Shapeways – Thoughts on a pioneering investment

I’m delighted to announce that after long discussions and a lot of hard work on the part of Philips, our co-investors Union Square Ventures and Simon Levene and most specifically Peter Weijmarshausen and his team at Shapeways, that we have finalised our investment in the company. The New York Times coverage is here and Shapeways commentary here. What I thought might be interesting is to give some context on the company and why we are so excited about it.

Background to the deal

Shapeways has been funded since inception by Philips within their incubator programme. If 3D printing seems like science fiction now, this was even more the case three years ago so they deserve a ton of credit for taking a view back then as to how this technology would develop, identifying a valuable space to occupy in the ecosystem and executing brilliantly to build a real business with thousands of happy customers. Greg Marsh, a former colleague at Index Ventures met them a couple of years ago and was impressed by the concept. When we spent more time with them this year, the traction we witnessed validated the concept and persuaded us now was the right time to invest. While Philips is not investing in this round, they will remain a material shareholder alongside founders and employees and the new investors.

What is 3D printing?

3d Printing is the fabrication of tangible objects in 3 dimensions. Items can be produced in various forms of plastics, resins, metal alloys and even glass. There are a few different technological approaches, but I would crudely describe the two principal techniques as

  • Deposition – building up an object layer by layer with the material being deposited by a device conceptually similar to an inkjet printer
  • Laser sintering – Here a volume of powder is enclosed in something the size of a large fish tank. Lasers are then selectively fired at locations within this space causing the material to fuse. After a print run the excess, unfused powder is shaken away for reuse and the printed objects can be removed and cleaned.

If you are interested the Shapeways Youtube page has various videos of the machines and techniques they use. The interesting factors about this technology with respect to the Shapeways business model are

  • Enables new types of production. Certain complex geometries (e.g. below) which couldn’t be produced by extrusion or moulding process can be printed by these new printing technologies. This has made the service very popular with puzzle designers and enabled beautiful objects with fascinating mathematical properties to be made for the first time.
  • Enables cost-effective production of single or low volume items. The cheapest way to produce a metal or plastic item at volume is still to injection mould it. However there are very high setup costs to make a mould and deploy the associated machinery which probably only get covered when thousands or millions of items are going to be produced.
  • Democratises production. All that is needed to produce an item is data (a 3D model) so essentially any consumer can produce an item and printing can be centralised and completely isolated from design, enabling an internet service bureau model

Image of Gyroid from Bathsheba/Shapeways – http://www.shapeways.com/model/24470/gyroid.html?gid=mg

What was the investment rationale?

Proven Business Model. Many other  companies such as eBay, ETSY*, Notonthehighstreet.com* and Moo* have all become very successful by tapping into people’s creative instinct and providing a marketplace for the long tail of designers to access production capacity or by exposing the small producer to mass market online. In this sense, Shapeways is operating a model which had substantial prior validation and where many network effects can help rapidly build a big business. Some of the effects are already coming into play for Shapeways, yet there is great opportunity to learn more from the success of other great companies and harness the network and scale effects to our advantage.

Market Timing. A key external factor which will impact the success of the Company will be how 3D technology develops both in terms of the quality of the output (resolution of printing, range of materials and finishes which can be produced, colours) and critically the price. Shapeways itself doesn’t develop the machines although it does work in very close collaboration with machine producers and operators to maximise product quality and minimise costs passing these savings onto the consumer. Our sense was that both on quality and price there were already many interesting applications for 3D printing (e.g. Puzzles, Jewellery, Homewares, etc.) but that the universe of potential applications could explode if prices and quality continue to progress in their current direction over the next few years.

Team. As with every investment a founding team with passion, determination, insight and openness to learn and experiment is what we look for and these guys have that in spades.

Traction. While the concept might be compelling, it is always nice to see a bunch of graphs heading up to the right. Whether it is community size, printing volumes, or revenue we saw a lot evidence that consumers were like engaging, buying, and referring this service to others.

There will be many risks and challenges ahead for the Company, but we look forward to help them with these as best we can, however long the journey.

*Index Ventures investments