Business

US manufacturing: Why the hottest start-up is a factory

  • 12 June 2015
  • From the section Business
Curren Krasnoff Image copyright curren Krasnoff
Image caption Mr Krasnoff dropped out of Hamilton College at the age of 19 to focus on shaking up the cement industry

"I really, really wanted to be in finance," confesses Curren Krasnoff from the head of a table in a corner conference room with a panoramic view of the Los Angeles skyline.

The son of a banker, Mr Krasnoff, 23, said that all changed when he was home for the summer after his freshman year at Hamilton College.

That's when his childhood friend - and eventual business partner, Daniel Rudyak, 23 - pointed out an industry that was ripe for a shake-up.

No, it wasn't taxis or food delivery or home cleaning - the current disruption darlings of Silicon Valley - but something a little more concrete.

Well, actually - it was concrete, at least in the form of a cement truck that was trundling in front of Mr Rudyak in 2011 while he was driving in Los Angeles' notorious traffic.

That's when inspiration struck.

"We realised it's so expensive to use cement trucks," says Mr Krasnoff.

So the two began experimenting in Mr Krasnoff's backyard, mixing various types of cement and webbing, trying to figure out if there was a way to make cheap but sturdy rollable cement.

The idea was that it could replace expensive mixing trucks in places that need just thin layers of cement. Drainage ditches, canal beds - mostly in developing countries in Africa - were the theoretical target.

Four years and a few mishaps later (his parents' driveway still has the odd concrete splotch of a test gone awry), the geosynthetic manufacturing company that the two co-founded after dropping out of college, Cortex Composites, has received hundreds of thousands of dollars in investor funding, and just accepted its first million-dollar contracts.

They're part of a growing trend of young entrepreneurs who have found themselves in an unlikely place: at the helm of firms operating in the most traditional of industries - manufacturing.

Image copyright cortex composites
Image caption The company makes rollable concrete, which is sold in sheets and activated by water
Image copyright cortex composites
Image caption Cortex Composites recently got its first multi-million dollar orders for its rollable cement product

'Not an app'

Mr Krasnoff is honest about his parents' dismayed reaction when he told them that it wasn't banking - or even a traditional tech start-up - that was luring him away from university and a stable career.

"They thought it was really crazy because manufacturing is a very intense industry - it's not an app where you can go and put it on the internet and people can download it a thousand times," he says.

But for Mr Krasnoff the appeal of actually making something tangible was irresistible.

He's part of what's been called the "hardware renaissance" of companies looking to move beyond traditional software and into markets like wearable technologies and internet-connected devices.

"The barriers to entry for people looking to build a product are coming down - it's faster to build a prototype, social media is making it easier to market your product, and crowdfunding is making it easier to raise that first lump of money," says Noramay Cadena, the co-founder of Make in LA, Los Angeles' first hardware-focused incubator space.

Ms Cadena worked for 10 years at traditional manufacturing firms including Boeing before founding Make in LA, which has partnered with a manufacturer, NeoTech, to help its first class of firms get their products made.

Image copyright Make in LA
Image caption Make in LA is Los Angeles' first hardware incubator, which will welcome its first companies in September

She says changes in the industry - in which big firms such as Boeing and General Electric have consolidated their businesses to focus on core competencies - have opened the door a bit for quirky, smaller firms looking to enter the manufacturing space.

Made in the USA

The problem now is finding factories that will manufacture their products, as smaller firms often only place orders in the hundreds or thousands - typically far less than the normal hardware order of millions of iPhones, for example.

There are three basic ways that hardware firms have solved this problem.

There is the incubator model, like Made in LA, which partners with big manufacturing firms like NeoTech or Flextronics, who agree to take on some of the smaller orders as a long-term growth strategy.

Some other firms first raise money via investors or crowdfunding and then use companies like Dragon Innovation, which works as a middle-man connecting firms like watch maker Pebble with contract manufacturers in China.

Dragon's Scott Miller says the company primarily focuses on orders of 5,000 or more, when it becomes cost-effective to manufacture abroad.

Image copyright Pebble
Image caption Dragon Innovation has helped connect hardware firms like Pebble with manufacturers in China and elsewhere

However, he says he has noticed that firms have come to him with smaller orders as of late - which is actually a boon for US manufacturing, because it is often more cost-effective to fulfill those orders here.

A Plethora of options

Then there is the third option - which has also captured younger builders - of building smaller, microfactories that can contract manufacture quickly and cheaply.

Jeremy Herrman, 28, and Nick Pinkston, 31, met in 2008 when they bonded of a shared love of tinkering and a mutual fascination with the still-nascent 3D printing industry.

Image copyright Plethora
Image caption Plethora opened in early 2014 in San Francisco, and now has over 20 employees and $5m in investment funding
Image copyright Plethora
Image caption Plethora co-founders Jeremy Herrman and Nick Pinkston bonded over a shared fascination with 3D printing

After years of hosting hardware meet-ups in cities around the globe, including their hometown of Pittsburgh and new base in San Francisco, the two realised that they were hearing the same complaint over and over again: it was difficult for hardware entrepreneurs to find manufacturers willing to take on their projects.

So at the beginning of 2014, the two launched Plethora - a fully vertically integrated factory in the Dogpatch neighbourhood of San Francisco, which they filled with advanced 3D printers, robots and traditional milling machines. They currently have 20 employees and have raised more than $5m (£3.2m) in funding.

Crucial to their effort is, of all things, software which the two custom built to allow hardware firms to upload their designs and get feedback on whether or not the object they were hoping to prototype could be built according to their specifications.

Mr Hermann says that he thinks there are a lot of young software engineers like him who have turned back to manufacturing, an industry he says "hasn't changed much in 100 years".

"I feel like that visceral sense of holding what you build in your hand is a very strong emotion," he says.

Something concrete, some might say.

Related Topics

Related Internet links

The BBC is not responsible for the content of external Internet sites