Josip Ćesić: Gideon is still in a phase where it spends more than it earns

Great hopes have been placed in Gideon, including predictions that it will become the new Croatian unicorn. The autonomous robots for warehouses powered by artificial intelligence, for which this startup is known, are currently mostly produced for the American market, as companies there, unlike their European counterparts, are more willing to automate operational processes. Interestingly, Gideon is one of the few companies that also assembles final products in the USA. Despite this breakthrough, the company continues to record business losses, prompting Josip Ćesić, co-founder and recently appointed director of the company, to explain in an interview at their Zagreb facility the current stage of the company’s development, what challenges they face, and what investors are saying.

Gideon has been showing losses in Croatia for years. How do you explain that?

– We are still in a phase where we spend more than we earn. Thus, we are partially financed from revenue and partially from investments. In that sense, our consolidated EBITDA on a global level is negative. On the other hand, the Croatian company is not the one generating significant revenue, primarily because we are active in the North American market, specifically in the USA and Canada. Therefore, our American company, where part of the production takes place today, is actually the entity that sells robots to end customers. Currently, our customers are companies from the automotive industry, as well as manufacturers of consumer goods, the food industry, and retail in the North American market. We have consolidated the entire business so that the parent company is in the USA, while the Croatian company is a subsidiary that holds the intellectual property. In Croatia, we work on product development, design, and building systems for managing autonomous robots. In that sense, the Croatian company is the holder of the IP, but since the customers are in America, a significant part of the revenue is generated through the American company.

What are the revenues there?

– At this moment, we cannot share precise information about the revenues of the American company since financial data and reports of private companies in the USA are not public.

So, your customers are in America. But what about the European market?

– Currently, we are not focused on the continental European market when it comes to direct sales channels. We have partnerships with companies like Toyota Industries Corporation, the world’s largest forklift manufacturer, which has also been one of our investors since the second half of last year, with whom we collaborate on technology licensing topics. Regarding Gideon, our direct sales channel is currently active in North America, as well as in the markets of Great Britain and Ireland, as they are, due to operational similarities, more akin to operations in North America. Continental Europe is certainly part of our future plans, but it is not currently in focus.

You mentioned Toyota’s investment. At that time, there was also a plan to present a new autonomous solution for retail. What is the current status of that new product?

– Our core technology is actually applicable in various types of applications. Two applications that are particularly interesting to Toyota are automated loading and unloading of truck trailers, which we are currently bringing to market, and order picking, i.e., commissioning goods in distribution centers serving retail. In a joint statement with Toyota, these applications were specifically mentioned.

Gideon is now recognized for its solution that addresses the problem of automating the loading and unloading of truck trailers. This is currently an almost completely unautomated segment, and it is a job performed by about a third of all forklift operators in the world. Therefore, it represents a huge opportunity for automation. We have recognized that our technology is well-positioned to solve this problem, which is why we have focused heavily on this application over the past two years. The market has shown great interest, and our customers have clearly indicated that they see significant benefits in it.

In Osijek, you have only seven to ten employees, and part of the team is also in America. Can you explain who does what?

– Approximately 80 percent of all our employees are located in Zagreb. In America, we have about ten employees, roughly the same as in Osijek. In Zagreb, the majority of the R&D team is located, while part of the software team is in Osijek, along with the finance team. In America, we have our sales team, part of the delivery team, as well as part of the production. Currently, the American team is relatively small, but this year we expect to grow to 16-17 people and plan to continue that growth next year.

Interestingly, many companies in your industry have production facilities in Europe, especially in this part of the continent, while in the USA they usually only have sales teams. You are one of the few companies that decided to have production in America as well. How did that decision come about, and since when has production been there?

– We established production in America in the third quarter of last year, so just under a year ago. We decided on this because, in our sector – industrial autonomous vehicles or autonomous forklifts – we are dealing with large vehicles. It is not optimal to produce such large machines in one geographical region, for example, in Europe, and then transport them across the ocean to the USA. Moreover, we no longer produce the basic chassis ourselves; we collaborate with established manufacturers of industrial vehicles like Toyota, Mitsubishi, and others. They also do not have production in Europe for the American market but regularly establish local production capacities. For example, our base chassis are now produced in Houston, Texas, and in Green Bay, Wisconsin. We do the final assembly in Chicago. This final step of assembling the vehicle occurs on components that we partially prepare in Croatia, and the final assembly takes place in the USA. Such a division of production between Croatia and America is logical from operational and logistical perspectives, and the final product is ultimately declared as American.

So, does this mean that the announced tariffs by Donald Trump on the European Union do not apply to you?

