We use our older machines to make parts for our new machines, says Kaushik Mudda, the co-founder and CEO of Ethereal Machines — in a true diamond-cut-diamond tradition.
In a lot of ways, when it comes to hardware, the proof is in the pudding. Last year, Ethereal won the ‘Best of Innovation’ award in the 3D printing category at the Consumer Electronics Show (CES), Las Vegas. The CES website called Ethereal’s ‘Halo’ as “the world’s first consumer-oriented 5-axis FDM (fused deposition modelling) 3D printer and 5-axis computer numerical control (CNC) router which is designed to bring about a metamorphosis to the world of manufacturing and kick-off the concept of hybrid manufacturing.”
Ethereal has recently raised USD 1 million in pre-Series A funding led by Blume Ventures. Powered by home-grown technology, Ethereal Machines is blazing a new trail in the hardware space in India.
Mudda sat down with The Passage to talk about the upcoming product releases, expansion plans and the struggles of building a hardware company.
On a side note, he has written a book about the 63 rejections he had faced before making his first sale.
The Passage: What’s the origin story of Ethereal Machines?
Kaushik Mudda: Navin Jain (co-founder) and I have graduated in Electronics and Communications from RV College of Engineering, Bangalore. At college, we used to take up small projects and go beyond the call of curriculum.
From the second year, we started making robotic arms, hovercrafts, etc. However, the parts we used were very crude. We understood we needed a CNC router to precisely cut out parts to improve the performance of these toys. But CNC machines cost around Rs 8-10 lakhs. Even if you could afford it, these machines were huge. When we approached people in this business, they either threw us out or quoted obnoxious prices.
That’s when we had the idea to make CNC machines ourselves. I had used my personal savings to build a small machine in 2014 at a friend’s flat. The idea was to build a cost-effective machine for our own use. It turned out that we were able to match up to industrial grade precision under Rs 1 lakh.
A lot of people were facing the same problems we did. We knew we had something in our hand. Bith of us took up a small garage. And on the basis of this machine, we started contacting people. We got rejected 63 times before closing the first sale.
The Passage: Give us a peek into the business side of things.
Kaushik Mudda: We are tightlipped about our core business numbers. Our enquiry pipeline has been growing 45-50% while the distributor franchise has grown by 23%. We get five to six enquiries a week for our machines.
We have never sold a machine at a loss from day one.
We are looking for a higher reach. Also, widening the applications of machines will help us capture the market. Lots of applications have been brought to us by clients. We need to double down on that.
The Passage: Walk us through the deep tech component in Ethereal.
Kaushik Mudda: Ethereal is one of the finest examples of deep tech the country has seen. At the heart of it, deep tech is the ability to string together strong expertise in multiple disciplines such as machine design, machine analysis, electronic design, electronic analysis, coding, etc., and making them work. That’s exactly what the Ethereal team is doing here.
The Passage: How do you pitch Ethereal to investors?
Kaushik Mudda: Only a few public-listed companies in the world have managed to do what we are doing here. In the process, we have been met with this huge wall of resistance.
Ethereal has been built along the lines of SpaceX. Boeing and Lockheed Martin used to make extremely costly rockets. Musk took advantage of the latest advancements in electronics and manufacturing tech to build rockets. His exact words were, “these guys are making Ferrari for every launch where a Honda Accord could have done the job”. We have done something similar.
The kinds of companies we take on have been around for the longest of times. We were able to bring down the cost of these machines using advancements in electronics, machine design and cutting-edge manufacturing tech.
When SpaceX started, Musk had only three or four chances to get it right. He managed to do the impossible in the fourth attempt. Likewise, we were about to crack. But we pulled through.
The Passage: Why did it take five years to raise pre-Series A funding?
Kaushik Mudda: Hardware is way more difficult to pull off than software. So much goes into making a machine. Ethereal is a combination of hardware, software and high-end electronics, informed by a good amount of maths. Putting all these together is extremely difficult. Moreover, the ecosystem is not as supportive. Exactly why you don’t see a lot of hardware stories in India.
Hardware takes time. But investors want immediate impact. That’s why India has seen a boom of consumer start-ups. But we are confident of changing the Indian ecosystem.
Back when we were starting out, we sold a machine to Lalbhai Group. Mohal Lalbhai got interested in what we were doing and he invested some money in Ethereal. We were also approached by a couple of investors in the beginning, but we were not keen on taking up the offers as Ethereal was selling fast and was profitable at unit economics level.
We wanted to position Ethereal as a tech company. For that, we had to upgrade our tech from 3 axis to 5 axis. The problems we have faced in 3 axis — access, size and cost — same problems exist for 5 axis, but at a magnified scale. We decided to take a crack at 5 axis. It took us two years to graduate from 3 axis to 5 axis. That’s where we spent the most amount of time. We stopped selling the 3 axis machines and went underground at the end of 2016.
