Manufacturing innovative start ups

Posted on 16 Feb 2017 by Malcolm Wheatley

It’s never been easy to be an innovator in the manufacturing sector, but the good news is that help is at hand. From bank-backed MakerSpaces to crowdfunding and support networks, Malcolm Wheatley reports on the opportunities on offer for start ups.

Take even a cursory glance at the business landscape, and it’s easy to tell that innovation is alive and well in British manufacturing; particularly when it comes to start ups.

The Airlander 10 in flight. Image courtesy of Hybrid Air Vehicles.
The Airlander 10 in flight – image courtesy of Hybrid Air Vehicles.

Consider, for instance, last year’s first test flight of the Airlander, a half-airship-half-aircraft ‘hybrid air vehicle’, which combines lighter-than-air aerostatic lift with a body shape that produces aerodynamic lift, like an aircraft wing.

Or Vert Rotors’ innovative ultra-compact oil-free conical rotary compressors, which are finding ready markets in aerospace and medical applications where vibration and noise are not acceptable.

Or Sugru, the world’s first mouldable ‘glue’ – colourful putty which sticks to almost anything, and which turns into a strong flexible rubber overnight. Or Koolmill Systems, which has developed an innovative low-power, low-waste milling process for rice, increasing yields of saleable rice by 25%.

New ideas, old problems

Yet look closely at such businesses, and all too often the story is one of innovation against the odds: hard-working, dogged founders plugging away at their inventions, struggling to turn a smart idea into a successful business, and – above all – struggling to gain access to finance to make that crucial leap from promising start up to commercial viability at volume.

And today, say those in the know, that struggle is more difficult than ever. “The challenges of establishing a manufacturing business are the same as they have always been,” says Mark Goldby, chair of the University of Nottingham-sponsored Nottinghamshire Manufacturing Network, and himself a co-founder and co-owner of two hi-tech electronics businesses.

Innovative Start Ups PQ - Feb 17“What’s changed is the pace at which entrepreneurs must develop and grow their businesses: they need more support than ever, and they need it sooner.”

Support networks

However, there is some good news: new forms of both support and finance are coming into play, giving those entrepreneurs valuable advantages compared to comparable business start ups even a decade ago. The struggle for growth and viability is still a struggle, but other people – and other businesses – are putting their shoulders to the wheel alongside innovators.

Take, for instance, the Nottinghamshire Manufacturing Network itself. The idea, says Goldby, is very simple: it’s a way of networking with other businesses, and other entrepreneurs, who have faced that same struggle, and who are willing to share insights and learning experiences.

And this is especially effective when coupled to the experts made available through business ‘incubators’, he emphasises. The result is a powerful step change in growth potential: entrepreneurs spending less time on figuring out how to do things – and making the inevitable mistakes – and more time on surefootedly learning from how others have tackled similar problems.

Ben Gray, director and founder of educational robotics manufacturer MeArm, for instance, had previously built up a small electronics distribution business – but quickly recognised the very different challenges of setting up a manufacturing business.

“Building up a business that made its own products was a very different experience,” he recalls. “Talking about manufacturing, supply chains, and factories was very new and different – even employing other people was a departure. The ability to sound out members of the network about some of those issues was very useful.”

Innovation also requires intellectual property protection – and here again, ready help is at hand. The government’s Intellectual Property Office works together with the British Library to support a network of some 16 public library-based patent libraries (known as PATLIBs) and business intellectual property centres, says Mel Rawles, network chair and the PATLIB officer at Plymouth Central Library.

Free to use, each PATLIB and intellectual property centre typically has close links with universities, patent attorneys, and other relevant experts, and offers ‘drop in’ sessions, as well as email and phone-based assistance.

From ideas to products

MAPP aims to address the challenges and opportunities surrounding advanced powder processes through an ambitious interdisciplinary research programme.
The adoption of low-cost prototyping through additive manufacturing (also known as ‘3D printing’) is growing within industry.

But a design on the drawing board is one thing – and a working prototype quite another. And the long, slow climb from start up volumes to mass production yet another. Traditionally, the quandary has presented innovative entrepreneurs with some awkward choices, possibly resulting in loss of control as they raise the capital to move designs from the virtual world to the physical one.

Low-cost prototyping through additive manufacturing (also known as ‘3D printing’) has helped. Another source of help is a growing number of specialist subcontractors, whose specific business model revolves around prototyping and low-volume manufacture.

Yet even here, new and potentially interesting alternatives are now on offer – and from some unusual sources. Barclays Bank, for instance, isn’t unusual in offering new businesses the use of space in its business incubators, where entrepreneurs can benefit from mingling with other entrepreneurs, and where mentoring is on hand from Barclays’ industry experts.

But the bank surely is unusual in also (as with some business innovation centres) offering eight so-called ‘MakerSpaces’ around the country, having turned over a number of redundant bank premises to the initiative. In each MakerSpace, innovative entrepreneurs can gain access to technology such as 3D printers, helping them transform digital designs into solid reality.

Manufacturing as servitization

Nor are MakerSpaces the only option open to innovative entrepreneurs looking to transition ideas into prototypes and products: in some situations, servitization is transforming the affordability of new technologies.

Four-year-old start up Robot Bike Company, for instance, produces custom-built bicycles targeting the mountain bike market, with each bicycle being a unique combination of carbon fibre tubing and connective ‘lugs’. But most of those lugs are also unique, explains Robot Bike Company co-founder, Ed Haythornthwaite, raising obvious manufacturability issues.

