This article is the second part of a series dedicated to the changing investment landscape in the AM industry. The first part of this series discussed what founders – who will be looking for funding – should consider to grow their AM business.
Many of you probably know Christina Perla, as the founder and CEO of Brooklyn-based 3D printing service bureau Makelab or through her work with Women In 3D Printing. I have been lucky enough to discover her bravery in running an Additive Manufacturing business while navigating a labyrinth of uncertainties and this is one of those genuine experiences that mark the life of every editor.
If you’re a founder or executive running a business, you probably already know that “capital is going to be hard to come by.” Investors and financiers have said it repeatedly, even in this edition of 3D ADEPT Mag. While the trade press has contributed to putting on a pedestal companies that continuously secure funding rounds from investors and other financial firms, the majority of entrepreneurs (75% to 85%) are bootstrapping their companies – which can be hard to believe because no exact figures have yet to be shared in our industry. However, it turns out that, I know a couple of AM companies that rely on their resources to grow their business and Makelab is one of them.
The truth is, in my modest experience of engaging with start-up founders, I have developed some sort of awe for them – for those who struggle and for those who thrive – because in the end, it takes a lot of courage to pursue this road.
With the changing investment landscape, I believe this conversation is more important than ever, as it strikes a balance between the two parties – those who are bootstrapping their business and those who go the VC route. Interestingly, it aims to give those of the former group a couple of options they should continue exploring in their journey.
Perla on the “growth at all costs” mentality
For the record, Makelab emerged in 2017 and since then, continuously invests extra miles to support businesses alike across vertical industries that may benefit from AM. According to Perla, the company was born by accident by two industrial designers who thought they were going to build a design firm. The intent with Makelab was that it was a cash-rich business that could fund the growth of the design firm.
“2-3 years in, Makelab tripled, we found a real problem that existed in the market that no one seemed to be really hitting the mark on, and my cofounder & I truly enjoyed building a business and the process of simplifying a complex operation. What we saw was that most of the industry was truly focused on advancing AM, focusing on metals and new use cases. Manny and I love that, we support it. But as industrial designers ourselves, it seemed that no one was really building a solution for designers like us, for those in the consumer products space. Whatever was out there, seemed to be just missing the mark, according to our customers”, she states from the outset.
The reality is, the company has been evolving in an industry where newspaper headlines had somehow defined “growth” as an important factor to get funded, to give credibility to a product that was not always or necessarily viable. While she believes that, to never lose sight of the real business, one should remain customer-centric, Perla recognizes there are many startups/companies out there with a “growth-at-all-costs” mindset that still haven’t hit product-market fit:
“They target everyone, and in doing so, they target no one. I believe that the pressure of that mindset can be detrimental if it’s brought on too early. When building a solution to a problem, you must first find it. Sometimes, that takes more time than the timeline that VCs and other founders give. But if you want to build a solution/product that lasts, it’s good to sit with it for a while.”
By focusing on your real targets, the latter will give you validation of your products as you grow, and VC money will only be “a tool to help you get to where you’re going faster. It’s not the end goal, and if it is then I would question the founder + the business”, she adds.
So, how does one manage to grow on their own?
Whether their company is successful or not, the founder will always need to pay bills, ensure healthy future cash flows, and as alarming as it sounds, capital sources can dry up overnight with no warning. Bootstrapping appears then as a double-edged sword: on the one hand, you have no dependence on investors and a lot of time to strengthen the foundations of your business, on the other hand, addressing the challenges and impromptu situations that may require (a lot of) cash flow, can be frustrating, time-consuming and slow down the process of building the road to success.
I was curious to know how Makelab managed to grow without raising money. Did they decide not to raise money or were they not given that opportunity? Most importantly, how did they overcome the toughest periods of the financial crisis? The honesty in her responses comes with a couple of lessons she learned from this period:
“It wasn’t even on our radar until 2020. It wasn’t until we tripled the business that we considered it. Growing is tough when bootstrapped. It’s a cash flow management + timing game.
In Q3 of 2020, we went out and tried to raise. We failed the first time. We went out again in Q3 2021 and succeeded. But it turns out the fund didn’t have any capital to deploy. In 2022, we decided to minimize our efforts (while keeping the door cracked with warmed relationships) and focus on growing our revenue and customers.
In a way, we weren’t even given the opportunity. Our business is tough, when you compare us to software SaaS models, the competition is stiff. SaaS wins. At the end of the day, dedicating 8+ hours a day to fundraising when we had little success, didn’t feel like the right move for us at this time.
Bootstrapping isn’t for the faint of heart. It’s tough, very tough. Many funded founders talk about runway and the cash in the bank dwindling. Well, in bootstrapping, you’ll experience many of those on a smaller scale. The good thing is- if you’re winning with your customers, you have revenue. If you have revenue coming in, it’s easier to weather those cash flow storms.
Many of the principles and tactics for cash management I did while bootstrapping should really be applied across the board. But the stakes are different. With bootstrapping, there is no boat coming to save you. No chance of a boat. It’s just you. The more predictive you can become with the cash that enters and leaves your bank account, the easier it will be. You should know everything down to dates & amounts. How much do you predict your bank account will be in 2 days, 4 days, 4 weeks, 4 months.”
What tips founders who are bootstrapping should keep in mind then?
Let’s make it clear: if you have no means to finance even a small and steady version of your business/project, then this article is not for you. You may want to explore other financial alternatives. However, if you decide bootstrapping is the best choice for your situation, a couple of strategies may get you on the process of building the road towards success:
- Select your team members wisely. “No company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.”
- Be prepared to take on many roles, including those you feel are subservient.
- Make sure you outsource what’s essential (e.g: legal and accounting).
To these tips, Perla adds:
- “Prioritization is key. You can’t dwell on something that 1) hasn’t happened yet, 2) is out of your control. That will only blind you from seeing potential solutions.
- Get creative. This is where being a New Yorker really comes in handy. Get creative and think outside the box. If there are any non-dilutive capital opportunities- grants, micro-loans, etc. – take them. Apply for them, and learn how to seek them out.
- Don’t get comfortable with loose expenses. Know where your money is going. Guard it with your life. Be smart about how you spend, you don’t have the same luxury as your funded friends. Find credits, find deals, and find ways to get free months on software products. All of those things add up and can help a lot.”
Just like each AM application is one of its kind, keep in mind that there is no “one size fits all” funding formula for start-ups. Moving forward, and speaking of Makelab, Perla’s statements here do not mean that VC or other investment instruments are out of the question completely. “But at this moment, we’re choosing to focus on our customers and our business”, she concludes.
Last but not least, no matter how complex the journey is, I believe defining your measure of success will help you appreciate each stage of the journey at its true value.
This article has first been shared in the January/February edition of 3D ADEPT Mag.