Las Vegas’ Downtown tech scene received a new blow with the recent announcement that Factorli, a manufacturing company that planned to handle small runs for hardware startups, will cease operations.
“This is a challenging time for the Factorli team, but after an analysis of the company’s progress and future capital needs, it has been determined that it would be best to reallocate those resources to other Downtown investments,” reads an announcement posted on the startup’s website Monday morning.
Along with the message came news that Jen McCabe, Factorli’s CEO and an investor for the Downtown Project’s Vegas Tech Fund, would no longer be working with the startup or the fund.
“Jen’s vision for removing complexity from the hardware development industry was ambitious and we look forward to seeing her achieve great things in the future,” the announcement said. McCabe was not available to comment.
The news shocked many in the community, coming after Factorli received media attention from both local and national news outlets, along with $10 million in funding from Tony Hsieh in May. The factory, nestled between auto repair shops on South Commerce Street in the Arts District, already had a small list of clients. The company planned to officially open in January 2015 for the International Consumer Electronics Show and was in the process of hiring new employees when it closed down.
McCabe first ventured into manufacturing when she joined the startup Romotive and began assembling their smartphone-operated toy robot, Romo. After falling in love with the Downtown Project, McCabe decided to stay in Las Vegas when the startup relocated to San Francisco in March 2013. She kept her hand in hardware by managing the Nimbus Portfolio, a branch of the Tech Fund that invests solely in hardware. Over 12 months, she invested around $100,000 in more than 24 companies.
Based on her experience with Romotive and Nimbus, McCabe began formulating the idea for Factorli, she said in a previous interview with Vegas Seven. Unlike software companies, hardware startups are typically more difficult to get off the ground. Founders need a larger influx of cash in the beginning to afford materials to design, manufacture and distribute a product. Startups usually can’t afford to manufacture in the United States, because most large companies won’t take risks on new businesses where growth is slow and the possibility of failure is immense.
After hearing the same problem over and over, McCabe realized that “there’s nothing between a 3D printer and China” where startups can manufacture small runs of their products. So she thought, why not build such a small-scale manufacturing facility in Las Vegas? The land is inexpensive. The tax rate is good for new businesses. Lack of humidity makes it great for storing inventory without damage. It’s close to Los Angeles and Silicon Valley and has easy access to New York through McCarran Airport.
While the concept received widespread support and enthusiasm, Factorli’s future was still uncertain. Manufacturing experts say it can be difficult to maintain quality control in small production runs. Issues that occur on the assembly line can cause a product to malfunction in the hands of a customer, and too many of those instances can bankrupt a startup that lacks the cash flow to provide replacements.
“In manufacturing, equipment and people work best when their work is repeated over and over, which is why larger manufacturers have higher quality and can be more reliable,” says Mike Sarow, who worked for six years in manufacturing at Procter & Gamble and is currently the CEO of hardware startup Kapture. “It would be harder to achieve that on small runs.”
Factorli team members declined to comment on McCabe’s departure or what would happen to clients who already contracted with the company. They instructed anyone with business questions to email them at email@example.com.