Reprinted from http://tcbmag.com/
Ask around about what’s happening with the increasingly talked-about technology called 3-D printing and you’ll hear a barrage of comments that sound like something Isaac Asimov would say: “Did you know you can print canoes?” “They’re printing cars!” “Did you hear about the human heart they made?” “There’s a printer making edible food.” They can sound straight out of sci-fi, but they’re often true.
Three-dimensional printing has been around for more than 20 years, but recent advancements have made it easier than ever to use, as inventors look for ways to print more than just the highly durable plastic parts and trinkets in use today. In the near future, food, electrically conductive materials and composites stronger than steel will be able to be printed out in layers, allowing just about anyone anywhere to make a variety of products, ranging from hearing aids and electronic components to a beef tenderloin, medium-rare.
A lot of this will be possible thanks to Stratasys, an Eden Prairie company with more than 1,800 employees, considered to be the market leader in 3-D printing. It was one of the first to develop the capacity to print objects back in 1992, to serve primarily industrial clients who required rapid prototypes.
Since then, the $5 billion (market capitalization) company has quietly improved its technology, acquired or merged with other companies, and positioned itself so that today it’s at the forefront of a culture-shifting moment that will change the way we work and live.
And to think it all began with a frog.
The technology that drives Stratasys is fused-deposition modeling (FDM), an additive layering process that transforms consumable materials (such as liquid plastic) into specific objects, directed by a computer-aided design (CAD) file. The printer uses a hot-glue arm attached to a robotic arm and extrudes plastic. It was invented 26 years ago by Stratasys founder and CEO Scott Crump, an engineer who had been working in the semiconductor industry. At the time, he was just looking for a way to entertain his 2-year-old.
“I wanted to make her a froggy, so I used a glue gun loaded with a mixture of polyethylene and candle wax,” he explains. “The frog was layered. What came out looked more like Lincoln Logs, but in building those up, I could build up a frog.
“After that I just kept playing around with it. I mixed things up in our pots and pans, but our food started to taste a little weird, so I moved into the garage. One weekend I put $300 into it. As time went on my wife said, ‘You know, we’re $10,000 into this. We either have to start a business or you have to stop this nasty habit.’ ”
The start-up process might have been nasty, but Crump was familiar with how it would play out from his father, who had co-founded 10 companies, including Benson Optical. His dad became an early investor in his new venture.
Scott Crump knew he needed others. He also needed a name. A meticulous, deliberate man, he didn’t rush this step. He considered more than 2,000 possibilities before choosing Stratasys, which he liked since it used the word “stratify,” which refers to layers.
Next, the pitch—not easy. If people today are murky about what 3-D printing is, back then it was totally foreign. Crump got a lot of blank stares and not a lot of checks.
“We took it out to 75 venture capitalists and met with 20 of them,” he says. “It was a hard sell, which I can understand, as we had no employees, no product and no market. We finally connected with a group in Boston called Battery Ventures. In 1990 it committed to $1.2 million, which was enough to get products to market, but not break even. I thought it would take $90,000 to get cash-flow positive, but it took $30 million. Most executives get fired over that,” he says, laughing.
As he is his own boss, however, he decided not to fire himself, and business grew, thanks to early adopters such 3M, Biomet and General Motors, which started using Stratasys for low-volume prototyping and parts manufacturing. It gained a foothold in a variety of industrial spaces, including aerospace, med-tech and automotive. And in 1994 the company conducted an IPO, selling 1.38 million shares of stock at $5 per share, netting it $5.7 million.
What evolved has become a wildly profitable business model (see “Printing Out Money” on page two). Stratasys manufactures orders for industrial parts on its Eden Prairie campus, home to 85 3-D printers, which Crump refers to as systems. From order to delivery usually takes five to seven days. (Stratasys also has manufacturing facilities in six other locations around the world, including Belgium, Turkey and Australia.)
Then there’s selling 3-D printing systems to clients—and these are not products you’ll find in the Best Buy. High-end systems that can produce the largest parts go for $400,000; the most popular retails for $200,000.
Then a client can return to Stratasys to handle overflow needs, so it’s back to producing parts, and perhaps up-selling systems.
In 2013 the RedEye facility at the Eden Prairie campus built about 6,100 parts per month, 200 per day. It has about 85 printers staffed by two or three operators.
None of this takes a lot of manpower to pull off. Once the parameters of the files get set, it’s pretty much automated. The systems run 24/7.
Stratasys is now valued at $5 billion, after a series of high-profile deals in recent years. And despite its competitors, particularly 3D Systems of South Carolina, it has the biggest market share.
Not that Crump is satisfied. In fact, he doesn’t think his company’s sales approach is quite right.
“It’s broken,” he says candidly. “Right now our incentive program is either for systems and not parts, or parts and not systems. They call that a false incentive. We do have our best-in-class incentive for systems, but because it’s so good, we don’t sell parts. The reason that’s important is 42 percent of the industry is in parts manufacturing