Start a Tech Business: How to Uncover an Unexpected (and Highly Profitable)...

Start a Tech Business: How to Uncover an Unexpected (and Highly Profitable) New Vertical

For every startup, one of the biggest questions isn't just what to provide, but which market to break into.

Start a Tech Business: How to Uncover an Unexpected (and Highly Profitable) New Vertical
by Jeff Haden

You see a technology. It’s interesting, but clunky. It’s useful, but only partly so. You have an idea for how to use that technology to transform the way businesses do business.

But which business do you choose to transform? Which market do you choose to go after? You can’t do everything… so how do you decide where to focus your efforts?

That’s a great question — so for answers, I talked with David Lakatos, the Chief Product Officer for Formlabs, widely considered the leader in professional desktop 3D printing. Formlabs first gained attention in 2012 through a record-breaking Kickstarter campaign to launch the world’s first affordable stereolithography desktop 3D printer. The goal was to make an industrial-quality, professional-level, 3D printer that traditionally cost over $100K at a price point of under $3,500. Formlabs raised millions on Kickstarter, went on to raise millions of VC funding, was featured in the Netflix Original Print the Legend, and in four years has become the top-selling 3D printer in its category.

So yeah, they know a little something about building a thriving business by transforming how technology is used.

Everything starts with an idea. Where did the idea to build an affordable 3D printer come from?

The guiding principle comes out of a class at MIT: How would the world change if all the equipment that is available to industrial giants like GM or GE was scaled down and available to anyone who wants to use it?

That’s the philosophy of Formlabs as well. We started by taking stereolithography, resin, goo, an imaging device, lasers… basically creating solids with light. That’s a different type of 3D than you see in mass media, which often is basically a glue gun on a gantry. Ours is super high precision and allows for myriad of different chemistries.

That’s how someone like GE or GM would do it… so that’s what we set out to create.

Going from a $100k price point to $3,500 or less is a big task, though.

True, but the industry was waiting to be disrupted. The cheapest machine was $100k, was incredibly hard to use… so we thought, “This is clearly a hard problem that some MIT graduates can solve.” (Laughs.) So we designed the world’s first high resolution desktop 3d printer through what at the time was the most successful tech Kickstarter campaign, and set a $3,300 price point. That was the Form 1.

Sure, it was cheaper, but we managed to keep the resolution at the same level as industrial machines.

Our model is to scale down the price and scale up the number of people who come in the door. We’ve built a huge group of customers, almost all of them professionals: 96% buy through a company budget. They’re not hobbyists.

People associate 3D printers with a hobby, but our customers are engineers, manufacturers… anyone who makes physical products.

You can’t market to “anyone,” though. So how did you decide where to focus?

That’s an interesting question, because our original pitch deck briefly mentioned that our printers would work for dentists… but we never thought dentists would be a big market. We defined our market by people who design, and dentists don’t design.

But then again, dentists are in many ways the geeks of the medical industry. They love gadgets. They’re first adopters of new technologies. But a lot of them had been been burned by 3D printing. They bought devices a long time ago that didn’t work out.

So originally we didn’t think about the medical field as a core part of our market, but we entered it in a big way when we introduced products for surgical uses. That opened the floodgates.

Over the last five years it’s taken a lot of energy to focus the company. We just grew to about 250 employees. For a hardware company that’s not a lot of people, and that means we can focus on just a few things.

And as for any company, it’s really important that we focus on the right things.

Say I’m a small business trying to decide where to focus — what advice would you give me?

When I say “people who make things,” that refers to anyone who designs in 3D. Our customer is anyone who designs in a professional setting.

With technology, the first criteria is reliability. Can your product hit the right benchmarks? Can your customers operate it reliably? We’ve made our printers better. The Form 2 is a huge jump in accuracy and resolution, and for dentists it’s all about accuracy.

Number two is materials. When we started, there were no commercially-available materials available that would let us do what we wanted to do. But we worked with a research vendor on surgical guides for a rare aneurysm: instead of opening up your skull, we were working with a company to create a surgical tool that scans the roof of your mouth and creates a drill guide for the surgeon so he or she can reach the precise spot. That made the surgery much better and safer. So we already had an overture into the medical and dental space, and that gave us a huge boost.

Number three is the market, and dentistry is really exciting. More and more dentists have scanners in their offices. You go in as a patient, they don’t just take an x-ray but you get a 3D model using multiple scans.

Even five years ago the adoption of the scanning technologies was not high enough. Now we have a printer that is accessible enough that a dentist is not hesitant to use it, the printer is is reliable and accurate, the materials are available… and the market is ready for it.

That’s a simple decision tree. Reliability and accuracy, materials, and market. When you’re thing about where to focus, find an area that has all three.

From a market point of view, it also helps that dentists will be able to deliver services in a much different way, which makes them much more eager to adopt.

We’ve been in the market for about a year, and over that year we’ve seen exponential growth. We’ve started to see dental model material and that’s probably the highest use by volume in dentistry. Before you have a surgery, your dentist can practice on a model. They can print out a surgical guide to make sure it fits and go straight to the procedure. They can use a model to try out a crown, they can remove teeth from the model and put the bridge on top of the adjacent teeth… they can practice the entire procedure.

We can actually print dentures directly now. You can have a denture that literally comes off a 3D printer, including the base part and the teeth. It’s currently not something that could stay in your mouth permanently, but it’s great for a temporary for a couple of weeks or months. As materials evolve, that time frame will change. All of these processes together can make a huge impact, especially for smaller practices — now they can do everything for their patients.

Zoom out and the dental industry will change completely with these technologies. Dentists will be able to do a lot more in-house and will be able to reduce the number of visits their patients need to make. Dental labs will also change; many are gigantic warehouses full of milling machines, ceramic, etc, but now they’re condensing and moving closer to the dentist.

So you didn’t choose to focus on what would transform your business — you chose to focus on what would transform another business, knowing that would drive demand.

That’s what business is all about: Looking for small signs that tell you that an industry or market is ready.

Another way to look at it is by thinking about the jewelry industry. Jewelers are less technical in general. Often they tend to have their own workflow. They’re not inclined to constantly go after the latest and greatest. Many are craftsmen and craftswomen who learned their skills from the previous generation. They need a lot more convincing than, say, dentists.

But in jewelry some of the applications are a no-brainer. Jewelers take a positive wax model, labors on for hours and days, and finally use it to cast. With an accurate 3D printer, the hand chiseling and grinding goes away. And you can design in CAD much more quickly

After you print the design, you can have the customer see how it looks and feels and adjust any of the the irreversible parts before you cast the precious metal.

3D printing could replace the current workflow with something much faster and more economical. But because the market and the types of customers are very different, dentistry is growing much fast because we’re bringing something to the market that dentists really wanted… but wasn’t accessible.

Smart jewelers might see the opportunity, though, just like smart people in a variety of industries.

Absolutely. When you take a tool that was extremely expensive but very powerful, and you take it to a completely different price point without decreasing the quality… that makes technology more accessible and makes it possible for people to do things you might not even imagine.

The parallel we draw is with mainframes and PCs. Take the mainframe, scale it down and make it accessible… and now all kinds of crazy things happen simply because you made a tool accessible.

3D printing is already heading there. We’re moving towards production. Most people use 3D printers to create prototypes, but we’re working to make end parts. The goal is to making better materials and better machines that can cross thresholds where the manufacturing of the end parts can be made through 3D printing.

That will lead us to a next big thing: Digital manufacturing. We’re really excited to see what happens when talented people have the tools and materials to truly turn their ideas into reality.