By Eric Peterson | Mar 05, 2022
Metal 3D printing systems
Subsequent to a stint with Israeli intelligence's technology unit, Buller worked in the solar and semiconductor industries in the United States. Then he went into the investment sphere with Khosla Ventures from 2012 to 2014.
His background in venture capital, however, did not intersect with additive manufacturing. "When I worked in venture capital, I actually vowed, believe it or not, I would never invest in 3D printing," says Buller. "It all seemed very much like a commodity to me. I had a lot of people coming to me, and their business plans all looked the same."
The commonality? "Basically, this all looks like a race to the bottom," Buller says. "I already worked in one industry that raced to the bottom, and in such an industry no one makes money."
Founded in 2014, Velo3D (NYSE: VLD) takes the opposite tact by focusing exclusively on high-value markets. Buller saw the potential for additive manufacturing in rocket engines, and sought to target that industry from the start.
"None of the designs these people actually wanted to make were manufacturable, and they had to spend months changing the designs and adapting them to make them manufacturable," he explains. "This was very shocking because I thought the point of going to 3D printing was to make all of the designs you want. I said, 'We're going to change that, and we're going to make a 3D-printing technology allowing people to make the parts they really want to make and of the quality they need for mission-critical applications.'"
It follows that Velo3D seeks to ease the pain points with design for additive manufacturing (DfAM). "It's possible to do, but it's extremely difficult, extremely non-intuitive, and it's extremely limiting to what you can actually do -- and it compromises the function," says Buller. "Our mission as a company is to allow engineers to actually design the parts they really need."
Like many additive technologies, Velo3D's Sapphire printers use a variant of laser powder bed fusion (dubbed Intelligent Fusion) to manufacture parts. The company's software -- Flow and Assure -- is a key differentiator.
Explains Buller: "Our customers design with whatever design tools they like." Flow then converts the design files to manufacturing instructions without the typical added step of DfAM, then, on the back end, Assure automates quality control.
In other words, he notes, "Flow prescribes, Sapphire executes, and Assure validates."
Velo3D's first products hit the market in September 2018, and the technology has scaled up both in terms of size and capacity. On the heels of the original Sapphire, the Sapphire 1Mz can print larger parts and the Sapphire XC is Velo3D's production-scale option for higher volumes. "As they scale up, they have a very low-cost manufacturing solution," says Buller. "Even if people don't need it right away, the existence of that product helps people choose our platform, because that allows them a path to a lower cost."
In order to build its printers, Velo3D leverages a decentralized supply chain. "We buy roughly 80 percent of the product from a set of contract manufacturers that build the subsystems for us," says Buller.
The company's technicians assemble the components at the company's facility in Campbell, just southwest of San Jose. Assembly takes two to three days, then testing requires another two weeks.
Revenue grew to $27.4 million in 2021, up 45 percent from $19 million in 2020. The company's guidance forecasts $89 million in revenue in 2022, based on a backlog of orders totaling more than $40 million early in the year that's largely associated with demand for the Sapphire XC, with quadruple the production capacity of a Sapphire. The XC first shipped in late 2021.
Most of the company's early adopters are in the aerospace sector, but the company also has customers in oil and gas and renewable energy. "Our biggest customer -- and that is about 25 percent of our business -- is SpaceX," says Buller. "SpaceX is developing its Raptor engines around our capabilities."
While Velo3D's client roster also includes Siemens, Schlumberger, and Honeywell, Buller highlights a strategy to supply the broader manufacturing ecosystem. "What we are selling is the manufacturing technology: the systems and the software and the manufacturing process. I'm not making parts," he says. "However, about 90 percent of all OEMs want to buy parts, not machines. So a big part of what we do is we collaborate with contract manufacturers in the industries that we operate. We supply them with the technology, we teach them how to use it, and then they make the parts for the end customers, for the OEMs."
Velo3D's business development personnel works to foster the workflow of such prospective end users to incorporate the company's technology into relevant product life cycles and then connect them with a contract shop that's outfitted with Velo3D's machines.
It has already established relationships with about 10 contract manufacturers in the U.S. and is working to replicate that network in Europe. "It creates a very deep sense of loyalty because we are bringing customers to our customers, which is extremely rare in our business," says Buller.
He adds, "This is for those innovators who are trying to make those products they couldn't make before. Every time that one of our customers challenges us with something that is valuable for them that is not manufacturable, we are here to actually enable that for them. And if we cannot do it today, we'll do it in three months or four months, and once we do, it opens the door for many other customers that need or will need the same capabilities later on."
Challenges: Adoption. "The opportunity is very large, but the actual market today is very small," says Buller. "This is an emerging market, and the rate of the growth of this market is entirely dependent on how we help our customers overcome their adoption barriers -- and there are plenty of those."
Opportunities: Velo3D is currently focused on aerospace, energy/power generation, and semiconductors. All of these markets need better solutions than legacy additive technologies offer, notes Buller. "We are only focused on applications where we are the only game in town," he says. "When we find needs like that, we have high confidence we can bring them to our contract manufacturing network and no one will be able to take this business from us."
"The other application is for companies that have a very fragile and non-agile supply chain," he adds. "Now, we provide them with the ability to replicate the parts they used to make with this very non-agile and non-scalable supply chain with a scalable, diverse, and very responsive supply chain."
Needs: The transition from a privately owned business to a publicly traded company via a SPAC deal in late 2021 covered many of Velo3D's needs. "Moving to a state where we are a publicly owned company with more than $200 million in the bank and with complete transparency of our financials has been transformational for us," says Buller. "That completely changes the dynamics and the risk profile for our customers to adopt this technology."
The company now has the capital to address two key needs: the hiring of another 100 employees in 2022 -- Buller estimates the head count will top 300 by the end of the year -- and moving production from the company's roughly 30,000 square feet in Campbell to a dedicated 80,000-square-foot manufacturing facility in Fremont by the end of Q1 2022. The capacity will jump from about 50 systems a year to 400 systems a year in the new space. "It's a massive increase in production capacity," says Buller.