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Why Space for Assembly Will Be 2019’s Biggest Hardware Startup Need

Insight re-posted from Futureworks NYC:

Two-and-a-half years ago, we wrote a series of stories that explored 21st-century manufacturing. We were inspired by a general manufacturing discussion that seemed stuck in limbo, constantly ping-ponging back and forth on these two questions:

  1. Was manufacturing thriving or dying?
  2. What is manufacturing?

We dispatched the second debate pretty quickly after conversations with Charles Euchner at the Center for an Urban Future, Kinda Younes at ITAC, Charles Boyce of Boyce Technologies, policymakers and a handful of founders at smaller firms. The consensus was that manufacturing no longer needs to be about mass-production; instead, New York City’s fingerprint was becoming bespoke manufacturing.

Bespoke manufacturing seems like an oxymoron at first glance, but custom builds are a signature of modern manufacturing. Production agencies and product innovation studios translate client needs through custom builds. With the combination of digital fabrication machinery and cheap sensors, our entire infrastructure is being overhauled, and there’s no bigger urban infrastructure (or buyer) than New York City. The integrated communication systems, for instance, that Boyce creates for the MTA; SITU Fabrication’s modular furniture, restaurant interiors, hotel lobbies and museum designs; Lotik’s smart water sensor.

NYC’s strong core of specialized manufacturers and hardware companies are growing teams, increasing revenue and developing an appetite to bring the supply chain closer to home. In 2019-2020, look for assembly space to be the highest common need for startups. A few factors are driving this.

Dog Spot’s installing their canine sanctuaries across the country but keeping as much of their assembly in NYC as possible.

First, of course, is financial success. Flagging startups aren’t increasing their square-footage. But there’s growth everywhere in NYC, and startups will take more space because they can. As cities across the country overhaul infrastructures, they’re looking to hardware startups to produce the 21st-century ecosystem, help them make sense of data-capturing sensors, IoT transmission and make the products to bind it all together. Cities and states are setting ambitious clean energy standards that require new technology. Legacy manufacturers are also looking for better ways to analyze and improve the state, efficiency and production of their machinery and supply chains. CB Insights points out that VC investment in the industrial IoT space jumped 275% from 2013 to 2017. Startups who’ve had the chance to hone their hardware, build teams and understand B2B clients over the past few years are already primed to take advantage of all this growth.

Second reason we’ll see an explosion in appetite for space is because of growing teams. New teammates themselves don’t need much space, but they do need a lot of coaching. Startup founders quickly realize that they can’t just upload their brilliant imagination, client-relationship skills and 10,000 hours of engineering experience into green employees. As startups evolve from a core of co-founders to a team with junior staff, they need to spend more time closer to home. Outsourcing assembly to Asia becomes much less enticing. As one founder said to me, “Yeah, China is cheaper, but I’m gone for two weeks, and when I come back, everyone’s spinning like a top. Hardware is tough, and teaching it is brutal. You have to be there every day.” This management reality (combined with family-building founders who will want to spend more time near home) means the increased search for nearby assembly is becoming inescapable. Which is a good thing.

The third reason is the value of keeping skills development and iteration in-house. 21st-century manufacturing is brand new, and very hard to predict where it’s headed, so possessing skills and refining operational processes are roughly as important as cash reserves and a perfect product. Founders who give their team the time and opportunity to develop, and iterate, products here, are investing in the skills to make V2, V3, V5.5, V7 of the product. Startups who build in-house refine their processes, adapt to change (which is constant), and prepare for the demanding, always-evolving, needs of clients. Startups who outsource either don’t or spend all their time on planes – not coaching teams and building their organizations. To build “in-house” requires additional space outside of just the office.

Voltaic System enjoyed 2x revenue growth over the past year without expanding their team. They’re shifting assembly from New Jersey to NYC so that product iterations become more seamless.

Take Voltaic Systems for example. They started in the solar-powered backpack business and are now growing fast into the B2B solar space. Their ability to affix solar panels on all sorts of products increases the RFPs they can pursue, conversations they can have and upsells they can suggest. Voltaic hasn’t grown their team over the past year, but they’ve increased revenue 100%. Clients who used to ask for just panels are now asking Voltaic to assemble panels onto infrastructure bits like parking meters before shipping them out. To adapt, Voltaic took space at the Sweet’N Low facility across the street from New Lab and is likely looking for another few-thousand square feet soon. Tarform, the electric motorcycle startup, recently took over 4,000 square feet in Brooklyn Navy Yard’s Building 50. Dog Spot also secured space at Sweet’N Low for R&D, assembly and storage.

These are just three examples of what will become a big-time trend over the next two years. The Sweet’N Low facility, which had closed in 2016, is already adapting, as is NYCEDC whose Brooklyn Army Terminal is already developing flexible spaces to meet this demand- with units in the micromanufacturing hub available at a lean 2,000 – 10,000 sft size that makes sense for these types of ventures. As demand grows, we will see more and more of these types of approachable industrial spaces for hardware production. And with that will come an increased demand for assembly hires.

Read the full article at Futureworks NYC.