Colorado Innovates in Manufacturing

Tim Heaton has a message for Colorado manufacturers resistant to change.

“If you’re not advancing in today’s day and age, you’re going out of business,” said Heaton, president of the Colorado Advanced Manufacturing Alliance (CAMA).

CAMA, which formed in 2012 as Colorado’s first statewide manufacturing association, is part of a push by industry and state government to boost the manufacturing base. Gov. John Hickenlooper is leading the way with several programs designed to award innovation and entrepreneurship in manufacturing.

“We’ve gone through that period where people didn’t even think manufacturing existed in Colorado to the point now where I’ve got legislators fighting over who gets to introduce a pro-manufacturing bill,” Heaton said.

According to a 2011 report, Colorado’s 6,000 manufacturing firms employ more than 120,000 people and are responsible for $16.3 billion in annual economic input. The state has identified seven advanced industries it wants to develop: aerospace, advanced manufacturing, bioscience, electronics, energy and natural resources, technology and information and infrastructure engineering.

Among the initiatives, public and private:

  • The Advanced Industries Accelerator Act, which provides state grants of up to $500,000 for funding for proof of concept R&D, early stage capital and retention and infrastructure.
  • CAMA’s Make-It-Now campaign, an effort to raise awareness of Colorado manufacturing, increase and train the workforce and boost innovation.
  • The Manufacturing Career Pathways Act and Colorado Helps Advanced Manufacturing Program, which call on community colleges to better prepare students for manufacturing careers.
  • The Colorado School of Mines and University of Colorado Boulder will participate in new Defense Department research institutes in order to expand public-private manufacturing partnerships.
     

As of now only about 200 of Colorado’s 6,000 manufacturing firms belong to CAMA. Heaton said they tend to be the more forward-thinking ones, adding that the state has its share of manufacturers who don’t want to change.

“They’re just going to keep chugging away until they’re forced to do something different. I do think those businesses will face a day when they have to make a decision. Are they going to embrace innovation, are they going to come forward and advance to 21st century manufacturing, or will they just go out of business?,” he said. 

Below are three Colorado manufacturers who have embraced innovation.

Modular Robotics

Eric Schweikardt has a low opinion of his own business.

“The toy industry sucks,” he said. “If we took our stuff and licensed it to one of the Big Three (toymakers), they would turn it into some bullshit, Transformers-branded, lowest common denominator, keep-your-kids-stupid, don’t-teach-them-anything-new, don’t-question-gender-stereotypes products.”

Schweikardt’s “stuff” is Cubelets and Moss, modular robots and robotics kits for children. And his take on the toy industry is typical of the unconventional approach taken by his company, Modular Robotics.

Boulder-based Modular Robotics is a manufacturer in a city known for software; a DIY operation in an industry where most manufacturing is done overseas; and a social crusader in a bottom-line field.

Schweikardt and co-founder Mark Gross are accidental manufacturers. Schweikardt was earning his Ph.D. at Carnegie Mellon when he created Cubelets, small magnetic blocks equipped with sensors and motors that can be assembled into simple, functioning forms. Gross was his faculty adviser.

Schweikardt was working as an architect, but hated it. Friends kept asking him to make more Cubelets, so he and Gross went into business. After landing their first Small Business Innovation Research grant, in 2009 they decided to launch in Boulder, where they’d both lived before.

They were completely unaware of Boulder’s rep as a startup hotspot, Schweikardt said. “I moved here because I can ski every day and it’s sunny 300 days a year.”

It was a fortuitous move. When they realized they could not bootstrap to the necessary funding level, they plugged into Boulder’s entrepreneurial network. The Foundry Group invested $3 million in Series A money and Managing Director Brad Feld is now an advisor.

Modular Robotics employees 45 people and, this summer, will move to a larger space for the fourth time. It will do $10 million in revenue this year, Schweikardt said.

Cubelets and their next-generation successors, Moss, are designed, assembled, tested, packaged and shipped in Boulder, a practice that Schweikardt said gives the company more control and is, in some cases, less expensive than having the work done in China.

Being in Boulder has paid off in other ways as well. The lifestyle makes it easy to attract and retain talented workers and Schweikardt can ask for help on the Foundry Group’s email list, advice which the first-time entrepreneur said has been invaluable.

Boulder’s “save the world” ethos is very much present in Schweikardt’s mission for his robots, which he thinks can prepare children to better live in and understand a complex world.