– Tariffs are a very complex topic, especially in the world of supply chains in which we operate. Our product is extremely complex and consists of hundreds of components, so tariffs certainly apply to us. Although the final assembly of the product takes place in America and the final product formally carries the label that it was produced in the USA, it is important to know where each individual component comes from – batteries, metals, iron, and other parts. Both our supply chain and that of our suppliers are exposed to different customs regimes. For now, intellectual property is not subject to customs burdens, but what will happen in the future remains to be seen. In any case, we monitor the situation day by day and consider various scenarios for production.

What is currently your biggest challenge?

– We are transitioning from a phase where clients see us as a promising startup to a phase where they perceive us as a serious and reliable business partner that can help them transform their operations. This is a huge leap necessary for large manufacturers of automobiles, food, and other products in North America to decide to entrust their key logistics processes – for example, loading operations – to a technology team from Croatia. Such companies are extremely conservative and cannot risk the stability of their operations. Our challenge is to convince them that our technology will increase efficiency, reduce costs, and improve their market position. This is not just about selling a product, but a process of significant operational transformation. On one hand, we are introducing innovations through robotics and artificial intelligence, and on the other hand, we must help customers transform their established production, logistics, and warehousing processes through these solutions. Therefore, although the market sees us as an AI and robotics company, we are essentially changing the way large industrial companies operate on a daily basis. Once robots enter their operations, nothing will be the same as before.

How do employees in warehouses where your robots are located react to them? Are they excited to see what they can do, or do they fear that they will take their jobs?

– In fact, we notice that in operations where we introduce our technology, it almost never happens that someone gets laid off. In the industry, we observe a huge shortage of labor, which is getting older, and today no one wants to drive a forklift anymore. Besides the difficulty in finding people who want to do those jobs, there is also very high turnover among those employees. The solution is automation. Today, people generally do not perceive robots as a threat, but as an opportunity for operational sustainability, cost optimization, and increased workplace safety.

How did Gideon employees react to the departure of long-time director and co-founder Matija Kopić from the company’s operations?

– Matija stepped back three years ago. For the last year and a half, I have been leading the company. Together with Matija, Edin Kočo and Kruno Stražanac are also here with me. The three of us are co-founders, and we have been working together with the entire Gideon team on the development of the company all this time. As for team dynamics, Matija has not disappeared. His withdrawal was a personal decision, but throughout this period, he has been available for conversation and advice. About a year and a half ago, Matija formally joined the Board of Directors as a member. I think we function well in that setup.

And what do investors say? We have received information that investors are not satisfied with your results…

– It is difficult for me to comment on specific speculations. We have had our ups and downs, and from them, I hope we have learned something. Currently, we are focused on looking forward – in an advanced stage of product development and with an exciting list of customers. The opportunities ahead of us are significant, and our key investors confirmed this during the last round of recapitalization last year. Along with new investors, such as Toyota, there are also existing ones – Koch Industries, one of the largest private companies in the United States, and Prologis, the largest global company in the industrial and real estate sector. All of them participated in the last funding round, further investing in the company. Startup companies like ours, as well as the entire industry, have gone through a phase of a sort of ‘reset’. The capital market has become much more demanding. In the field of robotics and industrial automation, many companies have simply disappeared over the last two years. We are happy to be working and delivering products. However, we are also aware that everything we have done so far is just a foundation for the challenges and opportunities in the future.

Are you looking for new investors?

– At this moment, no. This, of course, does not mean that this strategy will not change in the future. Currently, we do not have a need to secure additional capital, but, of course, we continuously balance that question. Profitability is the goal we are aiming for. Today, we are still not profitable, and this logically raises the question: if we are spending more than we earn, how will we finance ourselves in positive and negative scenarios? We continuously evaluate all these questions.

And what is your cash flow like? Do you have liquidity problems?

– We do not have liquidity problems. Midway through last year, we closed financing with new and existing investors, and the company is not at risk of liquidity.

Recently, you appointed Iva Vukina, a former director from Goldman Sachs, as the Chief Commercial Officer responsible for global expansion. What will her task be, given that she is in the USA?

– Iva joined us as the person responsible for direct sales channels, partnerships, and marketing. Her professional experience and responsibilities at Gideon are strongly customer-oriented, so it is natural for her to be located in America. She will work most of the time from New York, but our office in Chicago is often a gathering place for the team and a meeting place with customers, and our business also requires frequent travel and staying with clients. I travel between Croatia and America at least once a month, and soon Iva will spend most of her time in the USA as well. This dynamic is a completely normal part of our business.