Direct to consumer – customized automated manufacturing

The future of manufacturing is here and it is (drumroll please) – Direct to consumer (DTC) customized automated manufacturing (CAM – has different meanings so we will hold off on giving this one an acronym).

We are living in an age of new possibilities. We have gone from one off manufacturing -> to mass standardization -> to mass customization. We are entering a time when customized components can be manufactured at the same speed as standardized components for individual consumers. Consumers want customized, individualized products, that they can order on-demand from their smartphones. And they want them yesterday.

There are ample examples of mass customization with both startups and large brands trying to get into the game. There are many examples of failed attempts at mass customization but they are paving the way for new opportunities.

Examples of individualized mass customization

  • Levi’s F.L.X. Finishing – “Consumers will be able to start with seven of Levi’s most popular fits, including the 501. From those seven fits, using a variety of design combinations, they’ll be able to design over a thousand combinations of their own personalized jeans”
  • Function of Beauty – Custom made hair products – Custom made for your type of hair. They use the term hyper-personalization.
  • Nike – NikeID brand
  • Formaspace – – mass customized furniture to fit a certain area.
  • True Gault — the latest brand to crack the code on mass-producing personalized items. Use a phone to scan your foot. Then the heels are produced in Spain and shipped to your home

Pick any consumer industry and you will find manufacturers creating setups to mass customize products for individual consumers. Customized apparel, customized printed medical components that go in our bodies, customized automated food creation, custom furniture fit to your home, custom education, custom books.

The world of standardization will become more strained in markets which have mass customization options. The reason that mass customization will win is that there is pricing power for individualized products and data advantages to understanding customer wants.

Configured customization vs. individualized customization

Types of products which create personalization value tend to fall into two main categories, configured and individualized customization. Configured refers to your typical type of configurator or customizer type of application. The customer uses an application and they are able to choose their preferences based on configurable options. Nike shoes is an example of this. Pick the colors you like and the size and the materials. Individualized customization, on the other hand, is right-sized to the customer. In this case, the product is customized to the consumer based on unique characteristics of the consumer. Examples of this are 3-D body scanners that create clothes to custom size.

Individualized product creation is definitely within reach but building a unique product for each and every customer is not without its challenges.

Challenges to mass customization

  1. Creating enough value through customization to make the costs of implementation worth it
  2. Materials/inputs planning
  3. Materials and inputs movement
  4. Communicating customization options to customers
  5. Production location. Proponents of mass customization talk about mini-factories that operate within other businesses. For instance, an apparel mini-factory combined with a retail storefront.
  6. Maintaining manufacturing flexibility as complexity increases
  7. Configurator software

The streets are littered with failed attempts to create companies based on mass customization too. One recent example is shoes of prey. One of their findings was that while the model worked for fringe shoe designers, most people aren’t used to designing their own shoes. They had a good business at a small scale but weren’t able to scale up to a mass market.

Opportunities to mass customization

  1. Lack of skilled labor or difficulty keeping positions filled
  2. Personalized products create customer loyalty
  3. Pricing power for personalized products
  4. Digital enhancements, modular manufacturing frameworks, and flexible process create more personalization options

If you are working on a custom automated DTC company, reach out today. Some manufacturers also call this bespoke mass customization. We are trying to solve these challenges everyday and we are looking to invest. I am very interested in investing in technologies which enable mass customization so don’t hesitate to reach out if you are working on a system to enable this. I especially like Direct to Consumer automated manufacturing set-ups. Even if they are small, we like to tinker with systems over here. For instance, we have built applications with Raspberry Pi as a microcontroller to build products for Etsy. No system is too big or small.

Manufacturing Investment

If you are you a manufacturer looking for equity investment, great, we are an investment firm looking for manufacturers with the potential to grow. We are a venture capital firm. Typically equity investments in manufacturers was a game for private equity only. Recent developments in the global robotics, automation and sensor industries is enabling manufacturers to grow rapidly, or sit idly by with poor outlooks.

At the core of our investment philosophy is combining income producing assets with technology, especially if technology can help us increase the rate at which income is produced. For example, manufacturing machinery is becoming much more flexible in terms of customizing products, changing over jobs and they don’t require operators at all times. We have seen success in building out websites with strategic SEO and adwords to better utilize this type of machinery.

