Danielle Applestone is the CEO of Bantam Tools, which makes the Bantam Tools Desktop PCB Milling Machine, a CNC machine. During the company’s first five years it raised $312,000 on Kickstarter, and $6.5 million from investors. It sold thousands of units. Recently Applestone rebranded the company (formerly Other Machine Co.) and refocused its mission with new owner Bre Pettis, the co-founder and former CEO of MakerBot, the groundbreaking 3D printer.
You’ve led Bantam Tools for more than five years, and through a recent rebranding. What’s been the biggest challenge you’ve faced, running a hardware company?
The biggest challenge is understanding how to get a good fit between your product and the customer. Our first version was great for a very small subset of people, but we fundraised for a product that appealed to a broader group. And our newest version is even more focused: on professional engineers. It never ends. And the problem with hardware is that each iteration takes time and money. So if you accidentally don’t raise enough money at the outset, you’ll never get there.
We had to go through three versions of the product before we got to our latest one. It’s been very intense, because you have to make a guess who your market is, and how much money you’ll need to get there, and how many revs of your product you’re going to need in order to get that good fit. And it’s just tough. Have you ever heard the phrase, “Murder your darlings?”
Sure.
Well each time it’s like that. You know, like, “Man, all the messaging is wrong! Our whole sales strategy is wrong!”
What’s an example of one of your pivots?
We started out as an educational company, and then we realized that if we wanted to survive, we had to target professional engineers. That was very emotional, because it was like, “Well, what are we doing? We wanted to increase access. Are we still going to be able to do that, targeting engineers?”
We had to make a hard choice: survival of the company or original mission? So we changed our mission. I think that we’re still doing well, but it’s kind of hard to generally do good as a company first, and then move your societal goals along.
How do you build in that flexibility to pivot, so that you can get to that optimum fit?
Is pretty simple: you have to build prototypes, sell them, and watch people use them. My rule of thumb is: sell one hundred units, or sell a $100,000 worth of product. Bootstrap, or take funding, or do whatever you have to do to get those prototypes made because you’re going to learn so much in that process.
Like what?
Like, how hard is it to sell the product. And if it’s really, really hard you know that it’s going to be even harder when you’re not new anymore, and you have competition in the marketplace. You’re also going to learn what it takes to go from one, to ten, to one hundred of something. At one hundred you also feel the weight of the customer promise. That’s a really important one. You’ve got people using this thing, and they may grow to rely on it, and then it breaks. And then what do you do? So you get valuable reliability testing. But probably the most important thing: you’re getting real feedback from real people.
So a successful crowdfunding campaign is not enough.
No, because the people who support your hardware project on Kickstarter are not your target market. They are buying for reasons that are not based on your product. Maybe they just like you, or they love your video, or they want to be part of something they think is big. There are so many emotions tied up in crowdfunding that don’t exist when your product is sitting next to three other things at Target.
So don’t crowdfund as soon as you have the idea?
Right. Get units out in the world, test to see if people really want them. See how hard they are to sell. And then you can go through all these iterations rapid-fire. For example, maybe people do love the product but it’s too hard to teach them how to use it. Or it’s too complicated, so you’re going to have to have way more customer support than you thought. That’s another expense. You’re never going to know these things unless you put them out in the world. One hundred units also gives you one hundred stories to tell – which will be a big help when you do start fundraising.
You can’t learn those things in advance, drawing on a whiteboard.
Right. A hundred may sound like a lot, but it’s worth it if it saves you from building the wrong product. You’re learning the unknowns that you’re going to have to deal with later anyway.
What has gone smoother than you expected in the last five years? What developments have made it easier for hardware entrepreneurs?
Number one for us is the cost of motor control. A few decades ago it would be a thousand dollars per channel to control a machine. Now it’s $10. That makes a huge difference. So motor control was a big one. Also we use the TinyG CNC controller board, which is an open source platform, so we can buy them off the shelf from this open source place. We have heavily modified it now for our specific purposes, but when we got started it existed already. That was really huge for us. It has also enabled a lot of other small CNC companies. The other change that’s been pretty intense is that we can do a lot with very few people. Our entire company is eight people.
What changed there?
It’s because the kind of support systems that you need for running a business, whether it’s human resources, or payment processing, or web hosting, or customer resource management – it’s all on the web, easily accessible, and easy to learn. It’s cheap, and non-technical people can manage it. Even using something like ZenDesk for customer support. So we’ve been able to build out our infrastructure relying heavily on these digital tools that are low cost.
