As 18 companies offered shares, it was a busy week in IPOs. One of the standout offerings was from Xometry. It operates an online marketplace that allows for on-demand manufacturing.
The IPO price was $44, which was well above the $38 to $42 price range. Shares soared nearly 100% on the first day of trading (currently, the market value is around $3 billion). T. Rowe Price (Capital World Investors) purchased $70 million of the shares.
Randy Altschuler, a serial entrepreneur and CEO of Xometry is also the cofounder. He also founded two other startups, which were sold to public companies.
Laurence Zuriff, the Chief Strategy Officer for Xometry (he was also his partner in Xometry), was his teammate.
Both Altschuler and Zuriff were attracted to the custom manufacturing industry. However, they didn’t immediately start a business. Instead, they spent many months researching the market by speaking to small manufacturers. Altschuler stated that they saw specific themes emerge.
For example, small manufacturers depended on local customers who were more extensive, which was a considerable risk.
There were also challenges for custom manufacturing part buyers. It was challenging to find the best vendors and to determine the correct pricing.
Altschuler and Zuriff recognized the need to build a two-sided marketplace to solve these problems. However, it took some time before the market reached critical mass. The buyers were skeptical, even though sellers were keen to sell.
The pricing of the product on the market was another issue. SKUs do not exist for custom jobs. Instead, each position is unique.
This made it necessary for Xometry to build an automated system. One option was to go with brute force and look at all the possibilities. Altschuler stated that the problem was that such a system would take too much time to construct. Altschuler said, “It would also prove difficult and time-consuming for it to be maintained.”
The next step was to leverage AI (Artificial Intelligence). It was to harness AI (Artificial Intelligence). Xometry built a proprietary engine that was backed with patents to instantly provide quoting based on factors such as location, volume, and the manufacturing process.
“What got Xometry excited was the fact that they were using incredible tech,” Daniel Docter, a Managing director at Dell Technologies Capital and an investment in the company. “Over time, their AI algorithms became better, their modeling became less accurate, and they expanded their capabilities.”
This has allowed the company to successfully process transactions for more than 6 million parts in less than a year since its inception. There are currently over 43,000 buyers on the platform and 5,000 sellers (roughly 30% from the Fortune 500).
The rate of growth has been increasing. Between 2018 and 2020, the compound annual rate of growth was 92%. Revenues reached $141.4million.
Without AI, all of this would not have been possible. The technology has been strategic for Xometry.
Docter stated that the AI could predict how to make parts, such as it should be completed, how much material is needed, and its yield. “Xometry transforms an inefficient, manual, human-intensive process to an automated, precise, predictable, and highly efficient AI-driven process. Customers win; manufacturers win; and, frankly, the entire world wins.
