Congratulations! Investors are showering you with money despite the fact you actually make something people can touch. To be successful you need to focus on your technology and IP, and of course time-to-market is everything. How do you make best use of the “runway” your investors have given you?
One possible interpretation of the chart above is that having money means some custom equipment vendor wants to take it. And having worked at several startups, I can assure you that is the default assumption. But that is manifestly NOT the intent. Don’t kid yourselves; anyone who has been a supplier to a startup knows what it means to be stuck without warning with unusable inventory and racks of unpaid bills. Working with startups is its own specialized skill.
For OEMs, product development doesn’t kill startups, scale up does. Development is the “gee whiz this is fun” part; even the investors will be all excited as they count unicorns in their sleep. Product development is assembling the new bike you got for Christmas. Scale up is using it to climb the Alp d’Huez during the Tour de France, on an icy road, in a snowstorm. Scale up, if you are successful, is an unrelenting, agonizing grind that hopefully never ends. If you are unsuccessful, it is an unrelenting, agonizing grind that does end, way too soon.
For End Users, capex seldom kills startups; it’s opex, because it never ends, and you can never get it back. The same general criteria apply as with more mature companies, but keep in mind that scale-up is not a “once & done” thing. Investors will push you to go big or go home; they’ll (probably) happily fund the capex. What they won’t appreciate is wrapping money around everything you ship, if you ship at all, because your opex is way out of wack. There’s a whole process for scaling factories that starts with manual/benchtop processes, then “manumation” to “islands of automation and maybe eventually to giant automation lines (or even “lights out” factories). The right supplier will walk you thru this process and help you decide the right way to scale, not just hand you the factory you think you want today.
The people, processes and skills that got you funded and out of your garage are NOT the people, processes and skills that will turn you into a profitable manufacturing company. The great thing is that this “second” set of people, process and skills can be rented, complete and ready to go. There are companies that specialize in bridging small companies over the “valley of death”. Custom equipment suppliers can take the IP you so skillfully developed and integrate it into a world class production system, whether you are an OEM or an End User. The transition from product development to volume production does not have to be a death march, or even a particularly risky venture. You don’t have to burn up your runway developing the needed resources in house. The trade-off is simple: cash, maybe quite a bit, up front, but an assured low-risk outcome on a predictable schedule. Or… an indeterminate, long, expensive, risky venture with no certain end. If you insist on picking the second path, the experienced VC’s will want a very compelling reason.
As a startup, you have unique and valuable expertise. That’s why investors showered you with money. Any startup needs to focus, ruthlessly, on their goals, and not get distracted with expensive diversions such as teams of engineers and manufacturing techs for things like factory equipment, platforms and peripherals. Factory equipment design, even for things like platforms, is a specialized skill. But it’s not the specialized skill investors are paying you for; you need to focus on what makes you unique. And that’s probably not designing SEMI S2 compliant skins for a ISO Class 1 fab platforms. Hire people who do this for a living, only when you need them, for only as long as you need them. A good design/build firm like Owens Design can quickly understand your needs and integrate an OEMs product/IP into a world-class platform, or develop a rational equipment set, for your next phase of growth quickly and painlessly. Sure, that comes at a cost, but that cost is nothing compared to doing it all yourself, never mind the cost of failure. Your investors will understand. They may gripe a bit about the upfront cost, but if there’s one thing VC’s appreciate, it’s risk mitigation, and a good design/build firm can even help you make the case to your board.
In summary, leveraging factory equipment design experts like Owens Design has helped many OEM startups cross over the Valley of Death, reaching success. Our experience shows us time and time again that with our focus in design, build and integration of their platforms, we allow our start-up customers to retain small, high value teams that focus relentlessly on their core IP, delivering tremendous value to their customers. They pay us for what they need, when they need it; and expend their energies on what makes them special. Having an expert by your side at this stage is a huge competitive advantage.
Take a listen to a startup company SVXR (link) share how they successfully outsourced their product development.
This is the last blog of our series on “How to select a Custom Manufacturing Equipment Supplier.