And you can delegate what you’re not good at.
Yes, lately I’ve been trying to learn how to be a better CEO, and one of those things I’ve done is adopt the mantra, “Don’t do things that aren’t your job.” For example, I can do web development, but I shouldn’t. Because now you can use services that can do it very efficiently. It’s kind of like using Task Rabbit for what are pretty involved web development tasks and front-end development tasks. And it’s one or two hundred dollars to get exactly what you need, and it’s not a person who’s on your payroll, and they’re halfway around the world. It’s kind of incredible: the people are super reliable, and there are lots of platforms where many people are looking for work, and you can just go directly to them, and it’s a good fit. So all of these mechanics of running a business are getting easier and easier. But I have to laugh, because sometimes I think that everything else has just been a battle.
Selling to schools is something that you built the company on. What’s your advice to a maker who’s got a product that they are hoping that schools will buy?
Don’t be in a hurry. It takes time, and one of the biggest challenges is there are so many stakeholders. The ratio of stakeholders per dollar at schools is so high. That’s the crux of it. So if your product is cheap it can fly under the radar, and people can just activate at the parent level or the teacher level. But once you get past a certain price point you need to be way above that price point because you know there will be teachers, administrators, deans, principals involved, and then there’s the purchasing department. So it’s just a more complicated sales process.
And it’s not like schools have money. Schools are always strapped for cash. So we have found that if it’s a public school, which have less funds, they have to really really want it. And in that case they most often come to us. But when it comes to walking up to the random high school and knocking on the door, it’s just too hard. So schools are a very hard place to start.
So are you getting away from selling to schools?
We still sell to universities. It’s like 60:40 businesses:universities now. In universities people have an independent budget. A professor will be running a research group and they have an independent budget. Or there’s a collection of professors working on a makerspace, and they’ve already gathered the cash, they’ve already figured out what they need, and at that point it’s not a hard sell. So you’re just presenting the capabilities.
You’ve been an advocate for manufacturing in the U.S. versus Asia. I read that 80% of the Bantam Tools CNC mill is manufactured in the US.
I’m really just an advocate for local manufacturing. If you’re in Asia, use Asian manufacturing; if you’re in the U.S., then use US manufacturers. Whatever is closest to you. Especially when you’re small.
Why is that?
Because you need to be able to rely on your relationship. A lot of times you’re asking questions like, How fast can I get this? What price can I get? Or something goes wrong, and you have to deal with it. All of those are relationship questions, and if you are close, and you can get face-to-face with people, and you can build a relationship in times that are good, then when times aren’t so good you can lean on that. And when you’re small you really don’t have a lot of money to throw around, so you really have to build that relationship. Proximity is one of the easiest ways to get more bang for your buck.
That’s easier for you because you’re in the Bay Area.
Sure. Mechanical parts and electronics — Silicon Valley does that, and it has always done that. So it’s easier to find here. But I would say that even if you’re in Kansas, and you know a CNC metals supply company that’s in Oklahoma, it’s worth it. You’re in the same country, you’re dealing with same time zones, the same communication styles and language. It’s close enough even if it’s halfway across the country. For example, we use TinyG motor control boards, and that company is sort of split between St. Louis and New York, both a long way from the Bay Area. But whenever we’re in one of those places, we will make a point to meet up with them. And there are always events like Maker Faire, where everybody can meet.
These manufacturers are real people. And the more that they care about my product, and the more that they know that I’m going to promote their business, the better. Also in the beginning, especially, quality really matters and it’s easier to do higher quality things in smaller batches. We’ve found that as you move farther away from your manufacturer, and batch size gets larger, the mistakes get more costly.
That’s a good rule of thumb: the farther away you are, the more expensive the mistakes.
And you know that in the beginning you’re going make so many mistakes. We always tried to optimize for one thing: to reduce the cost of mistakes. We know we’re going to make them. Let’s just make sure that every time it’s a hundred dollars instead of a thousand dollars, or ten thousand dollars.
It’s interesting that iterating is so important to you, because that’s kind of what your machine enables: rapid iterating. In a way you’re enabling the very thing that you have found most challenging actually in your own project.
