Jon: Hi, I’m Jon Nordby and this is HXTV, the show that champions Houston’s innovators and entrepreneurs. We’re coming to you today from MacroFab, and our guest is the founder, Chris Church. Chris, welcome to the show.
Chris: Thanks for having me today, Jon.
Jon: Tell us about MacroFab.
Chris: At MacroFab, our mission is to make it easier and faster to bring new hardware products to market. Products with circuit boards in it. We like to call it electronics manufacturing. So, if you think about anything that is built around a circuit board, whether it’s a cell phone or the microphone—the things we have hooked up to our microphones here, there’s a circuit board in there that produces most of that value, and then around it there will be some packaging, some product like that that make it safe for whatever environment it’s used in. That’s the type of manufacturing we’re focused on.
Our target customer is really going to be a small to mid-size business. How they interact with us is, they come into our platform, to the website, and they’re able to upload their design files and instantaneously we tell them exactly what it’s going to cost to make, we give them the tools to plan production, what’s going to drive their costs when they go into higher volume, and if they like what they see they press, ‘Order Now,’ they put in their credit card information and go; whether they want one or ten thousand.
Jon: Let me make sure you understand, you can make just one circuit board?
Jon: So, what percentage of your customers do just one circuit board?
Chris: I think about 50% of our orders are in the prototype 1-5 range.
Jon: And is that unique for this space?
Chris: Our solution is unique in the sense that we give the customers the ability to scale. There are a lot of contract manufacturers that will say, hey, we’ll take one, and they’re in two camps; they’ll say they’ll take one because they’re desperate for any business, and then you can grow with them; or, they’ll say they’ll take one because they’re a prototype only shop and then you’ll have to then shift to someone else to actually grow and scale your product. What’s unique about us is we take the one and we also take the million all throughout that same platform without having to be qualified as a customer to get going for it.
Jon: Have you made it easier then, for people to find this market accessible to create circuit boards?
Chris: Yeah, I like to think so. If you looked at it just five or six years ago before we came around, if you wanted a circuit board built, you had to spend a lot of time calling different manufacturers, and you would have to find a manufacturer that was interested in you and your product. What we’ve done is taken all of that negotiation, all of that discussion out of it and said anyone who can design a product can upload that design and get a price and buy it. Now, you no longer have to build a relationship, you no longer have to negotiate, there’s no back and forth. You can sit up at three o’clock in the morning when the inspiration hits you, make a little design change, and then get a price and go right then and there.
Jon: What sort of level of knowledge does somebody need to have in terms of designing the board?
Chris: From our perspective—we get this question a lot, is like, ‘Will you help me design the board? Will you do all these things for my product?’ Where we come in is at the manufacturing stage. You have to be able to design a board or have somebody that you can hire to design it. That means basic electrical engineering skills, understanding how the components work, how they connect to each other, how to lay out a printed circuit board—that kind of has to be done before you come to us. You can iterate through your designs with us and get feedback on how that impacts your price or delivery time or even manufacturability, but what we won’t do is tell you how to design your board.
Jon: Tell me a little about size and scope. So, not only the size of the product that you can manufacture in terms of the circuit board, but also the batch size that you can handle.
Chris: We like to say we go from one to a million. Basically, it’s worth explaining how that works with us, right? We’re a platform, first and foremost. What you see here behind us, this is our prototype production facility. This is where we produce, typically, orders of one to one hundred. This is our facility here, but we work with other partners around the world, typically, a lot of partners in Mexico and Texas right now, where we make available their excess capacity. So, as you’re scaling up your production in our platform, we’re actually matching you to the best fit factory that can produce that volume at the best price and with the time constraints you have. It’s really transparent to our customers—rather, it’s easy, they don’t have to think about it.
Jon: On the back end, your matching, you’ve aggregated all these manufacturers and you’re matching up what the best solution is.
Chris: Yeah. And all the pricing is all pre-negotiated, so you don’t have to wait for bids to come in on that. You know exactly what your labor is going to cost, and so, we let customers literally go from one to a million if they want, and we can handle all of that and everything in between. Our typical customer is going to be in the hundreds to hundreds of thousands. Part of the reason why I started this business is it was very hard for me to find someone that was willing to take low volume work. But, every product starts out with one, or two, or ten, right? For me, it was our original mission to enable anyone, if they just wanted one, or if they wanted five of something prototyped out, to enable them to go and make that a reality. Today, we probably have about a hundred to two hundred prototype customers a week minimum come through this line.
Jon: Tell me a little about—you touched on this, what is the value proposition to the industry for MacroFab? I think when we were walking around earlier you mentioned there’s a bit of cost savings, time savings in the manufacturing process. What does that really equate to though?
