Citing a source close to the negotiations, last week a rumor from TechCrunch surfaced that 3D printing leader Stratasys (SSYS) is in talks to acquire Brooklyn, NY based MakerBot. Since then there’s been no comment from Stratasys management, and MakerBot founder and CEO Bre Pettis refused to comment on the speculation but then added “We’re not going anywhere”. Of course in the frequently bizarre M&A landscape, refusal to comment and even an outright denial of any possible deal is seen by some as proof that a deal is close.
Investors will have to wait to see exactly what the future holds for MakerBot, but I predict with a high degree of confidence that the company won’t be private much longer. I believe MakerBot will either be acquired outright or announce that they are going to go public themselves by the end of the year. Why? It’s basic human nature. Two years ago MakerBot received $10M in funding from Foundry Group, Bezos Expeditions, True Ventures, RRE, and a handful of angel investors. Those early investors want to maximize the return on their investment, and there is no better way of doing that than seeing MakerBot acquired at a premium over its Wall Street Journal estimated valuation of $300M. Amazon.com CEO Jeff Bezos is also an investor in MakerBot which has led to speculation that he personally or Amazon.com may be interested in a MakerBot acquisition. But the main driver behind any acquisition or IPO in my mind is the perfectly normal, yet nearly-overpowering consideration that MakerBot founders (pictured below) and early investors want to maximize return on their investments of time, talent, and money. I believe there will be too much money on the table for stakeholders to pass up. This is human nature, it is capitalism at its best, and it’s why I predict MakerBot won’t remain private much longer.
MakerBot founders (left to right) Adam Mayer, Zach Smith, and Bre Pettis in 2009. Bre Pettis stated at the time: "We finished our final prototype last night around 3AM and took this picture. We've been working around the clock getting this robot up and running.”
Founded in 2009 by Adam Mayer, Zach Smith, and Bre Pettis, Brooklyn-based MakerBot grew rapidly to become a global leader in desktop 3D printing. The company states
that there are more than 15,000 MakerBot Desktop 3D Printers in use by engineers, designers, researchers, “and people who just like to make things”. MakerBot quickly earned the attention and apparent adoration of industry experts who heaped rewards on the company that was a mere shoestring startup 4 years ago. The company’s Replicator™ Desktop 3D Printer was named Popular Mechanics “Overall Winner” for best 3D printer and Time Magazine’s “Best Inventions of 2012”. MakerBot also won “Best Emerging Tech” at the 2012 Consumer Electronics Show, the Popular Mechanics “Editor’s Choice Award”, the Popular Science “Product of the Year”, a TechCrunch “Crunchies Award” for best hardware start-up, a Gold Edison Award for Best Design, a Fast Company 2012 Innovation by Design Award, and was recognized by Fast Company as “One of the World’s Top 10 Most Innovative Companies in Consumer Electronics.”
Positioning with Patents
To date, MakerBot’s products have been apparently based on open-source work initiated by the RepRap (short for replicating rapid prototype) project. RepRap was spearheaded in 2005 by Adrian Boyer, a mechanical engineering senior lecturer at the University of Bath (UK) as dedicated open-source technology. While MakerBot was an early champion of the open-source model, insiders applied for three patents last year with patent application 20120046779 , 20120059503 and 20120059504. The move angered some in the open-source movement and led to public grumbling from at least one of the RepRap founders. To me the patent applications signal MakerBot is either positioning their intellectual property claim as a bargaining chip with a potential suitor, or creating additional value should they decide to go public on their own.
Major League Growth
As a privately held company having no SEC filings to research, there isn’t a great deal of public information available on MakerBot’s growth. But according to management MakerBot grew from a $75,000 startup in 2009 to garner 21.6 percent market share in 2011. Last year management estimated MakerBot had built a 25 percent share of the 3D printer market. “Phenomenal growth” to go from startup to 25% market share in a few short years would be an understatement. The more recent growth lies in the success of their two cornerstone products, the Replicator™ launched in January of last year and the more recent Replicator 2™, launched in September.
The Replicator 2™ sells for $2,199 on Makerbot.com and Amazon.com
MakerBot generated $10M in revenue from its printers and projects to "reach or exceed" $50M in sales in 2013
according to The Wall Street Journal
I don’t doubt the growth estimates of The WSJ either. MakerBot’s consumer and “maker-oriented” web site, Thingiverse.com has experienced over 17 million file downloads.
Supporting the claims of hyper-growth at MakerBot by both management and folks at The WSJ, are the Alexa traffic trends for Thingiverse.com which show an extraordinary increase in traffic over the last 24 months.
Moreover, Alexa reveals that compared to the overall Internet population, Thingiverse.com's audience tends to be male and appeals more to childless, highly educated individuals earning between $30,000 and $100,000, and that they view an average of 11.5 unique pages per day. This is quite the demographic to seize and there’s no doubt it has contributed to the torrid growth MakerBot has experienced.
New Factory to Meet Demand
Earlier this month MakerBot announced the opening of a new factory in Brooklyn encompassing over 55,000 square feet of production, warehouse and shipping space. The company also plans to hire another 50+ employees in the coming months, bringing their employee headcount count to over 300. Here’s a video from the good people at TechCrunch who were on site at the factory opening and conducted an interview with CEO Bre Pettis.
Because Stratasys doesn’t yet have an entry-level model for average users, a niche where Makerbot will generate $50M in revenue this year, and because there are other well-funded suitors (Amazon.com/Jeff Bezos maybe?) kicking the MakerBot tires, I predict this hyper-growth privately held company will not remain private for long. Of course MakerBot's founders may decide to go public on their own. If the ExOne (XONE) IPO earlier this year is any indication of the market's appetite for 3D printing, expect MakerBot to replicate a similar bang on Wall Street when shares begin to trade.