Innovative Start Ups PQ 2 - Feb 17The solution: build each lug through additive manufacturing, using a laser-sintered titanium fusion process – a technology financially inaccessible to new start ups wanting to purchase a laser-sintering machine from a manufacturer such as hi-tech metrology and machining specialist, Renishaw.

Which is where servitization comes in: a global network of ‘solution centres’ offers Renishaw technologies available on a pay-as-you-go basis, as a half-way step to customers being able to actually purchase the technology capabilities outright, via capital investment.

“Our goal isn’t to be a component supplier,” stresses Marc Saunders, director for global solution centres at Renishaw. “Instead, it’s to develop transferable production processes, using our technology. We don’t really want to be working long-term for any one individual customer. The solution centre model lowers the cost of entry to our technology, making it available to companies that wouldn’t otherwise be able to innovate with it.” Moreover, adds Robot Bike Company’s Haythornthwaite, Renishaw’s engineers are undoubted experts in their own technologies – usefully complementing the bicycle manufacturer’s own skills.

“There were two years of design challenges before we got to the point of production,” he recalls. “We were pushing the envelope in terms of what the technology and engineering could deliver. Renishaw really helped with post-production machining of the lugs: we needed fixtures to hold them rigid for operations such as cutting threads – but every lug is different. We were looking for rigidity and adaptable fixtures, and Renishaw helped us find a solution.”

Funding start ups

That said, many innovative start ups are still relying on the traditional means of access to mature machining technologies – buying second-hand. Olly Dmitriev, chief executive of Edinburgh-based Vert Rotors, recalls two years of R&D experiments using a 1960s-era milling machine, gradually taking the concept of conical rotary compression to the point of commercial viability. At which point, he explains, he ran into a problem familiar to many innovative start ups.

CEO Olly Dmitriev alongside the DMG-Mori produced HSC-20 linear machine - image courtesy of Vert Rotors.
CEO of Vert Rotors, Olly Dmitriev.

“For those two years, I’d run the business using my own money – but when I knew I had to buy large CNC milling machines from Germany, it was too much: I had to sell equity in order to raise the money.” Even so, he adds, finding and convincing the right ‘angel investor’ was no simple matter, and it took a year to get funding in place.

Today, though, Vert operates three hi-tech CNC milling machines, with the latest arrival from Germany reported to be the most accurate such machine in Scotland, capable of achieving tolerances of two microns.

Sources of funding famously dried up during the 2008 credit-crunch and ensuing recession, and as The Manufacturer’s Annual Manufacturing Report repeatedly highlights, funding has remained tight since. But businesses’ appetite for borrowing remains strong, says Darren Farnell, head of small business banking in the business banking division of Barclays.

He says 2016 was somewhat unusual in that businesses appeared to be far more confident about taking on external funding than in previous years. And Barclays, he adds, is definitely open for business when it comes to innovative start ups.

“We have specialist small business managers in branches right across the UK,” he insists. “Start ups can go into a branch, and have a face-to-face conversation about finance – and if we can’t lend, we’ll try to point them to other sources of finance, such as business angels.”

Make the impression

Businesses can boost their chances of their bank saying ‘yes’ by presenting themselves in a favourable light, and being able to demonstrate having undertaken appropriate due diligence, stresses Geoff Winwood, a business coach at European Union-funded business advisory service Oxford Innovation.

UK Manufacturing Pound Coin Currency Graph Money Brexit Finance - Stock
Businesses can boost their chances of their bank saying ‘yes’ by presenting themselves in a favourable light,

“Very often, we see entrepreneurs who are brilliant at what they do from a product point of view, but who need help with communication, strategy, funding, and bringing that product to market,” he observes.

“On its own, a product’s headline price doesn’t say a great deal about the resulting margin, and the eventual profit at a given level of sales. So it’s vital to flesh out a business plan: price points, anticipated sales volumes, product costings, marketing costs, and so on. And such a plan will almost certainly be needed, irrespective of the source of finance: anyone lending a business any money will want to see that it has done its due diligence.”

Fund from the crowd

That said, as Barclays’ Farnell affirms, funding is tighter than in the past: 2017, in short, is a very different kettle of fish from the more relaxed days of 2007. But from the dark days of the credit crunch, ironically, has emerged a whole new source of funding – ‘crowdfunding’, where innovative start ups pitch directly to small private investors through specialist platforms, with each investor investing a much smaller amount than might business angels or venture capitalist firms.

“Crowdfunding has really democratised investment: it’s not just wealthy private individuals taking a stake – it’s friends, family, neighbours, customers, suppliers and the general public,” says Luke Lang, co-founder and chief marketing officer of crowdfunding platform, Crowdcube, through which start ups as diverse as energy harvester Witt Energy, Airlander-manufacturer Hybrid Air Vehicles, lightbulb manufacturer Plumen, and flexible glue manufacturer Sugru successfully sought finance.

“Crowdfunding opens up early-stage investing to a much wider pool of potential investors.” Sugru founder Jane ni Dhulchaointigh, for instance, raised £3.5m on Crowdcube in July 2015 – the third biggest raise ever achieved on the platform – and reached the initial target of £1m of funding in just four days, with 2,700 investors taking a stake.

Moreover, concludes Dhulchaointigh, crowdfunding builds links between a business and its customers, helping to turn users into advocates – and engines of growth. “Our users have helped us perfect the product and build the brand – so it makes complete sense to let them share in the future success of Sugru,” she insists.