Chris: We look at a couple things. One is, what is the cost to onboard a customer? If you look at your traditional small contract manufacturer, say under a few million dollars a year in revenue, they may have ten customers. It may cost them a hundred, to two hundred, to three hundred thousand dollars per customer to onboard those. They can’t support a lot of customers because there’s so much manual work involved. Our cost of a customer acquisition and onboarding is in the hundreds of dollars. We’re able to get orders of magnitude more customers for the same effort as a traditional contract manufacturer. If you think about it from that perspective, whereas a typical small CM will have about ten customers, we acquire anywhere from 150-200 new customers a quarter.
We can support that even just coming through this line we’re sitting in here. And it’s all about efficiency there. We’ve eliminated costs in onboarding the customer; you don’t have the sales person to pay, you don’t have a quoting agent to pay, you don’t have an engineer to pay. That allows us to bring down the price to the customer, and at the same time, the technology we’ve created to optimize the process–and that’s really what a lot of our technology does is optimize the process, how do we minimize loss and time and decreased mistakes throughout this entire process that would traditionally be a human decision process, we have software do that. That enables us to have about eight times the throughput of a similar prototyping line.
So that means we can touch eight times as many customers and we can acquire those customers for an order of magnitude less, or actually a couple of orders of magnitude less. So, what that enables us to do, especially working with our contract manufacturing partners, it enables us to identify the most successful potential customers out of a much larger pool and bring those to either our line or one of our partners lines, and enable the customer to get the capacity they need to get their product as quickly as possible while enabling the manufacturer to get a new customer a new product at a much lower cost and to right fit it at the right time so they’re not struggling to push off an existing customer to make room for this new one. They can slot them in right when they have that available capacity. So, to kind of put it down, we look at three key things: lower cost for the customer, higher efficiency for us and the manufacturers, and the ability to take full advantage of capacity on the market.
Jon: So, tell me a little bit about what the next steps are for MacroFab. What’s the future hold over the next few years?
Chris: The circuit board is one step to a product, so we’re working with customers today and adding in capabilities to the platform to enable everything it takes to get from an idea to a customer ready product; that’s your packaging, your enclosure, any other materials you have to have in there, all of that to be managed in a very software driven approach through the platform making it easier and giving our customers one place to manage that whole thing.
Jon: So, looking around here it looks like you have some pretty big, pretty expensive machines. I have to imagine that you’ve probably had a long series of success behind you but tell us about fundraising. Have you been able to raise funds in Houston? Have you had to fund raise at all?
Chris: The answer is yes, we are venture backed. I do want to point out one thing, none of these machines, none of these benches, none of this was paid for with venture dollars. I always tell the startups I mentor, do not spend venture dollars on things like capital equipment, if you can because you’re selling part of your company for something that’s not going to be valuable in a few years. Spend that on technology development, spend it on your developers, your marketing, part of market fit. So, yes, we’ve raised venture dollars. All of this is paid for out of revenue. We scale this directly out of revenue, but yeah, we’ve raised about six and a half million dollars to date. We haven’t raised from many Houston VCs yet, we’re always fundraising though so you never know, that could always change in the future.
Jon: Give us a sense, why Houston? Why are you here? This seems like a business that could be done remotely virtually anywhere.
Chris: It can. So, firstly, I came to Houston, I went to high school in Baytown. I ended up here in 1995. I started out working here in the internet service provider industry and actually have been working with startups since the late 90’s. I’ve always personally enjoyed the nature of the city, how people interact, the way business is done is a very straightforward, it’s very focused on outcomes more than individuals, which the thing I synchronize pretty well with there. For this business in particular, Houston has a long history of manufacturing. A lot of people don’t tend to think about this but when we started this business there were 35 contract electronics manufacturers here in Houston. Some of those were taken out with the oil downturn, but this area of Texas as whole and the Houston area is very much a manufacturing city. There’s a lot of expertise for us to work with here. All of our team come from Houston and they’ve been working in manufacturing for 15-20 plus years, so we’ve have this great pool of talent to draw upon there. I guess sort of last part for me is I just believe Houston is a good place for startups of certain kinds. That isn’t to say, I don’t know that I’d start a social media startup here, but if it’s a business to business, enterprise focused, manufacturing focused, deep technology I think this is a great place to be as a startup.
Jon: Chris, thanks so much for sharing your story with us, inviting us into your home and having us here today.
Chris: Absolutely. You’re very welcome and I’m always happy to talk to you, Jon.
Jon: And that wraps up our discussion with Chris Church, founder of MacroFab, and this is HXTV.
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