forced two-month vacation because you're in a hospital right? And everybody just being like, "You cannot think of anything that will stress you out. Your body cannot handle this right now." I was just like, "All right guys. Tell me if shit goes wrong." I literally had my laptop with me in the hospital the entire time. I was like looking for emails for like, oh no things are going wrong and I didn't get any.

Josh: Those emails never came.

Amado: Yeah, those emails never came and when I came out it was like, "How's everything going?" They were like, "We're okay. You might want to go on vacation and relax." I was.

Josh: You looked at the numbers, and the customers and everything and everything really was okay?

Amado: Yeah, everything was fine and that was when I realized like, "Holy crap. I am replaceable," and I have never felt happier because it means I've done my job correctly. The instant I think you are replaceable as a CEO you've done your job as a CEO and founder.

Josh: What does that feel like?

Amado: It was a huge sigh of relief. It was like I don't have to worry about everything, And that's when I was able to actually be like, "Okay, I can take a breather now. I can actually go home and not think about stuff. I can put off emails until the next day. I don't have to be constantly checking my phone."

Josh: What a luxury, putting off emails to the next day.

Amado: It really is. Like you know you think you have to be on all the time, and when you realize you don't, I remember talking with one of our investors, you know, when I got out of the hospital I was like, "This is amazing. I don't have to worry about everything. I just continue to have to do my job which is basically making sure that they have everything they need to do their jobs.

Josh: Yep

Amado: And we're good.

Amado: But with all that, people have been really supportive. They're like, "Look, dude slow down. It's going to be here. You don't need to be scrambling all over the place."

Josh: Yeah, dude slow down.

Amado: Yeah. Ummm. And don't take it so seriously right? If anything I've become a bit more cheeky just because it's like I've looked death in the eye and kind of said, "F you. I'm still going to be here."

Josh: Yeah

So 2018 was a hard year, but you’d never know that from the outside. Amado says the company has basically doubled its revenue year over year. And now there are 266 million animals being tracked on the platform.

And part of Amado’s success came from a few listeners who tuned in to his original episode.

Amado: You know what's funny? I actually got some leads from the episode.

Josh: Oh, yeah?

Amado: Yes, from people in New Zealand, and southeast Asia, and they said, "We heard you on The Pitch," and I was like, what? It was bizarre.

Josh: Did any of those people that reached out because of the show, did any of that turn into business deals for you?

Amado: Oh, absolutely. Absolutely.

Josh: For real?

Amado: Yeah. Yeah, and then the comment afterwards whenever we do end up meeting in person, they're always like, "You're not as nerdy as you are on the show," to which I say, "Yeah, I'm not." But I explain, I was like, "I had 15 minutes of sleep when I did that, so I can guarantee you I know the science even in my sleep because that was really how we were then."

Josh: How is that because you know. We've characterized you as kind of the mad-scientist-built business.

Amado: That was the narrative of the episode. That's great.

Josh: Yeah. Do you disagree with that?

Amado: No. No, no. No. I laughed my ass off when I eventually heard the episode. I was like, "Am I really that nerdy?" Then my friends said, "Yes, you are." And I was like, "Okay." That's legit.

Josh: So then you had told me something you're like, "We've had people approaching us wanting to buy our company, and we haven't said yes yet — but we might."

Amado: So I mean we've had a lot of acquisition discussions umm.

Josh: So are these like your customers interested in buying you, like big meat companies, meat packing companies?

Amado: Whenever we do deal with a really big enterprise, there's always that question which is something I've had to get used to where they're like, "Are you open to acquisition," which is always very flattering, I mean what do you say on the spot? I just say, "Of course we are." And we'll just sort of use that as part of the funnel because we're learning about them as they're learning about us anyway, and then we get to see into their strategy where we sort of fit and where they want to do things. Then we can continue the conversation there, but I just sort of look at it like fundraising as in what is the goal of every startup? It's either to become one of these companies or to get bought by one of these companies. In the end this is why we're doing it. This is why we have investors in the first place, so they can get a return.

Josh: How many people do you think you've said, "Yes, we're open to acquisition," to?

Amado: So. We've been asked-

Josh: How many suitors are there looking to buy Rex?

Amado: About half a dozen right now.

Josh: What?

Amado: Yeah.

Josh: I mean you came on the show end of 2017. Here we are in 2019. Have these conversations been going the entire time? 

Amado: Mm-hmm.

Josh You're playing the long game. You're just like, "If people are interested in us now and throwing $50 million at us, or $100 million, if we just keep going, keep growing, they're going to be willing to throw double, triple that our way down the line."

Amado: That is our hope.

Josh: Any of these offers to buy the company that have come through, have any of them been big enough to make you seriously consider them?

Amado: There has been a lot of hesitation on my part. Umm.

Josh: Why?

Amado: Well, it's just sort of like these are life changing amounts of capital umm that could set me and my family for life right?

Josh: Yeah, like move to Aruba.

Amado: Yeah, right.

Josh: Bring your whole family. Never work a day in your life, another day.

Amado: But I also kind of look at it as I know myself. I am my parents' son. They are workaholics, and I'm a workaholic. And I always kind of think like, "What would I do if I had all this?" And the answer is always like, I'd still probably work. 

Josh: Oh, yeah. It gets boring as hell after a couple weeks.

Amado: Right?

Josh: You're like, "Damn it, if I have to see another sunrise on this beautiful ocean I'm going to."

Amado: Well, I don't think it would go to that level but I think for me it's like there's still so much I want to accomplish. There's still so much that I want to do that it doesn't yet make sense to kind of close this chapter of my life, right?

Josh: Right.

Amado: Like, the story is still being written. Let's see when there's an appropriate time to maybe move on to the next chapter so, you know, as long as we don't screw up so much, the suitors will still be there. And I think for us hopefully it's not an if it's a when.

Josh: Yeah, the wave is still cresting. Let's ride it for longer.

Amado: Yeah. Exactly. 

I like imagining Amado riding this startup wave. Because it’s actually the backstory to many of the big exits you’ve heard of, the founder just keeps saying no. I’m going to keep going a little while longer. 

Until they get an offer they can’t refuse, or they get tired of running the business, and for the first time start to wonder, hey maybe I am ready to be done? And then they agree to sell, and surf that wave off into the sunset.

Our show is hosted by me, Josh Muccio. Produced by Heather Rogers, Kareem Maddox and Molly Donahue. We are edited by Blythe Terrell with editing help on this episode from Devon Taylor.

Theme music by The Muse Maker. Original compositions from Breakmaster Cylinder, Bobby Lord, Haley Shaw and The Muse Maker. We are mixed by Enoch Kim. 

Lisa Muccio planned the recording of this pitch.

And here’s a quick reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.

Be sure to follow The Pitch on Spotify, or find new episodes wherever you listen.

All right -- you’ve been listening to The Pitch from Gimlet. We’re hard at work on the next season of the show, which is coming up in just a few weeks! On August 7. See you then.