We were doing 16-18 hours per day to perfect the tech and the hardware side of the 5 axis machines.
We took a big risk. We don’t want to just build a business. We want to build a tech company. We want to make the most advanced manufacturing tech in the planet — a place where the best of the tinkerers from across the world want to come and work.
The Passage: How are you going to use your funds?
Kaushik Mudda: A good amount of fund is going into R&D and iteration of Pentagram. Some money will go into establishing our market presence. We are also going to dive deep into applications. As we speak, the application team is breaking open a motorbike to see what parts can be cut in our machines. We are exploring verticals to find applications for our machines. We are also fine tuning Halo. We have beefed up the Halo and now it can cut aluminium. We also want to build a good distributor network across India, find more use cases and application partners.
The Passage: Are you looking to raise more money?
Kaushik Mudda: More than the money aspect, we want investors who we want to work with. I met Arpit Agarwal, principal and part of the investment team at Blume Ventures, in November 2017. Our deal happened in December 2018. For a year, we kept in touch. I didn’t even think about raising money at the time. I loved the interactions with him so much we thought how we could work together. And then we went for it.
Blume turned out to be the best guys one can ask for. We are six months into the marriage now. The kind of support I get from them is stellar. Even before Blume was on board, when I faced difficulties, Arpit would still help me out.
The Passage: We have come across a couple of bad reviews on Glassdoor. Can you take us through Ethereal’s hiring strategy and work culture?
Kaushik Mudda: Everybody makes bad decisions in hiring. We have learnt a lot of lessons from the process. We have made mistakes in picking people who didn’t want to dedicate themselves to the cause of making path breaking manufacturing tech in India. We hired people who saw Ethereal as a stopgap to take their career forward. When you have that kind of mind-set, you are not going to work as hard as other engineers who believe in the cause. We have a lot of old timers here.
Prasanna is the first guy I hired in 2015 and he is still with me. He is Ethereal’s head of purchase today.
We had to take strict calls with some people, which led to some bad reviews. Now, after the first round of interviews, we ask the candidates to read the reviews about us and discuss the areas they find problematic. We have an open hiring policy.
It’s okay if the candidate doesn’t have the right skill sets. We have taken people who had absolutely no skills. Honestly, we knew nothing when we started out too. We are okay with it as long as you are persistent with the cause of making good machines.
Ethereal never had a tier 1 hire up until now. We find somebody with the same skill set from a tier 2 and tier 3, who are a bit hungrier than a tier 1 candidate.
We get tons of applications. I personally go through each one of them. Ethereal is always on the lookout for tinkerers. If you have broken anything apart and put it back together, we are going to make you an offer. These are small parts of our hiring process we have built into our culture.
The Passage: Looking back, what’s your learning curve like?
Kaushik Mudda: I will try to give you a phase-wise breakup.
2014-15 was the year of getting beaten and still finding the strength to get back on feet. We got rejected many times. Our spirit was tested. 2016-17 was mostly about building a team.
At the end of 2016, we raised a small amount of investment. Around the same time, we stopped the production of 3 axis machines and started focusing our energy to crack 5 axis CNC machines.
We are trying to build a legacy – a company that will outlast us.
The Passage: What’s next? How do you plan to up your game?
Kaushik Mudda: Our machines are capable of working only in non-ferrous material. We are releasing a machine next quarter which can do materials like steel and titanium. At present, our entire focus is on subtractive small machines.
Ethereal Halo is quite a superstar. With Halo, we even managed to get attention from people outside the community. Right now, we are in the process of signing up distributors. Lots of efforts go into our machine designs.
Pentagram is getting readied for release. It’s going to take the world by storm. The price is going to be extremely competitive and the precision will match global standards.
On the business side, we just have one guy. Our machines speak for themselves. The entire team is tech and design.
About 30% of our enquiries come from abroad. Of late, I got an enquiry from Guadalajura, Mexico.
The Passage: Do you have plans to do an IPO?
Kaushik Mudda: That’s the dream. Even before I became an engineer, I had the dream of seeing my own ticker running, which I can monitor from my desktop. If IPO doesn’t happen in a decade, I will make it happen in a decade and a half. But I will make it happen.
The Passage: What’s the biggest roadblock you have faced while growing?
Kaushik Mudda: The perception. Our market finds it hard to accept that an Indian company is able to crack the code.
The Passage: What’s your USP?
Kaushik Mudda: We have been able to crack something nobody has been able to do in the local market. Price point is one of our biggest advantages. Our top three focus areas are jewellery, medicine and automotive.
The Passage: How do you build defensibility?
Kaushik Mudda: We have already built our defensibility. When we went to CAS we could only afford a 10x10 stall. We were the only Indian guys in the lane. You might be able to copy our mechanical design, but you can’t copy the heart of it. Even if you do, it’s going to take a lot of time. It’s not easy to replicate what we have done.