© Getty Images Europe
All investment strategies have the potential for profit and loss, capital is at risk.
Because Baillie Gifford invests for the long term, we forge deep relationships with founders and CEOs, which help form our views of their companies and shape our world views. Here, we share insights from Keller Rinaudo Cliffton, chief executive of Zipline.
Zipline’s founder Keller Rinaudo Cliffton is used to people not believing him. When he founded the drone delivery service in 2014, investors and experts in global health alike told him he was foolish. They didn't think his vision of ‘instant logistics’ – building the world’s first automated, on-demand logistics system to serve all humans equally – was achievable.
Cliffton recounts:
The technology wasn’t going to work. Even though the technology worked, we would never get regulatory approval. Even if we could get regulatory approval, there was no chance that a country would pay us money to do this.
But his small team, with their backgrounds in robotics, software and automation, thought differently. Ignoring the experts, they focused on working directly with governments prepared to give Zipline the time and space to make it happen.
“Rwanda,” says Cliffton, “by virtue of being a small country, very technology forward, innovative, willing to try new things and make decisions quickly”, was an excellent place to start.
His tenacity and perseverance are already paying off and saving lives. And healthcare systems and large corporations across the globe are sitting up and taking notice.
Solving the problems too big for the world’s largest businesses
If it’s said that good things come to those who wait, the number of delivery vehicles on our streets suggests that fewer people believe it. We want items to appear as soon as we have ordered them.
That distracts from the fact that only the wealthiest people on earth – the golden billion as they’re sometimes known – have access to logistics. And that’s costing lives.
Cliffton highlights the, “five-and-a-half million kids under the age of five who lose their lives every year due to lack of access to basic medicinal products”.
Those families, and the healthcare systems providing them, are unlikely to care about the software, control algorithms, ground equipment or regulatory approvals behind Zipline’s automated drone technology.
What’s important is the millions of vaccine doses, infusions, blood transfusions, cancer products and insulin being delivered by autonomous delivery drones within minutes of a nurse or doctor requesting them.
At the outset, Rwanda proved a perfect “partner” and testing ground for the company. Cliffton remembers offering to deliver all medical products to every primary care facility and hospital in the country to its Minister of Health. He says, “She looked at me and said, just do blood.”
And for the first nine months, that’s precisely what Zipline did. Except it was only for one hospital.
Cliffton humbly admits it was “a total logistics nightmare” and “way harder than they were expecting”. The company had to factor in the different storage requirements and shelf lives of blood cells, platelets and plasma and replicate this across the blood types.
Today, with over 35 million commercial autonomous miles under its belt, Zipline delivers medical supplies and 67 per cent of the blood to Rwanda’s 450 primary care facilities and hospitals. It supplies 7,000 hospitals and health facilities worldwide.
Zipline’s secret weapon
From an outsider’s perspective, you might assume Zipline’s competitive advantage lies in its small, automated electric aircraft, weighing about 22 kilograms, that can fly 300 kilometres on a single battery charge and deliver products from the sky onto the ground with the precision of two parking spaces.
Cliffton disagrees. He suggests that being “scrappy, frugal problem solvers” is in the company’s DNA and aircraft technology only represents 15 per cent of the complexity they have had to solve in real-time to build a cutting-edge logistics system.
While the company’s product vision is to approximate teleportation, Cliffton confirms, “a huge part of our mission is just that we think that everybody deserves universal access to healthcare”:
I think a lot of people are sick of this paradigm of technology companies being evil and destroying democracy. Many people want to be part of something they can tell their grandkids they created from scratch [to solve these kinds of problems]. And so, I think our mission has been our secret weapon in competing against much bigger companies.
Developing the infrastructure has become a source of national pride in many countries Zipline has launched in. It has always hired entirely local teams, whom Cliffton points out, “are doing what some of the richest technology companies on Earth have tried to do and failed.”
