Adafruit interviews Dan Rasure, Managing Partner TechShop 2.0 –
ADAFRUIT: So what is your title at TechShop 2.0?
DAN RASURE: As of right now I’m the managing partner.
Managing partner, OK. And then when did you start? When did you become the managing partner of TechShop 2.0?
So we started — this is the new entity we formed to buy the assets of TechShop. I had been following TechShop for most of the last decade. I had just got back to my hotel on a Thursday night, and I flipped open my iPad or computer and saw the notice. I sent a couple texts and emails to a couple contacts that I had at TechShop, and from that point, got a call back from Robert, and then Dan Woods. And then I met with the board. Then I flew to San Jose. That was all two and half weeks ago. And made an offer. They made the notice on Wednesday and I made an offer on Sunday night. Then it took us about a week and a half to get some agreements put together so we could proceed.
That’s cool. That moved fast. And then for the company location, is it going to be a Minnesota LLC, a California LLC? What state will it be based out of?
So as of right now, I have it based out of Kansas. But I’m still evaluating that. Obviously they did have 10 LLCs; still looking at those LLC locations, where they’re at. I’m very familiar with Kansas law, it’s almost identical to Delaware. But it’s in Kansas instead instead of Delaware. So that’s why we did that.
The other aspect is I’m looking at potentially relocating to Austin, at least temporarily, while we get things going, but looking at all the options. I’m very much a manager by walking around, so I want to be in the shops every single week.
What is your vision of the maker movement? What do you see the maker movement as it is now and what it could be?
So I see that TechShop served three very different but important segments. You had the hobbyists, the small business to corporate — and that’s obviously a very big differentiation between those or a big group, but similar characteristics — and then the education side, the STEM, the STEAM. And I believe that all of them have their place and they’re all extremely important. So I’m looking for ways within the shops to keep them together when need be, but also be able to give them their space.
One thing that I’ve talked to about members is that we absolutely love the STEM classes, but we also have to get our own work done, too. So looking for — you know, sometimes you just have to create a little bit of division in order to create a great environment for both parties.
Then on the entrepreneurship side, the small business, I believe that TechShop was a great place for companies to start. But there’s no reason for them to leave once they get a little bit bigger, because oftentimes they still don’t have the funds to buy the equipment that they have access to at TechShop. So it’s part of what I’ve already talked to about with Brooklyn, those other locations, is: Can we get more space available so those small businesses can continue to grow, continue to use the equipment within TechShop? And many times in order to support their production, it does require more machines. Where that comes back to the hobbyists is that the more machines that we can have, the more we can service the hobbyists and provide services that would otherwise not be available, like TechShop has for years that they’ve been in business already, but continuing to expand that. The other part is I believe that the more entrepreneurship and small business you have within the facilities, the more ideas get flowing, and kind of that flywheel effect.
It almost sounds like the movement towards like the HACKcelerator things where it’s a place where people are taking their ideas, building them there, maybe even shipping them from there?
Absolutely. But at the same time you don’t have to. If you’re just that hobbyist, you can still feel very welcome there. That’s my goal, that it can be something to very distinctive groups and support those groups very effectively.
As far as the things that TechShop 1.0 did, things that worked out, things that didn’t work, what things are you changing? What could they have done different or what are you definitely going to do different to not end up as TechShop 2.0 bankrupt for TechShop 3.0 to buy in or something?
I think a big aspect is corporate spending, that corporate spending at times was very excessive in my mind. And with that, it didn’t leave enough money to repair items, the paper stacked, and really grow the business.
Corporate spending as far as like –?
— they still only had 10 locations.
What’s an example of corporate spending so we can explain this to maybe a non-financial audience?
Significant corporate salaries. I’m a big believer in social media, but a marketing department that had an Instagram page but never did posts.
So basically people and marketing?
I believe a lot of the accounting expenses — I think that these were still relatively simple shops. But they incurred massive amounts of accounting overhead. At the end of the day they had $16 million in revenue and had a peak of upwards of $5 million in corporate overhead. That just doesn’t work if you want to stay in business.
Yeah, we run a venture-free, loan-free USA manufacturing factory in New York. And we send out our emails to the entire company of 150 people, hey, we made more than we spent. Turns out that’s a pretty good metric?
It is. And it’s simplicity. And sometimes simple is very good. So I think the one part about a makerspace is that where it grew up from the hobbyist side, and at times they lacked the production aspects, the equipment rental aspects. Because I grew up in the equipment rental business, and I believe that a lot of the aspects of TechShop are equipment rentals that never leaves. It’s about equipment utilization. It’s also about production and scheduling and merging those two items together. And when you do it well, I believe you have very happy members. When you don’t, you have five people waiting on one laser…getting ROI [“Return On Investment”] about it. And I think when you’re looking at items from that aspect, it just drives you to some more creative thinking. It drives your marketing. And everything get more focused.