Yeah, there are so many layers of dog fooding here — you can’t believe it. I think you’ll find that good engineers know that they make mistakes. They always want the physical prototype. So our goal is not to replace the printed circuit board manufacturing facility, but to get you to that board house faster. That’s the challenge. We want you to be able to iterate so quickly that you’re like boom, boom, boom: three to five prototypes, and now I know exactly how this thing is going to function. Now I can send that thing to the board house and relax. Our whole thing is just: iterate faster. The less you have to use our product, time-wise, the better. The faster we can get you revs, the better.
So we are definitely living and breathing it. For example, we rely heavily on 3D printing, and our own machines, to prototype accessories, or little jigs, or extra things for the assembly line.
And when we get to the point where we have to decide if we’re good to go we’ve already tested so many times that we can work with our manufacturing partners and get preproduction versions back fast.
We want to keep iterating, and keep improving, and really move into getting more people involved. We don’t want to just target professional engineers. It’s often engineers who have day jobs who develop a private business, or they come up with a niche product that they really just want to do. But I think that there’s also an even bigger group of people out there who categorize themselves as like tinkerers, who take things apart and whatnot. And I’d love to engage those people. So personally, one of the reasons why I wanted to stay at this company for a couple more years is to see if we can crack that nut.
If you think about a new product, there’s usually a lot of different elements that come into it: plastic stuff, packaging, metal things, electronics. So no new one machine is going to do all that for you. You need a suite of tools, a system. That’s a direction we may go in.
The Bantam Tools CNC machine is kind of a starter machine for manufacturing. What would you advise a neophyte to learn before they really get started milling and manufacturing?
I think that the number one thing is to learn a lot about different manufacturing techniques. So it’s like if you’re painting, and you have eight different brushes. Each one is going to make a different stripe, and if you’re trying to make tiny lines with a big fat brush it’s going to be difficult. Probably possible, but it’s difficult. That’s kind of like trying to 3D print thousands of parts. You can do it, but it might be difficult. So instead of coming at a product from the perspective of, “I just want to design a beautiful thing, and make it as beautiful as can be,” you should, instead, take some time to think about the limitations of each manufacturing method, and how much money you have to invest in things like tooling, or set-up fees, or whatever. It’s really just about exposure: watching how things get made and learning about those techniques.
And then you’re able to say, “Yes, I want this to have a certain look to it, but first let’s consider the tradeoffs that I’m willing to make. Like should this be milled? Should this be cast? Should this be extruded?” There are so many different options and price points.
Or you may feel like you don’t really know what you want and you’re just making prototypes, so you’re willing to spend more to mill it, so you have that control. Whatever you do, knowledge of these techniques really helps. An awareness of tolerances also helps.
Why is an awareness of tolerances important?
You should know what tolerances matter to your product. What are the pieces where precision makes a difference, and what are all the places where you can cut corners on precision and use lower cost lower precision manufacturing techniques. For example, when we started building our CNC mill, we had no idea what kind of tolerances we needed. So we just made everything to very, very high tolerances. But over time we realized that these very high tolerances were making it hard to manufacture. So we decided to figure out where we had to pour dollars into precision, and where it wouldn’t matter. And we really saved money and assembly time by making it less complex.
You’ve joined a small group of Maker Pros who have built a company and then sold it. How did that process get started?
We were at a certain point where we had achieved some steady growth but we wanted to be able to do more. We were like, “OK we’re growing, but we’re not growing enough to be able to do the big investments in R&D that we want.” So we had to find that cash somewhere. We weren’t really a good fit for a bank, not really a good fit for more venture capital. I thought, “Well, okay, let’s see if we can find a partner who can provide what we need.” So I started having conversations with a lot of different people.
How did that go?
It was hard. Some companies were interested in the software, but not the hardware, or vice versa. Some people would want just the technology and the team. That really didn’t sit well with me because we had worked so hard, and our mission was to build desktop-sized, accessible CNC machines and put them all over. And I feel we had built a tool, and gotten pretty good market penetration. But we really wanted more. So shutting down the hardware part, that was a no go. We didn’t work that hard to shut it down. We also weren’t interested in distributors who just wanted to buy it and sell it as an OEM. I really wanted to find somebody who would resonate with the original vision for the company.
And that’s where Bre Pettis came in.
When I reached out to Bre, I was actually looking for suggestions from him. So it was a surprise that he was interested in the company. And I was a little hesitant because I didn’t really know Bre very well. All I knew was what I read in the media.