Another example is in customization products where users can customize their product with software and then share their new creation in case friends want the same customized product or in case they want to customize it to their own preferences. We find this direction incredibly interesting in the Direct to Consumer space.

We have the belief that a manufacturing company can be started by one individual with one machine. The machine needs to be fairly automated, CNC, CAD type of machine. The individual needs to have some engineering background and some business background but we believe this is possible and we are betting on it.

While equity investment is not for everyone, below are a few of the types of things we are looking for:

Spin Out Investments

Spin-outs typically involve some sort of IP or research which has been shelved or left dormant due to existing business factors. Companies which are potential spin-out candidates usually have the one or all of the following characteristics:

  • An idea
  • IP
  • Potential Customers
  • Industry knowledge

But you don’t have one or all of the following:

  • Bandwidth for a new project
  • Young motivated leadership
  • Space
  • Free Cash Flow

We can help. Spin-outs, as advertised, entail creating a new entity that is separate from your existing company. The advantages of doing so involve creating separate risk thresholds (debt) and rewards (faster growth) for your personal wealth. Targeting and learning about markets which may be complementary to your existing business but without using your existing business name. Tapping into talent (young, technical) which may not otherwise be interested in getting involved with your legacy manufacturing operation.

We have seen spin-outs serve to differentiate production lines. We have also seen manufacturing spin-outs work to help get family business members into the business but without the conflict that comes from exposing your main asset, all while giving the next generation of family business owners freedom to control and learn.


You have a lot of equipment. Your competitors are loading up on robots and automation equipment. You need to compete. We have been there before and competition is difficult. It used to be that the competition simply bought an automated machine set up, now entire factories are automated and connected. Welcome to Industry 4.0. We are looking for manufacturers with established markets that are looking to upgrade equipment and processes especially if it gives them a competitive advantage.

At Capacity

Sometimes business makers need to get over the hump from a lifestyle business to a profitable growing business. Here is an example of a business at capacity which needed investment to grow. A friend of ours was stuck in a chocolate business that had plateuod. He had bootstrapped the company from scratch to slight profitability. He had a store, a decent clientele and he was at capacity. He knew he needed more equipment to take the business to the next level. He also knew that he only had about 5 to 10 years before he would want to sell the company. At the current rate, he would just be selling a job. A $50K to $70K job. Which we all know doesn’t command too much of a multiple on the sales block.

We were able to work with the chocolate maker to identify the equipment he needed to take the company to the next level. We helped buy the automated equipment and get to $500,000 dollars per year of EBITDA. The company ended up selling for a multiple of 5X on top of that due to the “fun” of the market and the potential for future growth. This was a turnaround in value of close to 50X ($2,500,000 vs. $50,000). With modernized equipment and automation we know how quickly companies can grow. The hardest part is creating a brand that can scale.

Bring Outsourced Manufacturing In-house

You have been outsourcing the production of a product and you would like to bring it in-house but don’t have the capital to do so. This happens all the time. Generally, this situation comes up when either your contract manufacturing suppliers aren’t able to keep up with your demand, they are charging too much, they are not good at communicating or quality has wained. We have successfully helped manufacturers buy equipment to set up their own operations in the past. The advantages to bringing manufacturing in house, can be cost savings but it can also be much greater. It enables manufacturers to go after new markets which might complement their existing business. It also allows you to bring more production engineering knowledge in house. Once you see the capabilities of a machine you may have new ideas.

Manufacturing Startup Brainstorming

Making the leap into starting your business with Forward Capital Fund does not require putting it all on the line. To the contrary, we are happy to work with automation engineers on side projects which can help provide a platform for making the leap. We will make machinery investment and help find space so that engineers can build up a clientele before leaving their full-time job.

We Are Not a Charity

Unfortunately, we aren’t a charity. We are similar to a private equity firm in that if we invest, we are typically looking for IRR of 20% or greater on our investment. Before we invest, we like to have a clear path to return for both ourselves and the manufacturer that we are working with. Our fund has investors who are looking for a return. We do have a network of banks, investors, mentors, entrepreneurs and engineers that are ready to help.

We are looking for limited partners interested in gaining access to manufacturing venture capital investments as well. We offer a tight manufacturing network with access to see the current trends and knowledge of where the market is going. We offer quarterly reports of our investments. We offer insight into tomorrows manufacturing leaders and tomorrows manufacturing technologies including automation, sensors, AI, IoT and robotics.