Is there $9 million in debt that you have to somehow restructure for the creditors for TechShop 1.0?
Well on the secured debt, there’s around $21 million worth of debt that we’re in the process of restructuring that debt.
How are you going to do that? Asking for a friend.
It’s being brutally honest, that “here’s where we’re at, here’s where we’re going, here’s what the new company will support”. And at the end of the day, we have to run efficient. And I know how much debt the company can take on and how much it can’t take on in order to be profitable and allow us to grow.
The Autodesk Foundation was an early investor, I think was $18 million. Did they have any — is there anything that TechShop 2.0 is responsible for because of that investment, or did that end when Chapter 7 hit?
So Chapter 7 actually wasn’t filed, bought this before Chapter 7 was filed. So there’s some confusion in the marketplace about that. But at this point, TechShop 2.0 is responsible for all the Autodesk debt.
And was it an investment or is it like, here’s money, we want it back one day?
It was a loan.
For payment of the employees’ salaries, the consultants, will that be paid at all or is that over?
The back pay is included in this. The consultants at this point are not. But people who were employed by TechShop, that is part of this deal.
And one other thing is that, there’s a lot of, within the community, there’s a lot of people who really know electronics or know woodworking, but they don’t know all the terms of what goes on in a wind-down and a cleanup prospect. And at the end of the day, when I make a comment, I’m not personally attacking the prior corporate leadership. It’s just the brutal facts. The company had too much debt. They spent more than they took in. And it left them in the position they are in today.
And the same goes with the creditors in that the company has that much in assets. Not every dollar that came in bought an asset. So there’s significantly fewer assets available today than what there was.
For the city-by-city basis of the TechShops that are out there, for the people who want to get their stuff out, how is that being handled and where can people find out more information?
So previously the GMs were doing it on their own dime. They were helping people out. We’re trying to help facilitate that communication better. And I expect to be sending out some sort of communication here in the next 24 to 48 hours so people can get their stuff out. Now that a little bit of time has gone by, it’s actually gotten a little bit more complicated than not. But we’re trying to resolve that as fast as we can, because I understand as a maker, this is the busiest time of the year. And you need your items. And even if it’s not the busiest time of the year, you want your items.
Your tools are tools. For the TechShop 1.0 locations, which that’s all refer-to stuff, are all of them going to be part of this new acquisition, or are there ones that are going to do their own stuff?
We’re still evaluating every location site-by-site. Even if for some reason we can keep every single location, there’s going to be an iteration. There may be some moves here and there. So we’re trying to keep everything together. But it is a very fluid and complicated process at the same time as well.
Are there ones that are for sure you’re going to close down, like this one never made money, couldn’t make money, doesn’t make sense to keep around?
Pittsburgh for sure has to move.
The San Jose location is a brand new or almost brand new facility, but it doesn’t have — the parking situation is a little bit questionable. It also doesn’t have a ton of space in that facility. So we’re evaluating our options there. And the Chandler, Arizona facility and the Brooklyn facility were a partnership with either Arizona State or the city of New York. So we’re trying to get through that process as well. And given that a public entity is involved, it’s not just about calling up the landlord and saying, hey, we did this. Can we come in and get to work. It is a more extensive process.
Is there a plan to have transparent finances for the new members that are a little scared? “OK, I already did a lifetime membership once.” What happens to them? Is there some type of like, hey, here’s how we’re doing members on a monthly basis. Here’s how we’re doing with cash flows, or any plans for that level of transparency?
Well I think those options — we may publish some items but not everything. And we will definitely incentivize members to help bring in more members. I believe happy customers are the best salespeople you can have.
Going to the lifetime members, what we’ve currently offered is if you were a lifetime member who just bought a lifetime membership, we’ll honor that with a $400 transfer fee. If you’re a lifetime membership who bought it as part of a loan or investment package, it’s $275 plus you get to convert whatever you invested at a rate of $0.20 on the dollar to machine use credits. Currently there’s machine use credits on, say, the water jet. But we’re evaluating every machine that has significant overhead costs and maintenance costs, making sure that members who use machines that have the high overhead aren’t being subsidized by somebody who just uses the sewing room, as an example.
For the new company, it’s you and Bill Lloyd. Bill worked on the construction of some of the TechShops with his company. Is there anybody else that’s on the board or owns any part of the LLC?
That’s our group as of right now. Both of us have our own partners as well. But probably it is the two of us.
Just you and Bill. Is he managing partner as well? I want to make sure I get his title in. What would he be called in this context?
We haven’t gotten to that point actually.
Haven’t printed out the business cards yet? Got it. So for the bylaws and voting, is this going to be like an LLC where there are meeting notes that the community can see, or is that way too early to even talk about?
Way too early.
