Perseverance Over Speed: Creating a New Category with Impinj's Chris Diorio

I hear this saying especially coming out of Silicon Valley that's fail fast. If Impinj had been held to fail fast, we would have failed because there was no fast. So the fail fast mantra works for disruptive approaches to existing problems where the foundation's already built. Fail fast does not work when you're inventing a new category.

Thank you, Patrick.

So we make miniature radio chips smaller than a grain of sand. Really smaller than a grain of sand. We were just joking, our radio chips are about the equivalent in length to 50 bacteria. And with those radio chips, enterprises can track their items, get inventory in stores, know that all the items in a medical crash cart in an emergency room are in the crash cart, and there's a myriad of other uses.

Well, the founding vision was none of those things. The founding vision was a wireless technology that allowed us to make very, very low power radios. The original idea behind the company was we were going to use that wireless technology to improve the power efficiency of base station radios for the new big thing, 3G wireless. But then the dot-com bubble burst, the bottom dropped out of that market, and we had to find something else to do. So we looked around, we did a lot of analysis, we looked at ultrasound and GPS and many things, and we settled on RFID because with our wireless technology we could make, like I said, miniature radio chips that were just tiny. I mean really so tiny that with the naked eye you can barely see them. And those radio chips absorb their operating energy from radio waves, so there's no battery. And we said we can make these chips, we can put an identifier in them, and we can allow enterprises to get information about their items, and then going forward ultimately enable people to get information about their items. So we started going down that vision, and then nine months later Walmart made an announcement that they were going to track all pallets and cases using this RFID technology. Wow. So we all high-fived, woohoo, success! We're going IPO in 18 months, we're done, right? Well, as we'll get into, we weren't done. About 14 years later we IPO'd with a lot of ups and downs along the way. And as I look back now, I can truly say any transformative technology takes time, a long time. It doesn't happen overnight. And that was sure a learning experience for me. But anyway, to go back to the beginning, the plan we initially had didn't materialize, so we focused on a new one and made it work, as is so often the case. And thus the Internet of Things was born. And Patrick, I'm sure you had that all as part of the plan, right?

Thank you, Patrick. No, it took a village. But I think part of it was, and Chris correct me if I'm wrong, we sincerely thought that might be the only round that we do. And you had great interest from all the top firms in Silicon Valley, partly because of you and what you had achieved in your relatively young career, but also due to Carver Mead, who is as consequential a figure as there is in the history of technology in the last 100 years. And that's not too much of an exaggeration. So how did you view that working with Madrona and Arch and our founder Tom Alberg and working with us versus going with some of the Sand Hill Road firms?

Oh, there's a lot in those questions. Well, first on the $15 million, at the time we founded the company I was a three-year faculty member at the UW. The idea of $15 million was kind of off-scale for me. So it's truly amazing that we were able to raise that amount of money. So yeah, we thought it would last forever, but of course that amount of money never lasts forever because you've got a ton of work to do, hiring people and all the things along the way. So we ended up doing multiple subsequent rounds and I believe raised something in the range of about $125 million over the course of the company before we IPO'd. But again, we were truly developing a transformative technology. So going back to those days, we had Tom Alberg on our board, we had Patrick on our board, we had Carver Mead. And it was the collective experience of you guys that kind of settled the company and allowed us time to really think and pursue opportunities. And anytime a major problem came along and I was all frustrated and all worried, especially Carver and Tom, they'd say, relax, it's okay, why don't you look at it this way? And it was that kind of wisdom, and it's more than wisdom, it was that experience and their ability to drive confidence in the paths we were taking. Confidence even though we didn't at that time know which direction we were headed or we would get there. It was that confidence that really helped build the company. And so you go out, hire good people, hire the best people you can, hire only people that are better than you are. And I truly mean that. And with this strong team, you will in general find a way to be successful. We have a set of principles that underly the company, and they are the most important thing to the company. When I go to customer meetings, I'll often start with our principles. They begin with be respectful, always act with integrity, always think big, always trust your instincts, always be curious and listen. And they end with a saying by Patton: tell people where to go, not how to get there, and you'll be amazed by the results. So those are our principles. And then we have our mission statement which is separate from that. And our mission in the world is to connect everything, and we're going to do it.

