Makerbot in the Trough

I’ve gotten a lot of emails this week about Makerbot. People have asked me what’s going on there, “what happened” and what will happen. As it’s been two years since my formal involvement with the company ended after the business was sold to Stratasys, of course I don’t know the answers to any of these questions, but it certainly makes for provocative discussion.

I was an investor in Makerbot in 2011 and had (and have) tremendous confidence in the company’s mission to bring 3D printing into homes, schools, offices all over the world. Makerbot was one of those rare “rocket ships” that grew by a multiple every year while selling into a new and exploding category that it was helping to define. New geographies, tons of hiring, new product categories and lots of invention along the way. Then a successful exit.

And now articles about layoffs, retail store closures, dramatic sounding pieces about the company’s “darkest moment” and how far it may still fall. And from my position of admitted distance at this point, I scratch my head. Because most of us have seen this well-worn graph:

And yet even having seen it we are still surprised when new technologies follow the pattern of introduction, incredible expectations, inevitable product shortcomings and then a seeming loss of interest. It strikes me as fairly obvious that even if you acknowledge specific problems that may or may not exist at Makerbot (“the last new extruder had problems!”, “ Some of the original open source makers are mad!”, “ Post-merger integration is hard!”), this couldn’t be a more textbook example of the Trough of Disillusionment.

I first met Bre Pettis in 2009. As I built a relationship with him and his cofounders, Adam Mayer and Zach Hoeken throughout 2010, I began to get really excited about the company. And in 2011 when I recommended to my partners that we invest in the company, one of them asked a straightforward and pertinent question: at what point will these machines be cheap enough, fast enough, sufficiently easy to use and reliable enough that a mainstream consumer outside the early adopting population would not just want to buy one, but would use it consistently? My answer then was — 2018 is my best guess, 2017 if things go a lot faster than I expect.

At the time, the current model Makerbot was The Thing-O-Matic, a DIY 3D Printing kit that Bre bragged he could assemble in 20 hours. It took mere mortals several days. It involved a soldering iron. The software was command line. A toaster it wasn’t. Considering that as the starting point (at least from our perspective), there was a lot of ground to cover to get to a piece of mainstream consumer electronics with sufficient available content, low-friction software and cultural context for widespread adoption. So my answer was — 7 years. In 7 years I think my thesis of kids, schools and toys will play out. 6 if we’re lucky.

We’re at 4 years today. The current generation of Makerbot machine is a dramatic improvement from what the company offered four years ago.

2014 vs 2010

It makes incredible things. But at last check, it’s still a “prosumer” machine. And while we didn’t have his conversation specifically, my guess is that if I’d been asked to posit what the business and product looked like in late 2014 / early 2015, it would probably be about what the company sells today. Candidly, a category leader with $100M in revenue would have been an optimistic Year 4 projection. The biggest difference is that I never expected them to be subject to public market vicissitudes at this stage. So having a single bad quarter like Q4 of last year, faced with growing pains and a product problem with the new extruder, just wouldn’t have mattered as much.

I could be wrong and 3D printing could be a chimera. But I don’t think so.

The prospect of being able to make toys with my kids is still one that lights me up. It was never about replacement shower curtain rings for me personally. I think a Makerbot is more in the vein of my first PC (an Apple II+) or my first erector set or my first electronics set. While there are clearly going to be bumps along the road, I think subjecting this story to the quarter by quarter analysis that is associated with the public markets probably just leads us to mistake the very normal trough for something much worse.

The interesting counterfactual to today’s prevailing sentiment is: what if Makerbot had never been sold and was a private company today? Given the growth, the market leading position and the relatively lower quarter by quarter scrutiny enjoyed by private companies, my view is that the company would still enjoy a “unicorn” status, be seen as a hyper growth market leader, and would have the time and space to work through such scaling problems as it currently faces.

Ultimately, these questions come to bear on any rapidly growing startup that is considering the public markets, either via IPO or via combination with a public company. And it leads to a longer, separate conversation about the relative merits of each.