Investment Notes: Factory.app

The Investment:

Factory.app has just closed their $1.05 million seed-round led by Investible, with participation from 1in100 Ventures, Beachhead Venture Capital, Hugo-Hamman Investments, and Club Investible member, Adrian DiMarco.  

Founded in 2021, brothers Paul and Michael Lutkajtis noticed a gap in the market for manufacturing businesses with fewer than 50 employees. The under-serviced sector (of roughly 80k businesses, nationally) lacked a streamlined process to create, track and manage work with traditional software processes being ‘too clunky’, overpriced, lacking industry relevance, with poor user-experience.

The market

When it comes to workflow management manufacturers have two options. Firstly, they can manually process orders and manage accounts; resulting in costly errors, double handling of information, and poor order management.

Secondly, they can choose a tech platform to assist with operations. This might be a basic accounting platform such as MYOB or Xero, and enterprise resource planning (ERP) tools, or a combination of both. The result? A high-cost solution, poor user-experience, and lack of key functionality to manage manufacturing operations.

Managers can choose the lesser of two evils.

Insert: Factory. The startup provides an industry-tailored product for SMB manufacturers, offering a simplified solution designed to fit their needs from the outset. The solution is affordable and bridges the gap between basic accounting packages and ERP tools.

Under the microscope: Our Investment thesis

For Investible, there are three major factors that underpin Factory’s growth potential:

1. Founder / solution fit —

Factory is purpose-built for manufacturers, by founders who understand the sector intimately. Growing up with parents who ran a manufacturing business, the brothers have a first-hand experience of their customers’ pain points.  

“We were literally living the same pain of manual processes and constant double handling that our customers face every day. With 90% of the manufacturing industry being made up of similar-sized businesses to our own [SMEs], we knew we could deliver huge value to thousands of companies globally by leveraging our own experience.” - Paul Lutkajtis

The duo have a well-rounded blend of tech and industry knowledge. Michael brings extensive practical experience, having run the family business, Vilno, for over two decades through significant growth. Conversely, Paul pursued a different but equally relevant career path in the tech sector, notable as a Senior Product Manager and Head of Product at REA and Zai Australia.  

Between them, the founder-duo has an intimate understanding of the problem, and the technological wherewithal to solve it.

2. Owning their niche

Factory is a customer-centric product, with vertical sector specialisation that sets it apart from other tools. In other words, their offering is designed specifically for small (<20 employees) to medium sized (<50 employees) manufacturers, whose segment has historically been overlooked by larger ERP/MRP providers. The industry neglect of this specific niche has left an underserved market, to which Factory intends to provide an all-in-one workflow management solution.

Factory’s customer-focused approach distinguishes itself from competitors by offering a combination of hands-on support, and leveraging AI, integrations and high-quality support content to enhance user confidence.  

3. The “means” of doing business

The platform offers significant productivity and efficiency gains for users, centralising workflows and information that has historically been fragmented among non-integrated systems (paper, spreadsheets, emails, and other platforms).  

By shifting such processes to Factory, customers have found a reduction of double handling (typically replacing 3-5 levels of double entry), ease of finding data, automation of customer communications and repetitive manual tasks. Early platform usage data shows that customers are using Factory to run their business, with the average session length (total) sitting at ~3.5 hours per day.  

Factory’s platform has demonstrated its capacity to draw in potential customers and successfully turn leads into paying subscriptions. With a current conversion rate of 25%, their effort to expand their subscription base in both Australia and worldwide are poised for success.

The Investible team is delighted to lead the investment into this brilliant team, and we look forward to supporting Factory on their pursuit of digitalising the manufacturing sector in Australia.  

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