It didn't happen early. It actually happened later on in the company's history. We had a set of ways that we behaved, but they weren't codified in a set of principles. And it wasn't even until after our IPO. And what year was that? We IPO'd in 2016. And so the principles came about I think 2017 or maybe 2018 where we actually sat down and said, okay, the company's growing, we're getting more and more people, it's time to write these things down. They were not new. They were a set of sayings and actions and the way we behave. They weren't new, but putting them down on paper was an important step in the growth of the company. But we were living those principles up to that time. And today I believe my number one job as CEO is to give every employee at Impinj the opportunity to be wildly successful. Because if every employee is wildly successful, the company can't help but be wildly successful. And I believe employees' job, and I tell them this, is to do everything they can to make our customers wildly successful. Because if our customers are wildly successful, we can't help but be wildly successful. And that really is the vision of the company and how we behave and act. And the principles kind of codify that, but it's just our viewpoint and how we go to market, how we act as people in the company. And it is the most important thing to our company.

There's two answers to that question. I think part of the answer is if you have a vision and you truly believe in it and you can see it, you know it's going to be there, you can just see it, don't give up. Just do not give up. Persevere and say I'm going to make this thing go no matter what. I don't know how I'm going to get there, I don't know what the path is, but I'm going to do it. And day by day I'm going to figure it out. And not just I, every person in the company's got to say that we are together going to figure it out. And so yes, in 2003 Walmart made an announcement that they were going to tag pallets and cases. This was great, it was fantastic, except for a couple of small nits. We didn't have any spectrum we could use, we didn't have any wireless standard by which to communicate, and we didn't have any products. Other than that, it was great. And on top of that, we didn't have any money to buy spectrum. So spectrum is not a cheap thing. Building all the products is not so easy. And creating a worldwide standard for radio communications, like people think Bluetooth and Wi-Fi, well we had to create the equivalent thing. We didn't have it. And you cannot create a worldwide standard overnight. So we got to work and we created a standard that finally got ratified in 2005 with an immense amount of work. It was like the work of a hundred PhD theses. It was just incredibly hard because it's like doing your PhD thesis and everybody's fighting you. We got the standard approved, but we had to build products to it. We still didn't have spectrum. So I personally spent a ton of time on that standard development effort. I was a project editor for it. And then I went and met with the FCC, I joined in front of the Ministry in Japan, and we did everything we could to get spectrum allocated for free. And with the assistance of some large end users, we actually made it happen. In the meantime, the market, all the hype went up, but with no spectrum, no standards, no product, it came crashing back down again. So by 2006 it was a mess because we had just gotten some of the spectrum and things, but everybody was walking away saying this RFID stuff's not going to work. It wasn't until 2010 that we were far enough along from a product perspective and everything else perspective that a couple of large retailers, Macy's, Decathlon, Marks & Spencer, decided to adopt RFID for inventory tracking in their stores. And that was the beginning of the turnaround. So we went through the typical Gartner hype cycle. Way up, more than a billion dollars of VC money got poured into RFID when Walmart made that announcement. Way down, crashing down. And only one company of that whole time made it out the other side. And it was luck. We were lucky enough that it was us. All the other companies failed or got acquired along the way.

We've sold more than 100 billion chips to date. Let's say that again. 100 billion. I said 100 billion. So we sold more than 100 billion chips. The industry has been growing at a 29% unit volume CAGR since the year 2010. And at this point in time, we're probably about 0.5% penetrated into the opportunity. The total opportunity is of the order of 10 trillion chips a year. I wish I had brought a vial. I have a vial that's about the size of the end of my pinky that's got half a million chips in it, and it's just tiny. So they are effectively consumable silicon. So we put the chips onto items in retail stores, for example, for retail apparel or apparel footwear tracking for inventory visibility in stores. The chips are generally inside the price label. So if you hold up the price label to a light and look through it, you'll see a little black dot. That's our chip. And you'll mostly be seeing the glue around the chip and then a small antenna laminated into that label. When you get home, you cut off the label, you throw it out, you own the item. And then the retailer goes and buys a new item with a new chip. Every one of those chips identifies the item uniquely. Employees in stores go out with a handheld reader maybe twice a week and do a quick store inventory so the store knows what they have, knows what they need to order. And going forward, we're actually doing self-checkout systems, loss prevention systems, and other kinds of systems to make the consumer buying experience much more seamless.

We're involved in a lot of those things. If you fly Delta Airlines and use the Track My Bags app, if you ever peel back one of the baggage tags inside, you'll see an antenna with a little dot on it. So Delta tracks your bag with what is now called RAIN RFID. RAIN for Radio Identification. If you run a foot race like a 10K or something like that, there's one of the chips with a little antenna in your bib which you throw out at the end of the race so you don't have to untie the tag and return it at the end of the race like in the old days. So our chips are on everything. If you think 100 billion, there's roughly two billion people in the entire Western world. So we've delivered roughly 50 chips for every person who's listening to this call. And we're just getting going. So as I like to say, we're the most pervasive technology that nobody's ever heard of.

