Delighted to report that today Shapeways announced a $30m fundraising led by Andreesen Horowitz. You can read more about it here >> (Shapeways, New York Times, AllthingsD, Wired, GigaOm, Venturebeat). Index Ventures first invested in Shapeways in October 2010 after many months of negotiations to spin out of Philips. The Company was based in Eindhoven in the Netherlands and had low revenues and a small but committed customer base comprised of a pioneering bunch of 3d modellers. The business model at the time is in essence the same business model that exists today. Firstly Shapeways offers a 3D printing service for 3d modellers who want to realise their own designs. Secondly Shapeways operates a marketplace where any consumer can browse and customise existing 3d designs and get them printed. In this case the original designer earns money on the designs they have contributed to the Shapeways marketplace.
Since 2010 a lot has changed both for the Company and more broadly in the 3D printing industry. Firstly 3d printing has received enormous attention and coverage in the media as people wake up to the fact that 3d printing is no longer science fiction but a very practical technology for a broad range of applications from healthcare to fashion. The Company has also made great strides over the last two years. The HQ has moved to New York, the team has grown substantially and the Company has also invested in its own manufacturing facilities which are now up and running in New York and Eindhoven. Over this period the Company raised additional financing both from inside investors and Lux Capital. This round however is a landmark financing for a private company in the 3d printing space and a very substantial venture round for any company at this stage. There are lots of compelling reasons to like Shapeways but for Index Ventures there were three key factors which underpinned our desire to invest again:
- Emerging Leadership in high potential industry. By any measure we could look at, whether it was number of models uploaded, production volume or overall size of community, Shapeways was emerging as the clear leader in consumer 3d printing. As with any marketplace business model, the bigger the marketplace becomes the greater the gravitational pull it exerts on new buyers and sellers. In addition to network effects there are also substantial scale effects in 3d printing as machine utilisation increases, materials costs fall and more experience is gained on optimising production processes. Cheaper production can feed into lower prices which makes for happier customers.
- Exemplary cohort and customer acquisition dynamics. At Index Ventures we always have a strong bias towards businesses that can attract consumers with little or no marketing. If a business is dependent on acquiring customers all the time through paid acquisition, however profitable this might be there is always the risk (or in most cases a likelihood) that at some future point in time, customer acquisition costs shoot up making it impossible for further profitable growth. The vast majority of Shapeways growth is driven by events, PR and the Shapeways community itself that operates globally though meetups. Also when you look at how customers behave over time through cohort analysis, there is a very steady pattern of spend over time with no sign of deceleration. In other words Shapeways effectively becomes a utility for its customers as sites such as Amazon have become.
- Passionate and multi-talented team. Growing Shapeways has required an unusually broad range of skills compared to the typical tech startup. To galvanise the consumer 3d printing industry has required the Shapeways team to be evangelists, educators and visionaries. In addition there is a highly complex production and logistics operation where the Company has had to apply lean manufacturing methods to relatively immature and fast-changing production technologies. Lastly the company has had to develop and rapidly scale the online community and eCommerce operation. There have certainly been many challenges and setbacks, but each one has been approached head-on and dealt with by an exceptionally committed and creative team.
Congratulations to Peter, Marleen and everyone at Shapeways and welcome onboard to our new investors.