It was a busy week for IPOs, as 18 companies issued shares. And one of the standout offerings was from Xometry, which operates an online marketplace for on-demand manufacturing.
The IPO was priced at $44, which was above the $38-to-$42 price range, and the shares soared nearly 100% on the first day of trading (the current market value is close to $3 billion). T. Rowe Price and Capital World Investors purchased $70 million of the shares in the offering.
The CEO and cofounder of Xometry is Randy Altschuler, who is a serial entrepreneur. He launched two other startups that were sold to pubic companies.
As for Xometry, he teamed up with Laurence Zuriff (he is the current Chief Strategy Officer). Prior to this, he was the managing partner at Granite Capital International Group.
Both Altschuler and Zuriff were intrigued by the custom manufacturing industry. But they did not immediately create a company. Instead, they spent months researching the market by talking to many small manufacturers. “We saw certain themes emerge,” said Altschuler.
For example, smaller manufacturers were usually dependent on larger customers that were local, which posed considerable risk. They also spent much time responding to requests for custom parts that did not turn into business.
The buyers of custom manufacturing parts also had challenges. It was difficult to find the best vendors and to come up with the right pricing.
To solve these problems, Altschuler and Zuriff saw the need for building a two-sided marketplace. But it took some time to get to critical mass. While sellers were interested, there was skepticism from the buyers.
Then there was the issue of the pricing for the marketplace. Custom jobs do not have SKUs. Rather, each one is unique.
This meant Xometry needed to build an automation system. One approach was to use brute-force and go through the possibilities. “The problem is that it would take too long to build such a system,” said Altschuler. “It would also be difficult and time-consuming to maintain it.”
The next approach then? It was to leverage AI (Artificial Intelligence). Xometry created a proprietary engine—backed with patents—to provide instant quoting based on factors like volume, material, location and the manufacturing process.
“What really got us excited about Xometry was that they were using incredible technology,” said Daniel Docter, who is a Managing Director at Dell Technologies Capital and an investor in the company. “Over time their AI algorithms got better, their modeling became more accurate, and their breadth of capabilities grew.”
The result is that the company has been able to efficiently process transactions for more than 6 million parts since inception. Currently there are over 43,000 buyers and 5,000 sellers on the platform (the customers include roughly 30% of the Fortune 500).
In terms of growth, it has been accelerating. From 2018 to 2020, the compound annual growth rate was 92%, with revenues hitting $141.4 million.
However, without the AI, none of this would have been possible. The technology has been strategic to Xometry .
“The AI learns and predicts how to make a part, how much it should cost, how long it should take, how much material would be needed, how would it likely yield, and so on,” said Doctor. “Xometry literally transforms an old, manual, grossly human limited process, to an automated, much more accurate and predictable, and hugely more efficient AI-driven process. Manufacturers win; customers win; and frankly the world wins as we collectively can do so much more with so much less waste.”
Tom (@ttaulli) is an advisor/board member to startups and the author of Artificial Intelligence Basics: A Non-Technical Introduction, The Robotic Process Automation Handbook: A Guide to Implementing RPA Systems and Implementing AI Systems: Transform Your Business in 6 Steps. He also has developed various online courses, such as for the COBOL and Python programming languages.