“I think we can get smarter as a culture by embracing a more nuanced understanding of the world and I think the best way to do that is with kids because I think adults are a little too stuck in their ways while kids are malleable,” he said. “And I think the best way to do that with kids is by giving them toys that let them build their own little complex systems.”

Lightning Hybrids

Author Neil Gaiman wrote, “You will learn more from a glorious failure than ever you will from something that you never finished.”

The Colorado Innovation Network adopted the phrase for a statewide contest for entrepreneurs, “Glorious Failure: In Search of Success Innovation Challenge.” Second place last year went to Lightning Hybrids, a startup in Loveland.

The “failure” came when President Tim Reeser and partner Dan Johnson abandoned their efforts to build a 100 mpg car to compete in the Automotive X Prize challenge. They built a hydraulic prototype, but quit the race in 2009 when it got too expensive.

What they did next is the “glory.”

They pivoted to work on their hydraulic hybrid technology, which captures energy normally dissipated as heat during braking. Their system captures energy by pumping liquid into a high-pressure tank and then uses that energy to power the vehicle. It improves mileage, lowers emissions and pays for itself in three years, Reeser said.

The kit, now in its fourth iteration, is designed for fleet vehicles, such as shuttle buses and delivery vans, and can be put on new vehicles or retrofitted. It’s being tested by a number of potential customers, including Colorado State University and the city of Loveland.

His original projection of entering the market in two years was wildly optimistic, but Reeser said the company should gain traction this year as customers evaluate test results. The number of employees will increase to 40 from 22 this year, he said. The founders launched with their own money, and have raised a total of $9 million. They are seeking another $5 million.

Lightning Hybrids had to overcome a number of obstacles, including investors who didn’t think manufacturing could work here. “The majority of the investors we talked to said anybody who’s interested in manufacturing in the U.S. is dumb, take it to China,” he said.

Perhaps because of the decline in domestic manufacturing, it was hard to find qualified fabricators, welders and others experienced in high-skill manufacturing, Reeser said, adding that the company is working with local community colleges on job training.

Access to Colorado State University in nearby Fort Collins, inexpensive real estate and a pool of young, talented employees willing to work for a little less in order to live a Colorado lifestyle are pluses of doing business here, Reeser said, adding, “We haven’t had any trouble attracting people to work in Colorado.”

Steelhead Composites

Manufacturing startups are uncommon; to have two come out of the same idea is even more so. But that’s what happened with Lightning Hybrids and Steelhead Composites.

When Lightning was raising Series A money, lead investor 9th Street Investments noticed a flaw in the supply chain. The supplier of its accumulators, vessels that hold liquids and gases, was missing deadlines and falling short of specs.

As part of its investment, 9th Street, led by Andrew Coors (part of the brewing family, but not in the beer business), stipulated that Lightning start another company to manufacture the accumulators. Then 9th Street failed to raise enough money for a second fund and Coors was looking for something else to do.

“I developed a passion for the technology. So when the opportunity came to take the helm, I jumped at it,” said Coors, who left 9th Street and formed Steelhead Composites in October 2012.

The company, based in Golden, makes lightweight aluminum-and-carbon fiber vessels that can be used to store liquids and gases. In addition to being in Lightning’s hydraulic hybrids kits, they are used in fuel cell and natural gas vehicles.

Steelhead, which now employs 14, expects to add six more by the end of the year. It has customers in addition to Lightning and should be profitable in the second quarter of next year, Coors said.

For Coors, leaving finance and starting the company was a chance to scratch an itch. “My work to that point was all bits and bytes. I wanted a job where I could actually produce something, make widgets and sell widgets.”

 He has no regrets: “I’m loving every day of it. Nothing is more satisfying than starting a manufacturing company.”

COLORADO MANUFACTURING

  • 5,300 businesses (2013)
  • 133,500 employees (2013)
  • $20 billion Gross Regional Product (7.3% of state total GRP) (2012)

Source: Colorado Office of Economic Development and International Trade, 2012

DENVER MANUFACTURING

  • 712 businesses
  • 11,000 employees

Source: Colorado Dept. Of Labor

TOP MANUFACTURING SECTORS/DENVER (by employees)

  1. Food
  2. Fabricated metal products
  3. Printing
  4. Beverage and tobacco products
  5. Miscellaneous

Source: Colorado Dept. of Labor


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