Enabling Industry 4.0 - Why We Invested in Geomiq

In a world where companies are as efficient as their supply chain and every day is key not to fall off the innovation curve, a broken quote-to-order process means that a significant part of the efficiencies of Industry 4.0 are lost on the way. Now, more than ever, is the time for intelligent manufacturing and agile supply chains. But first and foremost, now is the time to fix the quote-to-order process so as to enable a real end-to-end Industry 4.0 revolution. And here’s where Geomiq comes into play: custom on-demand manufacturing of parts in 3-days to fuel Industry 4.0.

Innovation has driven immense progress in industrial manufacturing since the 18th century, back when mechanical production was powered by steam. We have gone from mass production using electrical power in the 19th century to automated production powered by electronics and IT systems in the 20th century. And it is now time for technology to take manufacturing to the next level, integrating advanced manufacturing techniques with the internet of things (IoT) to create manufacturing systems that are interconnected and can communicate, analyse, and autonomously use the information they are provided with. The time for the autonomization and digitisation of manufacturing is finally here.

Industry 4.0. Intelligent production. Autonomous robots that know what they need to do without being told. AI, of course. Smart factories. Machines that can see, think and decide. It certainly sounds very exciting. Very techie, and very futuristic. So much that it even made industrial manufacturing look (very) sexy to the eyes of a VC investor like me. However, to be honest, also a bit too deep-tech for an investor in tech-enabled marketplaces and platforms.

But then I met Sam and Will, co-founders of Geomiq, and Industry 4.0 took a whole different meaning. It’s certainly groundbreaking to think of fully automated manufacturing floors run end-to-end by robots with no human intervention. But all the efficiency and productivity gains of all that innovation is certainly hindered if the most basic step of the process — i.e. making the manufacturing order — is broken.

CAD and new generation “CAD- like software” has digitalized the design step and advanced manufacturing techniques are powering intelligent manufacturing. But sourcing/procurement is lagging behind, mainly driven by the complexities of working with suppliers (i.e. manufacturers). Companies still face long lead-times (c. 6 weeks per prototype part in the UK) caused by a uselessly complex, long, iterative and unreliable quote-to-order process: it takes a design engineer forever to find the right supplier, then it takes the supplier forever to get back to them with a quote, put some quality issues into the mix and add the typical delays…and you get very long lead times. Now think that if an average assembly has 30 parts and you need to do this for each of them…you get innovation projects paralized for weeks.

And in a world where companies are as efficient as their supply chain and every day is key not to fall off the innovation curve, a broken quote-to-order process means that a significant part of the efficiencies of Industry 4.0 are lost on the way. Definitely, now is the time for intelligent manufacturing. But first and foremost, now is the time to fix the quote-to-order process so as to enable a real end-to-end Industry 4.0 revolution. And here’s where Geomiq comes into play.

Geomiq (stands for Geometry IQ) is a data-driven manufacturing marketplace building the world’s best and most sustainable supply chain by directly connecting design engineers with pre-vetted manufacturers. Engineers upload the CAD file of their design, get a quote within 24h and have the manufactured part with them in as little as 3 days. Custom on-demand manufacturing of prototypes and low-volume production to fuel Industry 4.0. A year and a half old, as of today Geomiq has manufactured more than 500k parts for c. 2k engineers working at industry leaders such as Delphi Technologies and Shadow Robots and is growing at a 60% average MoM.

When we invested in Geomiq and issued a Term Sheet two and a half (sleepless) weeks after meeting the team for the first time, the world was a very different place than it is today. But today, in a world hit by Covid-19, our investment thesis holds more than ever. We do not know what the post-Covid-19 world will look like, but we are certain that it will require more innovation, more agile supply chains and more autonomous manufacturing processes. In this new future, Industry 4.0 will become evermore relevant and we will need more founders like Sam and Will developing sustainable tech solutions to enable it.

Sam and Will are founders on a mission and they have a secret

Some call it founder-market fit. We call it ‘founders with a secret’. We mean industry insiders, who understand their market and customers inside out. And who are obsessed with solving the problem they are after. Founders on a mission.

Please meet Sam: mechanical engineer by background and at heart, 12-years design engineer and a force of nature. He was running a €600m marine project in Germany and got frustrated over and over again at how inefficient it was to get prototype parts manufactured. One day he just had enough and left to launch Geomiq.

And on his way out, he met Will. Second-time marketplace entrepreneur, sales machine and a people’s person now also turned engineer. Not sure he had ever heard about CNC machining before meeting Sam but he definitely gets people and the frustration they feel when they can’t do their job properly because of inefficiencies in the process. He is on a mission to fix that. And you should listen to him talking about CNC machining now…a natural!

On top of it all, and many other things like a lightspeed execution, Sam and Will are also wonderful humans. Which is key for us if we are bound to work together for years.