Like many of us, you’ve probably read negative articles about Bre, and maybe you’ve seen the movie, “Print the Legend,” which painted an unflattering portrait of him. Did that worry you?
That was one of the first things I asked him. I was like, “Tell me about what happened? Why are people so upset with you?” That was really important to me: I was like, we are going to be real with each other, really real. And so we went through a process, and it was, honestly, a lot of talking. I think I’m a good judge of character, and I felt at the end of the day that this person has good character. Whatever happened in the past, I mean, please don’t judge me on my first year as CEO, or even my second year. So people grow, and I’ve always believed in people’s capacity for growth. And what I have experienced, in the process of him buying the company and us going though a rebranding, which is really stressful, has further cemented my feelings about him, and his skills. Because MakerBot wasn’t luck. I now know that. I remember thinking, “How did MakerBot get to where they got to? Was it luck? Or timing?” Nope. It was calculated. There are elements of that that I don’t like, but there are elements that I do, and some of those are what we need. So if someone has an open heart, and an open mind, and they can listen — then that’s fine with me. I can work with that.
Are there lessons from MakerBot that Bre is applying to Bantam Tools?
Yes, we manufacture our machines in-house. We have component suppliers, and then we do final assembly and quality control in-house. And I think because of his experience with overseas manufacturing, which weren’t good, that made him more confident that what we were doing was right. It may not seem logical to manufacture a CNC machine in Berkeley, California, but because he had tried it so many other ways, he said just keep doing what you’re doing.
How do you think Bre will change the company and the product?
One of the reasons I’m excited to work with Bre is that he has that special marketing and sales skills that I don’t have. I mean I’m a Ph.D. in material science, and I’m trying to learn everything as I go. But now I have an amazing partner in that area. So I’m just so excited for this next phase of our company.
What do you think Bre saw in your CNC milling machine?
Well you know mechanically the Bantam Tools Desktop PCB Milling Machine is very different from the MakerBot, but in terms of the people it is designed for, they are pretty much the same.
Bre did what he did with MakerBot because he wanted to unlock human potential in this creative realm, and our product is the same. We’re bringing technology that eliminates all the middle players: it’s like if you want to make something, here’s the tool you can use to make it. In that way we’re similar to what 3D printing did, it’s just that CNC machines are more complicated. So I think that he saw an opportunity to buy a company with a really solid product and a really solid team and then add his special sauce. It’s like there’s this nugget of value out there that is not growing as fast as it could be. And he can get back in the game in terms of unlocking this creative human potential. This really aligns with his core beliefs.
So do you think Bre will be pretty hands-on? Do you think you’ll be working pretty closely with him?
In the realms of sales and marketing probably, he’ll be hands-on. But I will still be an independent CEO. It’s more of a stewardship relationship: he’s there, I can ask him questions and advice. He’s there to provide that. And then whenever it makes sense I can say, “Hey can you go to this event for me?” Everybody knows who he is, and wants to hear what he has to say. It’s really nice for me to have that secret weapon.
Is Bantam Tools open source?
From the very beginning our machine has always been closed source. The software’s been closed source. But we use an open source TinyG controller board that we purchase directly from that open hardware company, and we contribute to their firmware. It’s the same with the geometry libraries that our software engineers contribute to. So our relationship with open source is we’re going to give you money, and time. We don’t release the source code for our particular hardware and our particular software, but we do give back to the community by giving money and time to open source projects.
How many units have you sold so far?
We’re in the thousands, but not 10,000. That’s all I’ll say.
What kind of advice would you pass along to other makers who may find themselves in a position to sell?
First, we had over 30 investors — angel investors, VC funds, etc. — so I had a lot of people to satisfy. We also had a board of directors, so the key was finding out, What do all these people ultimately want? They were not going to get their “10x” – ten times their investment. We all knew that. But what were the other outcomes that would be satisfying? And thankfully they cared about the mission. They cared about money, because that’s what they do. But they cared about the mission almost as much. So this turned out to be a good acquisition. We got acquired by someone who’s going to build the company, and who has a skill set that was hard for me to find. I don’t think anybody out there is better at marketing hardware than Bre. So we’ve got a great partner and we can continue. The lesson is: even if you can’t get a fabulous return on your investment from the money standpoint, you can get it from a “this is really good for society” standpoint. So figure out what people want, and what will satisfy them. The other thing is: keep it moving.
