Investing in the Future Part 1 of 3: Seeking Courageous Investors

Raising capital for a hardware-based startup can be a real challenge. It’s not just about securing financing, but seeking the right kind of money from the right type of investor. I learned that finding a courageous investor who shares your vision for the future can make all the difference. Here’s my story of how we got Essentium off the ground, and some tips for emulating our success.

As the CEO of a young manufacturing technology firm, I’ve certainly given my share of presentations to potential investors and venture capitalists. In an effort to raise capital during Essentium’s startup phase, I’ve told countless people about the genesis of our company, our products and technologies, the markets we serve, and the positive business outcomes our customers have realized. (For those who don’t know, Essentium is a fast-growing manufacturer of industrial-grade 3D printers and filaments, and we’re committed to bridging the gap between 3D printing and traditional manufacturing.)

Regardless of your startup idea, one thing all ventures have in common is that raising funds is not easy, and I’ve failed to “get to yes” many more times than I’ve succeeded (but fortunately you only need a few yes’s). Having lived through a failed startup before Essentium—and not the let’s-hope-for-a-gentle-soft-landing kind of failure, but instead, one where the-board-met-there-is-no-way-forward-and-everyone-is-fired-immediately kind of failure—I feel incredibly fortunate that Essentium has been able to transition from a formation-stage to a growth-stage startup. In the end, no matter the strength of the idea, it’s all about the hustle. In Essentium’s case, our incredible team (which has generated a compelling stack of new tech combined with a go-to-market strategy that is working), our repeat customers, new contracts, and growing pipeline all combine to empower us to firmly march into the growth stage of our business plan. This has allowed us to demonstrate our value to potential investors more directly, and during this process I was able to take a moment and reflect on the way pursuing financing, and the type of mandate behind the money you’re seeking, either opens or closes doors for entrepreneurs trying to capitalize, in particular, a hardware-based venture.

I’ve learned that it’s difficult for hardware companies to garner interest from some typical venture capital funds or angel investors because most are looking for the next Uber, DoorDash, or DraftKings.com; some kind of software-based service that requires little infrastructure and brings a fast ROI. Conversely, hardware-based businesses are very capital intensive. Sales cycles are long. Physical plants are huge. Equipment costs are high. Even though the product may be groundbreaking—like soft-robotics, self-driving cars, or 3D printing at scale, for instance—payback periods may push out for years (or decades…Tesla, anyone?). This can make hardware companies a tough sell to venture capitalists, no matter how high the long-term payoff might be. That said, to make entrepreneurial manufacturing dreams come true and, more importantly, support important society-changing innovation, we must encourage what I call courageous investors.

But why does this matter at all? Sure, there are many areas of innovative hardware manufacturing which are chronically underserved by the venture capital market. As a result, new products and next-generation technologies are taking much longer to bring to fruition than they should. And everything from the environment to consumer choice to economic resilience suffers. There are literally billions of dollars available in the US alone for investment; that’s what venture capital R&D is all about. However, as Silicon Valley VC funds continue to focus mainly on the category of scalable, software-based architectures, global manufacturing and innovations which may systemically benefit global supply chains, the environment, and the consumer, can be hamstrung by a lack of investment.

Now, all is not doom-and-gloom. Take some comfort with me alongside promising announcements by Desktop Metal and others who are also unlocking serious investment in manufacturing focused hard-tech. But again, given the insatiable consumer appetite for the latest hot widget and the growing interests in mass customization, these exceptions to the rule are lamentable. So, on behalf of all hardware startup CEOs, I call for greater courage on the part of venture capital firms to adopt different risk profiles and place “big bets” on promising young companies seeking to architect the manufacturing technologies of tomorrow. I challenge investors to consider broadening or outright changing the mandate of their next fund to allow room to focus on the hardware sector and manufacturing companies which need more capacity, larger facilities, and new assembly lines to make the products that will benefit all of society, including these very investors. It might not be easy, but the rewards can be incredible and the long term positive knock-on effects can be tremendous.

If it weren’t for our persistence in the early days, along with a steadfast belief in our technology —and a series of “lucky” encounters including finding a high-profile champion who attracted attention to our venture—I might still be looking for that angel investor to take a chance on Essentium.

In my next article in this series, I’ll share some specific tips for raising capital for a hardware manufacturing company. And stay tuned through the final article in the series which will look more specifically at where the influencers are investing their money in additive manufacturing, and why.

Essentium, Inc. provides industrial 3D printing solutions that are disrupting traditional manufacturing processes by bringing product strength and production speed together, at scale, with an open ecosystem and material set. Essentium manufactures and delivers innovative industrial 3D printers and materials enabling the world’s top manufacturers to bridge the gap between 3D printing and machining to embrace the future of additive manufacturing.