Not that long ago, two people funded and built a resin production startup by trial and error, subsequently catching the attention of a large investor. It all started with UV curing nail polish being poured into a 3D printer.
Nowadays, HARZ Labs supplies tens of tons of resins to 70 countries around the world annually and plans to double it in a year. Back in 2017, it was a small startup with only two people on the team — Andrey Adamov and Aleksandr Yurasov. They were enthusiastic about experimenting in the field of 3D printing and were looking for funding.
In this article, the CEO and the CTO of HARZ Labs take a stroll down the memory lane and talk about the mistakes they made, how investors reacted to their ideas, and the benefits of partnering up with 3D.ru, who’s currently holding an open online 3D printing event.
It all started with quitting a job, nail polish and bad experience with body shops.
First startup mistakes
Andrey Adamov, the CEO of HARZ Labs, said: “By the time I was 33, I realized I can’t work for someone else anymore. A had a bit of money set aside, so I decided to quit my job and return to old projects. Namely, to the synthesis of pharmaceuticals, paints and varnishes — I already had experience in these fields thanks to my chemistry degree.
“Like many startup founders, I believed that offering the market something new was enough to succeed quickly. In 2014, production of UV curing materials was that innovation for Russia.”
At that point in time, Adamov was still a long way from creating HARZ Labs. What he was doing was basically a hobby, there was no business experience or a business plan.
“Even though I was doing it because I found it interesting, I had a plan. The only thing is, it was a plan for self-funded production and subsequent sales on the domestic market, not for attracting investments. This was the main mistake, since the domestic market was very narrow. I had to make more ambitious plans and go worldwide, but I had no experience: I was a scientist, not a businessman.”
The first field he chose was car paint. The technology Adamov created could help completely paint a car within 30 minutes, which was a global innovation at the time. It sounded good on paper, but the startup was immediately faced with the lack of understanding on the body shop side. No one wanted to invest in something new when everything worked fine just the way it was.
Going to the local businesses turned out to be pointless, chain body shops had to be involved for the plan to become reality. It was impossible to convince the people in small body shops to use a new resin. Everything came down to the price that was five times higher than the market average due how innovative the material was. Despite being expensive, it had a lot of advantages, but the specialists needed to enroll in training programs, universities, and experience a paradigm shift within themselves in order to explore them. Pulling all this off as a small startup was out of the question.
Body shops weren’t the only field Adamov attempted to approach.
There were several formulations of UV curing materials developed in the first six months, which gradually started getting popular among nail techs. Knowing that, Adamov participated in the Beauty Expo. In addition to new experience, he got product feedback and it became clear that the nail polishes were a success. Although, the unfamiliar market had its own quirks.
Adamov said, “Nail techs are an interesting group of people. It’s either big companies or self-employed people, each dreaming of their own line of products. This is a common practice for Chinese brands that design custom bottles and labels for their customers. The demand was there, but the scale was very small.”
The most important thing about the beauty industry is that marketing matters a lot more than the product itself. So, having a brand name and investments is much more important than the nail polish. In terms of prime cost, the nail polish itself can easily be cheaper than the bottle it comes in, but customers aren’t paying just for the product, they’re paying for the process, the brand, the setting and the marketing.
In other words, it doesn’t matter how good the product is most of the time — no one will use it if you don’t invest in promoting it. This was another thing Adamov didn’t take into account.
As a result, Adamov made a line of nail polishes and gave them out to friends without ever entering the market. Besides, there were no marketing or PR people on the team and he didn’t have any investments secured.
That journey took two years.
The 3D printing experiment that changed everything
In 2016, 3D printing was rapidly becoming more and more common, and so were the UV curing printing materials — the same technology Adamov used for the nail polish. When the liquid is exposed to sunlight or UV rays, it instantly hardens. You can make a material so reactive it can only be stored in a black, completely opaque jar.
Around the same time, Adamov got his hands on his first 3D printer. Out of curiosity, he put his own nail polish into it and it worked: the model got printed. It was decided to continue the experiments.
Printing became more affordable over time, and you could buy a good printer for under $1500.
Adamov said, “I bought a few. There was no clear goal at first, I was just experimenting. At some point I noticed a shortage of consumables for printers and finally decided to draw up a business plan.
“I shut down my previous projects and channeled it all into printing. I took out a loan and rented a lab, spending about $70,000 in total. Looking back, there was a much cheaper way to test my theory — I should’ve gotten an investor. Regardless, I approached this project more seriously than I did the nail polish and body shops. I started visiting investment clubs, participating in competitions, and trying to get in touch with as many innovative establishments as I could.”
Unfortunately, non-core funds and investors weren’t interested in the project. Nobody wanted to invest in a one-person startup that had no other investments. It was a vicious circle.
It became clear that growing the project alone would be too difficult
New addition to the team
Aleksandr Yurasov, CTO, HARZ Labs, said, “We met in 2017 at one of those startup parties where you could check out other people’s projects and get feedback on your own.
“Back then, I was looking for a way to apply myself in terms of skills, values and money while getting a degree in international journalism to add to the two I already had in physics and education. Not long before the event, I set a goal for myself — to assemble a plastic prototype of a certain electronic device. I ordered the materials from one company and got an invoice so big it made me take a closer look at the resin market. This was a week before I met Andrey.”
Adamov was doing a presentation on resins and 3D printing and Yurasov was in the audience. They met later to discuss their possible partnership and clicked right away. Yurasov entered the startup on pure intellectual value; he didn’t ask for money, but he didn’t invest anything either.
