Why most AM startups fail to sell

AM Survivor #5

The sale of a company by its founder can take many forms. Sometimes the founder wants to sell, sometimes they have to, and sometimes they sell even though they neither wanted to nor planned to.

One common element is always the valuation of the company. And in 99 out of 100 cases, there is a deep discrepancy between what the buyer wants to pay and what the founder expects to receive.

Most often, the sale does not happen—which usually ends in a life-altering catastrophe for the founder.

The history of the AM industry is full of cases where founders missed the right moment to sell their shares, only to later go bankrupt or drift on for years as a zombie company.

However, the reason is not greed, but rather a overvaluation of their own contribution that is detached from economic reality, and an inflated perception of the company's worth.

If someone has spent 5–7–10 of the best years of their life building a startup in the AM sector, they expect to get millions (in any currency) for it. And they take it personally when they receive offers only in the hundreds or even tens of thousands.

Or when someone offers a symbolic €1, but in return agrees to take on all the debt the founder is too ashamed to talk about.

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IMPORTANT: I’m not referring here to the rare cases where companies were sold at absurdly inflated valuations—symbols of which include MakerBot Industries, acquired by Stratasys in 2013, or Avi Reichental’s reckless shopping spree during his time as CEO of 3D Systems in the late 2000s and early 2010s.

Those times are gone for good, even if Desktop Metal and Markforged tried to emulate them in the early 2020s.

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Today, acquisitions are rare, and when they happen, it’s usually in the form of fire sales. Companies acquire others at extremely low prices—often buying corpses. They acquire either the staff, or the customers, or some piece of hardware.

Few people are interested in companies themselves. Those doing well are not for sale and have prohibitive valuations. Those that would like to sell have unrealistic financial expectations.

In the latter case, it usually looks like this:

• The founder has sacrificed most of their life to building the company, at the cost of family, friends, hobbies;

• The company gains some degree of recognition in the market, wins awards, and the founder is featured in media interviews; the company and its products are reviewed and discussed on social media;

• Over the years, the founder meets many people, also outside the AM industry; they become a businessperson others like to meet and even boast about knowing;

• Their social status improves compared to before founding the company;

• They have no alternative life plan beyond running the AM company.

But the situation in the company deteriorates—financial problems arise, followed by growing liabilities and debts.

Taxes, fees, insurance, or an impatient early-stage investor asking about an exit. A few hundred EUR/USD would come in handy—just enough to catch a breath.

So the founder starts looking for a new investor but quickly realizes that:

• The 3D printing investment market is over;

• And beyond that, there’s no appetite for investing in debt-laden companies with an existing private shareholder.

So one option remains—selling shares to a strategic (industry) investor—either a competitor, or a company that uses AM enough that it might integrate the founder’s solutions.

The founder builds a plan with two scenarios:

1. Scenario A – sell everything for a high enough amount to live off for several years and plan a new future.

2. Scenario B – sell part of the shares to cover all liabilities and continue working in the company—even as a minority shareholder.

In Scenario A, the founder asks for several million. In Scenario B, about 1 million.

Unfortunately, the potential investor requests financial documents and conducts due diligence, which reveals that... the company isn’t even worth 100,000. In fact, it’s probably better not to acquire it at all.

The founder refuses to hear it, taking the response personally—as an insult. They mock the offer and keep searching. But the situation repeats itself.

Soon Scenario C emerges—sell everything to pay off the debt and start over in a different industry, perhaps employed by someone else.

But it turns out there are no takers for that either.

The founder’s company may have some value—but only to them. It has no marketable potential. The diplomas, the media interviews, the years of developed IP and product offerings—none of it matters.

And in truth, no one is interested in acquiring a company just to rescue a founder from the financial trouble they’ve landed in.

The story ends in failure. The founder either shuts down the company and spends the next few years paying off debts while doing something else (or working for someone else), or drags the company into obscurity—transforming it into a zombie business.

The lesson here is that not every business is a product that can be sold. Most businesses are simply the work of a group of people.

They hold value only to those people. And even if a buyer does appear—they evaluate it completely differently than the founder would want.