One of the strange things in our industry, which you don't see very often, is that our early adopter companies were some of the largest enterprises on the planet. Think Delta Airlines, think Walmart, think Macy's, think Decathlon, the largest sporting goods retailer, think the Department of Defense, think Department of Homeland Security. I mean, it's these enormous size companies or institutions, hospital chains. And so we learned pretty early on that we needed to work with the large enterprises because they were the ones who could retool their operations and retool their supply chain to use what we were bringing to market. The advantage there is our customers were huge. The disadvantage there is that they had huge operations and it takes years for them to fully deploy.

That is correct. We went to the end user and said, tell us about the problems you're having. It's really about solving the enterprise problem. Tell us the problem you're solving. We can solve this problem. Here's what the solution will look like. And the most important thing there is establishing a trusted relationship with that enterprise customer. Truly a trusted relationship that you and they are in it together to solve their problem.

Actually, Patrick, two of those companies have had a very significant impact. Obviously our relationship with TSMC that goes back more than 20 years. And we have worked closely with them and they with us to develop this technology and develop these chips. We actually chose TSMC early on because we did a bunch of technology evaluation. And back 20 years ago, TSMC wasn't very big, but they had by far the best technology. And we've had a partnership with TSMC ever since, both their investment in us, and that was a financial investment. Today they're an investment in us and just a customer for them and the things they do to help us along as we develop newer products. The other one to look at is UPS. If you listen to UPS's public statements by their CEO, they talk a lot about RFID and they talk about tracking packages and the benefits it's driving for their operations in terms of reducing misloads, reducing miss shipments, and providing packages at the right place at the right time when they say they're going to deliver it. So I encourage you to go listen to some of those statements because it really is a testament to a company getting in early, understanding the benefits of the technology, seeing it as an opportunity for them, and then driving it forward. It's an example of one of those Fortune 100 enterprises that takes time to adopt but has had the vision for a long time.

Well, yes. First about Tom. Tom was a wonderful person and we all miss Tom. He was wise, he was smart, he was trusting, he was helpful, he was patient. And I wish he was still around. I really do. He was on our board from day one, along with Patrick joined us on the board earlier on. Maybe at some point you can tell your story about how we got to that board. But he was on our board from day one and he stayed with us up until just a couple years ago. I believe he was on two boards in the very early days: Amazon and us. And he stayed with us, I guess probably I don't remember when he stepped down, maybe 2020 in that time frame. So his wisdom and the values that he brought to the company were immeasurable to our success.

Yeah, we went on a walk. I do this a lot. So we had obviously gone through the terms and there were some sticking points. And it's often really hard to settle a negotiation around a table. So oftentimes, and I do this with our enterprise customers as well, say, you want to go on a walk or do you want to go on a run? I've actually done deals on a run. And there's something about going out and walking or running. Be careful though if somebody's a lot younger than you when you do the run. And I remember, Patrick, I said, you know, Patrick, what's most important to you? He just told me. And I said, well, here's what's most important to us. How do we get to a resolution? We just walked, worked through it. It was probably only 30 minutes and we came back and we were done. And I've done that innumerable times with many, many customers actually out in the field.

I'd like to go back to the investment topic for just a second. You know, I hear this saying especially coming out of Silicon Valley that's fail fast. If Impinj had been held to fail fast, we would have failed because there was no fast. And as I said before, any transformative technology takes time. Everybody kind of takes mobile phones for granted today. It's taken 40 years. I mean, I used the first mobile phone in 1985. It had a rotary dial. It was in a briefcase with a rotary dial on a coil cord. Right? So the fail fast mantra works for disruptive approaches to existing problems where the foundation's already built. Fail fast does not work when you're inventing a new category. And the benefit of having Madrona and Arch on our board was that they didn't have the fail fast mantra. You guys had the nurture the company to success mantra. And Impinj was incredibly lucky, incredibly lucky and thankful to have Madrona and Arch as our first investors.

