In 3D printing merger, Stratasys gets a hot "prosumer" brand and Makerbot gets resources to grow

By Erin Griffith , written on June 20, 2013

From The News Desk

Standing in front of a crowd of press and employees, Makerbot CEO and founder Bre Pettis got a little bit choked discussing the details of his company's merger with industrial 3D printing company Stratasys.

"We're a special place," he said of the company he has built for the last three years. "We're going to stay an independent company. Makerbot is Makerbot is Makerbot."

His infectious enthusiasm for what he does always comes through, but he also seemed a bit overwhelmed by it all, understandably. Just two weeks ago, the company unveiled a major milestone in the form of a new 55,000 square foot factory in Sunset Park, Brooklyn. At the time, Borough President Marty Markowitz said Makerbot had the potential to be the "Apple Computer-sized tech company in Brooklyn."

The two companies placed a big emphasis on Makerbot's independence today.

When I asked why the deal was done in all stock, both Pettis and Stratasys CEO David Rice seemed taken off guard. Stratasys chairman Elan Jaglom yelled from the side of the stage, "It's a merger!"

Later Jaglom and Rice elaborated: Paying for Makerbot in cash would divert funds that the companies need to invest in their own growth. Furthermore, price tag on a hot brand like Makerbot didn't come cheap, Rice said. Lastly, Jaglom pointed out, this deal is a merger, not an acquisition. Makerbot has built up an incredible company culture and brand -- the last thing Stratasys wants to do is disturb that by acquiring, and therefore owning, the company outright. "If we start interfering with what they do, it won't work," Jaglom said.

So the point, then, is to offer resources. Stratasys, having only recently formed via merger itself with a company called Objet, will offer Makerbot expertise on anything from engineering and technical IP to scale in supply chain materials.

"It is a combination of a company which is well established with very strong infrastructure and deep processes, combined with a very young fast aggressive high tech company," Rice said. "We have 500 patents, 25 years of experience and millions and millions invested on research, which will be provided to Makerbot."

Stratasys knew it needed to offer a "prosumer" product, or an affordable 3D printer which professionals and consumers can purchase and experiment with. The company could have gone to market with its own. But it quickly learned that the Makerbot brand, along with its "Thingaverse" ecosystem of developers, could not be easily replicated.

That brand and ecosystem did not come cheap -- the deal values Makerbot at $403 million with potential earnouts of $201 million. Last year the company did $15.7 million in sales; this year's sales are already on track to top that, having hit $11.5 million in sales in the first quarter.

The deal will provide a solid exit for Makerbot's venture investors, Foundry Group, Bezos Expeditions, RRE Ventures, Sam Lessin and True Ventures, who put $10 million into the company in 2011.

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