By Eric Peterson | Sep 12, 2019
San Jose, California
Enclosures for utilities and contract fabrication services
San Jose, California
Industries: Energy & Enviro
Products: Enclosures for utilities and contract fabrication services
Hardcraft "was formed by acquiring two different third-generation, unrelated manufacturing companies and merging them together," says Evert. One, Oakland-based Lucasey Manufacturing Corporation, made infrastructure products for utilities, and the other, San Jose-based Peninsula Metal Fabrication, was a contract manufacturer.
Owner and CEO Brandt Kwiram worked as a managing director for an investment fund before the deals that launched Hardcraft. Evert, who previously worked in tech sales, notes, "Brandt and I had zero experience in manufacturing before this endeavor."
After he was laid off from one company following a merger, Evert accepted a position as VP of sales for another tech company. In between the two jobs, he consulted for Kwiram and helped Hardcraft develop a sales team. "He conned me into staying and running the company," jokes Evert. "What was exciting was the product Lucasey Manufacturing made."
That would be the "phenomenal" racks and enclosures for electric utilities. Lucasey had an exclusive contract to supply PG&E. "Utilities are recession-proof," says Evert. And contracts are usually long and exclusive. "There is no name brand nationally in terms of what we make for utilities," he adds.
Hardcraft consolidated Lucasey's operation and IP into Peninsula's 70,000-square-foot facility in San Jose. "Almost all of the employees were retained," says Evert. He says the first year "logistically was a nightmare" getting the new company established. "2017 was all about people and processes. . . . 2018 was about basically every piece of machinery." That involved a capital expenditure of about $1.5 million.
In mid-2018, Evert began turning on sales under the brand Hardcraft Systems, and for "2019, we're full force ahead working on sales." The company has targeted utilities in key markets including Washington, Arizona, Georgia, and Alabama, and has about 20 to 30 customers in the pipeline.
"Out initial assessment was our product was better than what was out there," says Evert. "Our racks are seismic-certified -- totally different than what the industry standard is." That means modular, customizable, and installation-friendly, "no torches, no welding required," he adds. "Our aluminum racks are stronger than steel and easier to use."
Besides Hardcraft Systems, Hardcraft Precision picked up where Peninsula left off with high-mix, low-volume metal fabrication.
Evert says most job shops in the Bay Area cater to the semiconductor industry, but Hardcraft looks to target every other industry. "We're strategically and intentionally staying out of that," he says. The idea is to target $50,000 to $20,000 jobs from companies that "are sick of playing second fiddle to the semiconductor customers," Evert explains. "Let's treat them like the big boys . . . and they'll keep coming back and back and back."
The two largest customers are in the audio and defense industries as of mid-2019, and there are many small manufacturers and medical companies on the client roster. "The spread is wide," says Evert.
Hardcraft Precision and Hardcraft Systems currently generate about the same amount of revenue, but Evert says he sees the latter growing at a more rapid clip in the near term and hitting about 60 percent of sales in 2020. "In a perfect world, I'd like it to be 70/30," he adds.
Hardcraft has grown by about 20 percent since 2016 and Evert says the table is set for an even steeper spike. "That was really without a concerted effort on selling," he notes. "We now have all the processes defined and improved, we have the right machinery in place, and our talent level versus two years ago is light years ahead."
Evert adds, "We are hyper-aggressively working on growth now."
Challenges: On the Hardcraft Systems side, "The hardest challenge for us is educating the utilities around the country," says Evert.
For Hardcraft Precision, it's the setups. "Constantly revising processes is a challenge," notes Evert, noting that the average order is 50 units or less. "Nobody out there has solved high-mix, low-volume well. You really have to have defined processes."
For both divisions, the talent market is almost always in a frenzy in Silicon Valley and the cost of living is extremely high. Evert says about half of the Hardcraft's employees drive 90 minutes or more on what the Wall Street Journal called "the worst commute in America."
Opportunities: Evert says Hardcraft Precision is targeting medical device companies, smaller defense contractors, and projects with tight tolerances or needs for ultrasonic welding.
Hardcraft Systems has emphasized market education and developing relationships with sales agents and manufacturer's reps. "What we've been careful to do is select the right agent in each market," says Evert. "Since 2016, we've added six new agents out there."
The sales cycles can be protracted, but the long game is bearing fruit. "There's a utility in the South I've been engaged with for two years," says Evert. "This week, they finally called me."
Needs: "Our simple need is to go out and grow the business," says Evert. "Now that we have the people, processes, and equipment, it's time to grow the business."
He commends Kwiram's long-horizon strategy and investment in the company. "As long as we don't screw it up along the way, we should be at $100 million in utility sales in eight years."
If all goes to plan, the company will then look to shave some time off employee commutes with a move to the East Bay. "Our goal is to build our own plant in the Livermore area," says Evert. The timeline? "In a perfect world, in the next 24 to 36 months."