A very telling story about Sam and Will. About a month and a half ago, when it was already obvious that Covid-19 was a serious threat to people’s lives and to our healthcare system — and Will and Sam were flat out redesigning operations so the team could work from home — I got a call from them. They thought Geomiq could help. They had spent the weekend navigating engineering groups and were organizing a hackathon that night to unite efforts in one direction and make them actionable. Geomiq was at a privileged position to help bring PPE (and potentially a ventilator) to UK hospitals as fast as possible and Sam and Will had decided to put all of Geomiq resources into that. Countless hours followed and Covid 19 Makers was born. They have made a lot of progress and are now working with many medical devices providers to accelerate their manufacturing processes.

In the past few weeks we have seen the unimaginable become our new reality, our livelihoods striped of from their very essence, and a lot of pain around many of us. But we have also seen the best in people rise up. In a situation when we are all trying to survive, it takes a lot of humanity, sense of responsibility and generosity to put all your business and personal resources to work to try and help the common good.

Geomiq is a defensible and scalable business…

Network effects are inherent to the model but more than that, Geomiq has built-in SaaS features to make the product more sticky for both engineers and manufacturers. Moreover, it has built a strong community of advocates, both on the supply and the demand side. Very high retention and repetition rates speak for that.

Geomiq is also a very capital efficient business as it beautifully combines B2C dynamics in bottom-up acquisition of engineers (lighter B2B sales forces, lower CAC, virality…) with the higher LTV of B2B models (higher AOV, higher retention and engagement…).

…in a large growing market…

At Samaipata, we spend a lot of time thinking about where the future is going and making sure we invest in businesses that are riding on strong socio-economic and technology trends. We call it ‘why now’ — why is it now the right time to launch this business as opposed to 3–5 years ago. With Industry 4.0 upon us, that was a no-brainer in the case of Geomiq.

Moreover, we look for very big and growing markets. And manufacturing is a huge $6.7tn global market. Just prototyping and low-volume production is a €10bn market in the EU alone, being conservative. Think about it: every physical good around you has many parts (even if you don’t see it). Well, each of those parts has been prototyped, several times, in several materials. And this space is growing, constantly, as a more sophisticated consumer demands shorter product life cycles and faster innovation, and new materials are developed, enabling what wasn’t possible before.

Take 3D-printing, one of the additive manufacturing techniques Geomiq’s platform users. After the consumer 3D-printing hype (and crush) of 2013–2014, 3D printing is now ripe to revolutionize manufacturing and is expected to grow from $10bn in 2018 to $97bn in 2024, according to ARK Big Ideas 2020 Report.

…where a marketplace will be the winning model…

At Samaipata, we have a deeply specialized investment thesis and invest in pre-series A marketplaces and digital platforms.

So, while looking at Geomiq, we spent a lot of time thinking whether a decentralized on-demand marketplace powered by multiple suppliers (manufacturers) in the back-end was the winning model in this market vs. a single fully vertically integrated manufacturer.

We concluded with full conviction that that was the case in prototype and low-volume production as it is a market:

• very fragmented, with numerous players on both the supply and the demand side. There are more than 40k mechanical engineers and 10k advanced manufacturers in the UK only
• with high heterogenity in demand needs (materials, manufacturing techniques, sizes…) and supply capabilities, which makes it very unlikely for just one manufacturer only to be able to cater all of the demand needs
• where one fully-vertically integrated manufacturer, regardless of the size and budget, can never compete in price with a network of multiple manufacturers. Let me explain why. In this market, where volumes are low and procurement times irregular (as they are driven by R&D cycles), there are no economies of scale. Price efficiency is driven by capacity — actually, by excess capacity: in an industry where c.80% of the manufacturing costs are fixed costs, a supplier with underutilized capacity will quote for a new job at variable cost (20%)+ little more (% of fixed costs) to try and cover at least some the fixed costs. On the other hand, a manufacturer at full capacity, will quote at 100% costs (variable and fixed) + margin. In a nutshell: the more excess capacity, the more competitive in price a manufacturer will be. Thus, by definition, a marketplace powered by hundreds of manufacturers will always have more potential excess capacity and more room to be more competitive in price — as different manufacturers will have excess capacity at different times — than one single manufacturer by itself (hopefully so for the single manufacturer, as if it always has spare capacity it won’t last long in business).

…and that makes the world a little more human.

Today’s manufacturing supply chain is socially and environmentally unsustainable. It is opaque, wasteful, resource intensive and heavily reliant on fossil fuels. Geomiq’s platform sits between the designers and the manufacturers and will be a critical part of the new infrastructure needed to build a more sustainable and transparent supply chain. Through better product specification and disciplined material and supplier sourcing, Geomiq’s platform can drive efficiency and productivity gains, reduce waste and promote the use of more sustainable materials.

We are proud investors of any business that uses tech to make the world a little more human; and even more so alongside the incredible guys from Eka Ventures, kings and queens of sustainable consumer technology, who are also joining Geomiq on their quest to build the world’s most best and sustainable manufacturing supply chain.

Welcome to Samaipata guys, it’s an honour to be your co-pilot…let’s continue breaking speed limits!

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