Case Presentation: Artaic, LLC
Dr. Ted Acworth, MBA, PhD was introduced by Richard O’Brien, WPI Venture Forum program co-moderator and program chair. Founder and CEO of Artaic, LLC, Acworth started the company in 2007 with a deep appreciation for design and the art of mosaic. A scientist and engineer by trade, as well as an award-winning entrepreneur, Acworth has been developing and commercializing innovative technology for twenty years.
Artaic is developing a unique design and production technology that aims to revolutionize the industry using the technical expertise in ultra-precision metrology systems design.
Mosaic is art made from tiny tiles of materials, typically glass or marble, cut to fit into a mosaic design. Labor makes up 25 to 50 percent of the cost. Glass and marble suppliers are quite limited. The process is complicated, entailing finding the artist, fabricator, shipper, and finally, an installer. Marble can cost about $350 per square foot. Artaic’s solution is a high-speed robotics technology that can produce one square foot in 12 minutes compared to 2.5 hours manually for the competition.
The company’s value proposition is the creation of an innovative mosaic brought to a new level, a new art form that is both more sophisticated and more accessible for consumers. A fast, flexible provider, it offers a full-service solution at client locations, then fabricates and ships the mosaic work. Artaic’s current projects include an 85-square-foot, LED-backlit mosaic as the centerpiece of an Italian restaurant, a high-end residential kitchen with 45 sq. ft. of custom mosaic, and a 500-sq. ft., three-story lobby mosaic that was completed in one week versus five to six months for the competition.
Due to the current capital crunch, Acworth has been able to accomplish things with very scarce resources, for strategic as well as financial reasons. This means in-sourcing, out-sourcing, and deals with partners and customers. Tile manufacturing is expensive in the United States compared with India and China, but outsourcing to those countries can be risky and slow to ship product back. Tile is very heavy, too expensive to air freight, and it is easily broken.
The Boston-based company employs seven people, plus in- and out-sourced consultants and advisors, including five artists for commissioned work. There is a patent pending and several other filings planned for 2009 on the robotic fabrication and computer-aided design they developed. To build the first robot, they collaborated with Elm Electrical, a production equipment, designer and integrator in Westfield, Massachusetts. Elm has the expertise and personnel to be an excellent outsource partner. Acworth said they are truly industrial artists, differentiated by being cheaper and faster, with full service.
The tile market is huge, $70 billion globally, but mostly in solid color tiles and is 70 percent consumer. Artaic’s competition is further up the market pyramid — custom patterns handmade by mosaic artists. This is a $250 million market, with customers in the Middle East, Asia, and Russia consuming the most mosaics.
Distribution is an issue that Acworth sought advice about. To reach the consumer market directly, he would need a showroom in every town in America. Artaic has an OEM deal as an outsourced manufacturer with an existing larger company that already has a distribution partner.
They have a three- to five-year sales plan and three sales strategies: direct to architects and designers, to OEMs and to distributors. Artaic has a certain amount of investment today, but depending upon revenue, growth can be modest or aggressive. They have exit strategies and industry comparables for a sense of what price they can exit, in an IPO or through an acquisition.
Acworth concluded that at the core, Artaic offers a disruptive innovative technology. Not just robots, it is a systems engineering company that can move custom mosaics through the pipeline quickly. They can be a mass customization company with large long- term opportunities as well as practical short-term opportunities.
Panelist Richard Gilles asked the first question. An entrepreneur, designer and a local town official with a focus on sustainability and market transformation, Gilles inquired about operating in the current economic environment. In response, Acworth said they want to make sure they are still around in a year, so he wants to raise money and grow his business. Acworth is positioning Artaic as an affordable luxury brand, and ready to deliver its product extremely quickly.
Panelist and keynote speaker Vaibhav Nalwaya wanted to know if the business is scalable. Wouldn’t it be possible for someone to copy this process? Acworth had reviewed this possibility during his due diligence. The technology is not easy; it is not cutting-edge science but it is sophisticated engineering. In addition, Acworth has aggressive IP positioning.
Panelist Brigid Oliveri Siegel, partner, Polachi & Company, Inc., and executive board member for the WPI Venture Forum, addressed Acworth’s interest in finding a VP of sales. She advised him to focus on which is most important – experience with a disruptive technology or someone who understands the market in distribution and in architectural design.
The panelists concluded that investors want scalability. They recommended Acworth outsource sales and marketing and take in orders as a mass manufacturer, but concentrate on selling to businesses rather than consumers, for the growth in a timeframe that venture capitalists seek.