It’s clear from what Cliffton says that fashioning a new kind of global logistics network that is automated, zero emission and 10 times faster than any other delivery form does not phase him. Zipline’s partnership with Walmart in the US demonstrates that once you offer this service for health and wellness products, customers expect everything else to be delivered within the same timeframe (minutes rather than hours) and to-the-door convenience.
He says, “we went from delivering a small number of SKUs [stock-keeping units, the codes retailers use for tracking inventory in their stores and warehouses] to 3,000 SKUs to 12,000 SKUs. Now we deliver 27,000 SKUs of the 30,000 total SKUs in the store we’re attached to.”
This is made possible by Zipline’s first distribution centre in Arkansas. Cliffton explains, “that distribution centre basically enables teleportation of essentially any product in that store to any home within 50 miles.” Should the company succeed in replicating this across the Walmart franchise, it gives you an indication of how large the growth opportunity could be.
From the starting point of delivering blood in Rwanda to dropping off rotisserie chickens and birthday cakes in the US, drone delivery has the potential to take a significant share of the global logistics network. If the company succeeds, it will tremendously impact humanity, facilitating universal access to healthcare products and everything else.
Risk Factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in November 2022 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
Important Information
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.
Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.
Financial Intermediaries
This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.
Europe
Baillie Gifford Investment Management (Europe) Limited provides investment management and advisory services to European (excluding UK) clients. It was incorporated in Ireland in May 2018. Baillie Gifford Investment Management (Europe) Limited is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. Baillie Gifford Investment Management (Europe) Limited is also authorised in accordance with Regulation 7 of the AIFM Regulations, to provide management of portfolios of investments, including Individual Portfolio Management (‘IPM’) and Non-Core Services. Baillie Gifford Investment Management (Europe) Limited has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. Through passporting it has established Baillie Gifford Investment Management (Europe) Limited (Frankfurt Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in Germany. Similarly, it has established Baillie Gifford Investment Management (Europe) Limited (Amsterdam Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in The Netherlands. Baillie Gifford Investment Management (Europe) Limited also has a representative office in Zurich, Switzerland pursuant to Art. 58 of the Federal Act on Financial Institutions (“FinIA”). The representative office is authorised by the Swiss Financial Market Supervisory Authority (FINMA). The representative office does not constitute a branch and therefore does not have authority to commit Baillie Gifford Investment Management (Europe) Limited. Baillie Gifford Investment Management (Europe) Limited is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.
China
Baillie Gifford Investment Management (Shanghai) Limited 柏基投资管理(上海)有限公司(‘BGIMS’) is wholly owned by Baillie Gifford Overseas Limited and may provide investment research to the Baillie Gifford Group pursuant to applicable laws. BGIMS is incorporated in Shanghai in the People’s Republic of China (‘PRC’) as a wholly foreign-owned limited liability company with a unified social credit code of 91310000MA1FL6KQ30. BGIMS is a registered Private Fund Manager with the Asset Management Association of China (‘AMAC’) and manages private security investment fund in the PRC, with a registration code of P1071226.
Baillie Gifford Overseas Investment Fund Management (Shanghai) Limited
柏基海外投资基金管理(上海)有限公司(‘BGQS’) is a wholly owned subsidiary of BGIMS incorporated in Shanghai as a limited liability company with its unified social credit code of 91310000MA1FL7JFXQ. BGQS is a registered Private Fund Manager with AMAC with a registration code of P1071708. BGQS has been approved by Shanghai Municipal Financial Regulatory Bureau for the Qualified Domestic Limited Partners (QDLP) Pilot Program, under which it may raise funds from PRC investors for making overseas investments.
Hong Kong
Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 and a Type 2 license from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Suites 2713-2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.
South Korea
Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.
Japan
Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.
Australia
Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”). Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client. In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act.
This material contains general information only. It does not take into account any person’s objectives, financial situation or needs.
South Africa
Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.
North America
Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.
The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission ('OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.
Israel
Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.