They worked on sheer enthusiasm for almost a year. Adamov was more involved in development, and Yurasov set up printers and figured out laser circuits, stepper motors, and so on. Of course, the split of responsibilities was nominal — when there are only two people in a startup, everyone does a bit of everything.
They decided to fully exclude the low-cost segment and focus on a specific field — dentistry. The goal became clearer: they weren’t aiming at mass production because it would be difficult to compete with China. Instead, they chose specialized production where the product’s performance was more important than its price.
Adamov: “We had hope, but investors just laughed when I started talking about dentistry. They asked questions about the size of our company, the patents, and production. When they found out that it was just us two, the conversation ended.”
The guys made a universal resin for dentists and started going to small regional trade shows. As they gained more experience in the field, they found out about specialized dentist conferences where word of mouth traveled quickly. Around the same time, they became active on social media. People from different countries started noticing the startup, and the turnover grew.
Yurasov: “All the first sales were random. The recurring ones started with one dentist who ordered resins for surgical templates. We used odorless, biocompatible raw materials; he believed in us and paid in advance. We made several versions that weren’t up to par, but it worked out well the fourth time around, if I remember correctly. Today, this product is the only one that has remained unchanged.
“HARZ Labs now sells 80% of its products to dentists.”
At first, the duo only had enough money to cover the costs of the office and some equipment. They weren’t getting any money themselves, so the search for investments went on. They didn’t even have financial statements, just the product and customer reviews.
This was the state of things when they did their first project for 3D.ru, one of the largest 3D printing service companies in the CIS.
Securing the investment, first tests, and the most expensive ad at the expo
Among other things, 3D.ru uses resins in printers that consume tens of kilograms of material per day. The materials are very expensive, a liter of those can cost over $1000 with shipping. The startup came to talk to them about that exact type of resins.
They agreed to do the testing on a machine that consumes 20 kg of materials per day and costs over $600,000, so the main goal was not to break the printer.
Yurasov: “We took notes and made a similar product that was slightly inferior in performance to its predecessor but got the job done anyway. The main thing was, it could be used to print. We mixed it using a bucket, a drill, and the simplest tools you can buy at a hardware store.”
Adamov: “After the first test, another 200 kg of the provided material was consumed in a week. Our potential investors from 3D.ru were nice enough to pay for everything. As soon as our ability to successfully produce resins became obvious, they set up a meeting and offered to take our company to the next level. We started contract negotiations.”
They signed an NDA and agreed on a 50/50 partnership. HARZ Labs invested knowledge, and 3D.ru invested money and experience.
The first large chunk of investments went into setting up the production. Prior to signing the contract, the startup had only a 40 square meter office, now they were starting to build their own lab and purchase equipment.
Yurasov: “We had an office at a technology park. For various reasons, it was difficult to produce chemicals there, so we did it at night. That’s why we invested in a production space as soon as we got the money.”
It was no longer just a hobby, and the guys started to approach their work more seriously. With the support of 3D.ru, they hired a team of professionals to manage the company. The team spent six months building an operational framework and drawing up a plan for the next three years.
With that, the product was ready for large-scale marketing.
What happened next
Adamov: “In our first year, we went to Formnext, the biggest 3D printing expo held in Germany. We made a splash because we invested more money in marketing than in the expo itself. We rented a 12-meter stele in front of the entrance — the most expensive ad space. On the very first day, we were approached by people from one of the largest IT companies in the world. They had always bought this space before, and said they were very surprised. The marketing strategy totally worked, our name was on a lot of lips.”
Word of mouth started spreading, and product growth surpassed all expectations. Besides, the global resin market is growing by about 20% per year, and by 100% in the Russian segment.
Adamov: “We send more free samples of the product today than we used to sell in a month when we started — up to 50 kg.”
The team managed to avoid the problems that rapid growth usually entails because they had secured investments and took care of production capabilities, which are now ahead of the company’s needs by about two years.
And, naturally, they started recruiting new people. First, they hired employees for production — they were directly involved in mixing — then scientists and supporting staff.
Now the company has more than 20 specialists, but the staff shortage is still palpable. They experienced a serious spike in growth regardless of losing two month of sales in 2020 due to the lockdown: there were problems with remote work, and dentists didn’t have any patients.
Adamov: “The plan is to grow by 100% a year. We feel very comfortable despite the competition. While someone is releasing a product, we already have it certified. For instance, we’re the only company with a fully certified line of dental products in Russia.
“Individual customers from other countries buy resins for their needs as well. Right now, we’re working on getting European and American certification, and we expect to become one of the leading companies worldwide as soon as it’s done.”
Yurasov: “We’re also advancing in medicine in completely different directions. Among other things, we’re currently working on arthroplasty of the knee hip joint. It requires special templates — we don’t sell those yet, since they have to get certified first, but people are already applying for prototyping. We’ve already printed ears, noses, jaw joints and other surgical templates.”
Also, HARZ Labs is entering new markets for industrial machines with a load capacity of more than 200 liters and desktop printers with engineering materials.
Word of advice for the startups
HARZ Labs: “If you have a product, become more visible and sell it. If you have ideas, test them and communicate with people. If the idea is good, it’s not difficult to evaluate it and make a prototype. We spent quite a lot of our own money and time on this but we could’ve done it much faster, had we turned for help to a large specialized company with experience earlier.”
For those who want to test their chances, 3D.ru is currently holding an open online 3D printing event for the entire community with the opportunity to receive funding of up to $1,000,000.
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