ABACON: Why we invested in Daedalus
Imagine a manufacturing plant running 24/7, fully autonomous, orchestrated by AI and operated by robots, and capable of producing custom, mission-critical parts. Forget labor shortages. Forget pen-and-paper processes. This is the future of manufacturing. This is Daedalus.
A fascinating vision, but let’s start with the bigger picture to better understand why we think Daedalus will become a global champion.
The term “product-market fit”, which is well-known in the VC and startup scene worldwide, has been extended in recent years to include the aspect of founders, consequently many refer directly to founder-product-market fit. This holistic evaluation where all three aspects must work together becomes even more important as startups address increasingly complex problems e.g. how to generate and store clean abundant energy, how to transport people and goods without harming the planet, how to sustainably feed >10bn people without mass animal husbandry and emissions, how to develop autonomous systems and robots that support humans in all disciplines of life and business, and many more.
Of course, the entrepreneurs themselves are crucial, they have the vision for the product and, together with the business angels and VCs, the craftsmanship of company building. But almost more important are the market and certain tailwinds. So let’s start with that.
THE MARKET
Practically any manufacturing company that uses custom-made metal parts can become a Daedalus customer. Although, the spectrum is almost infinite, key industries are semiconductors, energy, medical and pharmaceutical technology, mechanical engineering, and aviation. Equipment manufacturers and companies in these areas usually have no or only limited in-house CNC-controlled turning centres and milling machines to produce these custom-made metal parts as they focus on other parts of the value chain. CNC stands for Computerized Numerical Control and refers to the automated control of machining tools (such as drills, lathes, mills, grinders, routers and 3D printers) by means of a computer. Therefore, they rely on the thousands of small local subcontractors or order the parts in China. The market is correspondingly large and established. The worldwide turnover from the production and finishing of metallic parts is ~600bn$, of which ~100bn$ is in Germany. Driven by the focus in this decade on deep tech problems that require greater levels of hardware innovation, the market is expected to grow further.
>100,000 small and inefficient machine shops serve the $600B market for high-mix parts
Looking at the individual suppliers in Europe and the USA reveals surprising figures. Most of the small suppliers are profitable, despite poor processes and low utilization. The average plant has an annual productivity of ~1200h per machine. As context: Running a 1-shift operation with 8h production on 250 working days results in 2000h respectively ~1700h, taking into account 15% of unplanned downtime. According to the latest data from the Industry Association, a supplier needs ~1.4h of manpower to generate one billable machine-hour; a strong indicator of the low level of standardization and automation in the value chains today.
Double-clicking on the precision parts sector reveals further opportunities: top customers such as ASML, Zeiss or Trumpf are willing to pay a premium, but in return, they not only have high-quality requirements and therefore require special machines (e.g. longer traverse paths, larger diameters), they also increasingly expect a comprehensive digital data chain from the raw material through production to the end-of-line testing. The vast majority of suppliers are not in a position to provide these services.
THE PRODUCT
Daedalus was born with the vision to become the default way precision parts are made globally. The team is pursuing this by building software-controlled and robot-operated factories so manufacturing companies can get mission-critical parts reliably and at scale, in days instead of months.
What cloud computing did to server rooms,
Daedalus will do to precision manufacturing.
Not only is the vision revolutionary, but Daedalus’ approach is fundamentally different from anything we’ve seen before. Over time, Daedalus will require fewer and fewer skilled workers for production, increase productive hours, offer shorter lead times, and will use the growth to invest in both more and different machines that drive selection and availability … a flywheel of competitive advantage is created
Two perspectives:
- Daedalus approaches the challenge of autonomous factories as a systems problem, so they first digitize all value chains or information flows to form a closed loop and then successively introduce AI/automation (small loop = improving machine/CAM programming; large loop = accepting, pricing, and sequencing of orders) and robotics. Thus, they are developing a vertically integrated operating system. Not all aspects have to be developed by Daedalus, instead, they can use turnkey solutions from the market or from other startups, such as Coboworx, which offers turnkey solutions for machine loading and palletizing.
- At its core, Daedalus is an exponential company and business model. What most people don’t see, it builds on top of a linear, immediately profitable business model: The production and shipment of high-precision parts. Through clever financial leverage, this requires only a low CAPEX. The linear business model therefore not only improves cash flows but is also the technical center that enables the codification of knowledge and automation of sub-steps.
Timing is also very favorable: we are currently seeing major advances in exponential technologies such as robotics, AI, and sensing. At the same time, there are strong tailwinds in demand (both volume and quality) driven by massive government subsidy programs in the US and Europe to support the clean energy transition, the sovereignty in key technologies such as space, solar cells, semiconductors, quantum, or robotics as well as the decoupling supply chains.
THE TEAM
Daedalus’ founders and management team Jonas Schneider and Daniel Gauder bring a wealth of experience at the intersection of AI, robotics, and CNC machining.
Jonas Schneider (CEO/Founder) was previously heading robotics at OpenAI and injects the perspectives of AI, robotics, software development, and system automation. He also combines the best of both worlds: On the one hand, Silicon Valley with the unstoppable quest for great visions and massive speed. On the other hand, based on his education at KIT, the values and grounding of Europe with a deep understanding of engineering, production, and precision. With the foundation of Daedalus, Jonas joins a group of successful startups founded by former OpenAI colleagues. In reference to the famous “Paypal Mafia” — a group of former PayPal employees and founders who have since founded and/or developed additional technology companies such as Tesla, LinkedIn, Palantir, SpaceX, Affirm, or YouTube — the term “OpenAI Mafia” was coined for it. Years will tell if it deserves that term, but we are very confident.
Jonas is complemented by Daniel Gauder. Daniel brings more than 15 years of experience in CNC machining, especially in high precision, and has an outstanding network of partners and customers. He draws on his experiences from ramping-up various CNC production facilities around the world. After founding and selling his own manufacturing company, he set up and managed production plants for global corporations and hidden champions.
Daedalus was incorporated in the US out of the Y Combinator W2020 batch. With key employees in San Francisco and an operational headquarter in Karlsruhe, Daedalus is a global company backed by a one-of-a-kind group of investors: Today, we are excited to celebrate a significant milestone for Daedalus with the $6M Series Seed Extension from renowned global investors, led by Addition, with participation from Khosla Ventures, Y Combinator, First Momentum Ventures, LEA Partners, and ABACON CAPITAL.
For us, this investment highlights our unwavering dedication to the European deep/high-tech ecosystem and will be part of our broader robotics cluster. We’re thrilled to partner with Jonas, Daniel, and the rest of the Daedalus team to build the world’s first autonomous and flexible factories.
Do we miss your perspective on this topic? Any topic you want to know our stance on? We’d be happy to hear from you, so feel free to reach out.
Learn more about ABACON CAPITAL on these channels:
> Follow us on LinkedIn: @abacon_capital
> Follow us on Crunchbase: @abacon_capital
> Follow our publications on Medium: ABACON’s view
