What can be worse than disaster? Success, when it comes too quickly and easily. Re:3D, a startup that makes industrial 3D printers, avoided the problem by bootstrapping. But a big name in the industry, MakerBot, just got caught up.
MakerBot was hot when it first offered consumer 3D printing kits. It took an open-source approach to the design and sold thousands. A design exchange let people upload and download files that could drive the devices to make objects. In came a $10 million found of venture funding led by Brad Feld and Foundry Group. In the summer of 2013, industrial 3D printer company Stratasys agreed to purchase MakerBot for $403 million in stock.
The company laid off 20 percent of its workforce, according to reports, and shuttered its three retail stores. MakerBot's own public take on this was a little more circumspect. Here is part of the company's statement:
Today, we at MakerBot are re-organizing our business in order to focus on what matters most to our customers. As part of this, we have implemented expense reductions, downsized our staff and closed our three MakerBot retail locations.
With these changes, we will focus our efforts on improving and iterating our products, growing our 3D ecosystem, shifting our retail focus to our national partners and expanding our efforts in the professional and education markets.
"These organizational moves are part of the continued scaling of MakerBot," said David Reis, chief executive officer of Stratasys.
Where did things, 3D or not, go wrong? Perhaps the company had overreached. Opening retail locations may sound like a great way to introduce more people to your products, but making them work is tricky, particularly when you aim at expensive prime retail space like Boston's Newbury Street, where merchants say that the space costs outstrip the potential profits.
"For a while, we tried to have this super utopian business model that was probably more befitting of nonprofits, where we just shared absolutely everything we were working on." One of those things was a rough sketch for a second 3D printer model. The good news? Word spread like wildfire among MakerBot fans who were immediately sold. The bad news? Everyone stopped buying the first generation printer to wait for the latest and greatest--which was still a year away.
"We got through it somehow, but we definitely shot ourselves in the foot that time," Pettis says. "And you can only shoot yourself in the foot so many times before you can't walk anymore."
MakerBot moved away from sharing details and toward proprietary systems that ticked off a lot of its fan base.
And then there's the performance Stratasys. Its stock high in January 2014 was $136.46. Price today: $56.37. When the bloom is off the rose, corporate executives, particularly a subsidiary's new CEO sent by the parent, tend to cut, cut, cut.
When you take a lot of people from others to build your business, there is always an expectation of what you'll eventually provide in return. If you don't meet expectations, there is a strong chance that your dream will be whittled down to size. Before you take the money, be sure you really need to. As Re:3D showed, it may be that you can get things moving without giving away the bulk of ownership so you can achieve what you set out to do, not what someone else decided would be more profitable.