What’s the postmortem? Is there any cautionary tale or a white paper that could be released about, “here’s how not to run a TechShop like thing or a makerspace or a hackerspace,” that you all would be willing to work with a university that would be able to help to write a case study on this? Is that at all interesting?
I’m sure that there is. My personal interest, and I believe Bill’s as well, is going to be focused on going forward and not the rear-view mirror. But obviously there is a ton of information that has been generated that could go toward a white paper.
You were into wind power, alternative energy. It was Sunflower Wind, LLC?
What experiences did you have in that industry that you think you’re going to bring into running TechShop 2.0?
There’s a tremendous amount from Sunflower. It was a startup. It did go thought a couple iterations. I had a good initial group. My first investor on that was Mike Pompeo.
Wow, _the_ Mike Pompeo?
Like the CIA guy, who’s probably going to run the State Department, Mike Pompeo?
Wow. Do you still talk to him?
I haven’t talked to Mike for quite some time.
We know who’s getting a TechShop membership for Christmas!
…And then Michael Schneider who became the youngest college president in the entire country. So even though Sunflower didn’t make it, there is a tremendous amount to be learned from both startups and the failure. And with that, I think the biggest thing is communication and seeing how the members have really struggled the last two weeks and being in the dark, and possibly even before then.
So while I’m not saying that everything’s going to be absolutely transparent and we’ll just publish our income statements, I do believe in communication with the members. And it’s why, once we announced it, I was on the Facebook boards, knowing that the members are the ones who can help make this place better. They live it. They experience the great and they experience the bad.
And you can’t fix everything, but you have to look at it — you have to look at it from their point of view and that, can we make it better? A lot of times the simpler answer is the best answer. And it happens by actually being on the floor and seeing, oh yeah, this is not working. Let’s fix it.
So I gotta ask, because you said Mike Pompeo, I thought Mike was not a fan of wind credits at all. That’s what he’s kind of known for is saying no to wind stuff. Was it because of this experience? Do you know anything about his thoughts about wind?
Well, in the stimulus package, wind credits and a lot of the renewable credits, it opened up the potential for fraud. I saw it by a couple of other companies who didn’t even put up brand new turbines. And they collected significant amounts of money from the feds or local utilities. In a lot of ways, it created a cash grab. Some of those early stimulus packages, they weren’t the best for the taxpayer.
And in some cases, I think the market would have done significantly better if the incentives were just a little bit less. Because I think a lot of failures got funded that shouldn’t have gotten funded through the process.
Are any of your Sunflower windmills still around that people could go see, like here’s a cool windmill?
Nope. The one thing that we didn’t design was our blade. We took a more conservative approach and took a blade that had been around in the industry. It wasn’t until after some blade failures — but then after I was hired to be a consultant on a lawsuit for another wind turbine company that I got the chance to work with that original designer of the blade. And he told me, “That blade was my first project out of college. I wanted that project back my entire career.”
There was a flaw in the design. It wasn’t one that was picked up in the original turbine that went in, say, the Tehachapi Wind Farm and a lot of the California wind farms. But given that our turbines went into Kansas where we have a lot more wind — and our hydraulic wind turbine design did create more power than a traditional gearbox design. So with that being said, we found the problem a lot faster than others. And to put in all the work that we did related to the turbine and have it be a purchased component that failed was extremely frustrating.
I guess that makes sense to make the blades. Is it like they sell the razors, give away the blades — no, wait, give away the razors for free, sell the blades. Is it like that at all?
Yeah. So it was an interesting one. But I’ve taken that experience as part of my last R&D project that I was a part of was a 12 kilowatt laser. It’ll cut up to one truckload worth of quarter inch plates in an eight hour shift, so the fastest laser in the world, produced and it is an amazing piece of equipment. And much of what I learned at Sunflower I applied into that project.
And then running for a government thing, you ran back in 2004. What experience did you take from that that you can apply to TechShop 2.0?
Always do your own due diligence. Oftentimes the answers aren’t — it’s not black or white. And in our very divided world right now of Republican versus Democrat and even deeper factions than that, the key is finding common ground, and that we’re not going to agree on everything. But that shouldn’t keep us from talking about other items that we can agree on. And at the end of the day, we’re all Americans. We have that going for us. We have that common ground. And we need to build, not divide.
If folks want to tune into this adventure or this story, what’s the best place? Where do they go? How can they learn more? How can they participate?
Right now we have an email signup at techshop2.com. It’s a very basic website. We’re in the process of getting a new one up. But it has a little bit about what we want to do. Look for more updates there. But you can also sign up for our email blast through there as well. And we are posting regular emails to that system.
OK, well that’s it Dan. Thank you so much.
NOTICE OF LIQUIDATION EVENT – PDF.
Editor’s note: Transcribed interview, did the best we could – pt & ladyada.