It's always, I think one of the hardest things is bringing on board great people in areas that maybe you're not as comfortable with or don't have as much experience with as a founder. You know, Tim, that's probably the hardest thing in a company is to hire good people. And you always make mistakes along the way. And then to be able to correct your mistakes relatively quickly because what you'll find in a company is that bad apples, you will hire some, can cause immense damage. They don't only cause damage financially or other things, they cause cultural damage. So the question is how do you find the right people? And I don't know that there's an institutionalized way to go at it. I meet with people, spend time with them. I try and kind of probe who they are. I ask them questions about some of the things that were most difficult for them, how they would approach problems. But they're all basically ways of getting the person to open up and tell you who they are as a person. And I don't like to make a hiring decision until I understand who a person is. You know, on the technical side it's easier for me. I have a, I guess I'm going to share my cheating technical interview question. I haven't figured out a way to do this on the non-technical side. But on the technical side it's really easy. I meet with somebody and I say, I'm going to give you 20 minutes to ask me any question you want. But then I'm just going to ask you one question. And I'm going to tell you the question right now so you have 20 minutes to think about it. Okay, the question is this: I want you to spend the rest of the interview and teach me something. It could be in any topic, anything. And I've had people go into soil biology, I've had people go into neuroscience, I've had people go into the details of spectrum analyzer design, whatever it is. I want you to teach me. We actually did something in crypto and we were deriving equations on the board. I just want you to teach me something. And you can get a lot from a person by asking them to teach you something. And you're not asking them questions to probe what they don't know. You're asking them questions to probe what they do know. And that's the most important thing because if they actually truly do know something and they worked it all out and they understand it, and I like it, you've actually learned something about the person.

I haven't yet figured out an equivalent question if I'm hiring a sales lead or something. But it is a question I use fairly often.

I would have said, you know, I don't really like eggs. Yeah, next question. Outside the box thinking.

How did we manage to get public? Through a lot, again, of perseverance. I mean, we had tried previously and had had success just due to bad timing or events that happened. It was just, you know, in a prior attempt the market bottom dropped out of the market just as we were about to go out. So a window opened in that 2016 time frame. We decided to go. We put everything into it. And we really focused on our story. This idea that we're going to connect everything in our everyday world, from point of manufacturing through the supply chain to point of sale to consumer use to end of life, beginning with the enterprise side. And in so doing, we're going to transform business operations and really we're going to transform people's lives. That was the basis of the story. And the industry has been growing at this pace. The opportunity is here. All the pieces are in place. And so we went out and told the story passionately. The idea was hard. We did not have the most glamorous IPO. You can hear about all these glamorous IPOs, they're flying here and there on private jets and it's easy. No, we didn't get to do that. I think in the first week of the IPO, we ate at McDonald's one night, Au Bon Pain one night, Subway one night, and then one night on the train where all they had for food on the train was a bag of M&M's and a little half bottle of screw-top white wine. And that was dinner. But we did pull it off. And you ended up raising about a hundred million. The valuation, the market cap after you went was like 400 million.

And what the IPO really did for us is it opened the window to the financial markets so that as we executed, we had access to more capital. And it basically allowed us to accelerate our trajectory and put more distance between us and our competitors. And that really was the benefit of the IPO.

So when you use the term RFID, it's about as broad as saying radio because there's all NFC is RFID, there's animal tagging, there's all kinds of RFID, key cards are RFID. So a couple years ago we wanted to rebrand the industry in a name that was more consumer facing because the future is really about consumers getting benefit from the connected items. So we decided to rebrand the industry with RAIN, Radio Identification. That name has been a little slow to take hold, but I believe it will take hold. And there truly is a future coming where not just enterprises but people get the benefit of connected items. Where you can locate the items in your house, just put readers in your house, you know where things are. Where you can authenticate your medicine or you authenticate items you buy, either for authentication purposes or before you even purchase them. Where your phone, just by connecting with those items, we're not in phones today. This could be the reader. The phone could easily be the reader in the future. And I don't see any reason why it won't be a reader in the future. People will be able to get information about their items using their phones. And you can almost think of it as a kind of an AirTag type model writ very broadly. So that really is how I envision the future. Every item that has value or interest to people, we can connect. And we're going to do it. And we're going to extend the reach of the Internet by a factor of a thousand, from powered electronic devices to things. And that is the Internet of Things. And we're going to connect everything. And it's going to be fun along the way. So I'm just getting going. Good thing I'm still young.

Don't get old. Interesting advice from a physicist. Just keep going. I work hard, but I also play hard. Enjoy the time with your family. Enjoy the time when you're not working. Enjoy the time when you are working. I guess that is the advice. If you really like what you're doing, then it's not work. So I love my time at home. I've got a granddaughter now. She's the joy of my life. And I get to, I actually take time off work half a day every week, not counting the time that I spend with her on the weekends. And I babysit for half a day. That's my time, block out of my calendar to go be babysitting. And we play blocks and we read Dr. Seuss and all kinds of stuff. I get to do that. But I also love what I'm doing at work. And so I guess that's the story. Do what you love, love what you do.

We built an amazing company. You guys were on the team. We built a company that's kind. And I know Patrick and I both learned a lot. And you spent a lot of time mentoring and sharing advice. And this is another great example of that. So thank you so much. And here's to the next 25 years.