What do you mean by that?
People have a lot of emotions when it comes to transactions like this. So much of it was emotional and so many times things would stagnate because we couldn’t get past an emotional barrier. So I was like, “Okay, what do I have to do to keep this deal invigorated, to keep people open? It was highly tactical. There was a lot of time when it was on shaky ground. But I tried to keep it moving, and stay focused on the goal, and the needs of the people that I was working with. You can’t be blind to the feelings that are involved. It’s always an emotional thing.
How do you keep a sale process moving?
It can be really difficult to do. Why is this person blocked? Why is this person not open to the current rev of the deal? You have to really think about that and address that person directly. A lot of it is just listening, to be honest. I have a 13-year-old and there are points of time in life where what is wanted is just not possible. And you have to figure out how to satisfy that person, and let people express that energy, so that you can move on. Because you can’t just stare at that brick wall saying, “I’m going to move this wall, I’m going to move this wall.” It won’t move. You’ve got to figure out how to dissolve that wall of feelings.
That’s a challenge.
I think that’s why so many companies fail during this process. They get to the point where they don’t even get acquired. They just fizzle and die. Because the acquisition part is hard, and it’s really different from operating the business. You think you’re a good operator and then you try to sell the business, and you’re like, “Whoa, this is a different game entirely.”
Thirty investors is a huge group to deal with.
It is. But we had a good relationship. I over-communicated with them. I sent out monthly reports. I was always available. You have to make sure that people are informed, and that they’re responded to quickly. That really helped because ultimately they felt confident that I had tried everything and that this was actually the best outcome.
So it’s important to build confidence that the outcome you’re pushing for is the best outcome.
Yes, because if there are other options, they will want you to go down that road. But if you have literally exhausted every option and communicated that process, people will feel like, “Okay, I can get on board with this. It’s not everything I wanted, but I can get on board with it.” Because you can get stonewalled as CEO, and then you can’t move, and the business dies.
And how long did the sale process take?
I had a board meeting in early February where it was, “OK guys I think I’m going to do this.” And then we closed on the first of May. So it was three months. But I had been thinking about options, and pursuing other avenues, for about three months before that. It’s just that those options weren’t adding up. People wanted bits and pieces of the business, but not the whole thing, with the whole vision. And that’s what was really important to me.
So keep people in the loop, keep the conversation going, keep the deal moving — that’s what you would recommend if somebody is selling a company.
And don’t underestimate the role of emotions.
Because even though you’re dealing with a money crowd, they’re not just looking at the numbers?
It’s always emotional. Even people who are big wheelers and dealers — they don’t want someone else to get a better deal. And that’s an emotional thing. Money’s at the end of it, but maybe someone wants to be the best in this category, or they’ve had a previous relationship with other investors that they are competing against. Those are all actually emotional reactions. So yeah, that was an interesting thing to observe.
In September, when you launched the new brand, you announced that you were focusing on professional electrical engineers, instead of a more general maker/crafty audience. Were makers ever really a target customer?
Oh yes, if you look at our Kickstarter messaging, it was pretty maker-y. Our message was very much: “a desktop CNC machine for everyone.” And it made sense: there are a lot more hobbyists and makers out there than professional electrical engineers. But once we got past that Kickstarter, it was like, “OK who’s buying?” And it was very few hobbyists and makers. And the hobbyists and makers who did buy were pretty technical in their day jobs.
Why do you think it turned out that way?
Because it’s a big purchase: $3000+. And that’s difficult to justify if you’re a hobbyist. If you’re a professional electrical engineer it’s easier. An engineer is thinking, “This machine is amazing! I’m going to make my money back in two months!” So electrical engineers appreciate the value, and they can put it to work. Ultimately I want to grow the audience beyond that, to makers and a more general audience, by getting these CNC machines into libraries. But short term we’re focusing on electrical engineers who want to create boards faster. A professional engineer knows what a CNC is; they’re already technical people. Their employers will buy it for them because it increases their productivity. It’s a business purchase.
Is there an overlap with professional engineers who are also makers?
Definitely. I’ve talked to many machine shop guys who love the Bantam Tools Milling Machine. They’re saying, “I need this at home. I could bring it home and show my kids what I do, and how awesome it is.” They understand the importance. “I can get this, I can show it to people, and it’s fun and cool.” Instead of hearing, “Oh, boring, factory,” it’s, “This is the future.”
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