Peter Hogya

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January 12 2023

Funding that Fits Your Product Stage

Peter Hogya Blog clean manufacturing, cleantech, climate tech, climatetech, funding, grants, investor, manufacturing, new york state, nextcorps, prototype stages, SBIR, startup funding, startup support

Fundraising can be a particularly difficult part of building your startup.

There are many nuances to what kind of funding you should be pursuing and when, and misunderstanding these nuances can lead to a lot of wasted time and effort. Therefore, understanding where you are in development is vital to finding the right funding sources. Below, we’re going to connect the broader Prototype Stages from the Manufacturing Readiness Level (MRL) methodology to the appropriate funding sources to pursue at each stage. While the MRL methodology touches on financials, it does not provide a comprehensive framework for pursuing external capital and the significant body of knowledge required to be successful.

Concept Stage

The Concept Stage roughly corresponds to MRLs 1-3. It is the ideation phase; you are still doing research, still testing out ideas, and still trying to establish product-market fit. At this stage, prototypes are either nonexistent or only proof of concept. From a financing perspective, this is the stage with the most risk and many sources of funding will simply be unavailable until you can establish proof that there will be a future return on investments. Because of these difficulties, many grant and accelerator programs are targeted at this early stage to help.

Some of the most common grants startups take advantage of are from the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These are government programs that provide funding from different federal agencies to support research and development (R&D) into novel and innovative technologies. They are both broken into 2 phases with funding from $50,000 – $250,000 for the first phase and $1,000,000 for the second phase. Because these programs are handled individually by each agency, it is important to find the one that is most relevant to you and stay up to date on the details of their program. For particularly early-stage ventures, the National Science Foundation provides more general funding than other agencies like the Department of Energy or Defense. Outside of these programs, many other sources of grant funding will vary based on what local and federal programs are currently being supported. It’s important to stay connected to the organizations that distribute this funding to stay up to date on new opportunities.

Realistically, it is the founders’ time and money that will start a venture, and friends and family can provide some invaluable early support. Association with academia, either as a student or as faculty, can also provide an opportunity to explore new technologies, potentially with funding as well. Some grants, like STTR, also require contracting research work from an academic institution using a certain percentage of the award. For these reasons, many ventures involving new technologies will have individuals with an academic background on their team. Finally, crowdfunding can provide another potential source of funding at this stage but can be a very involved process with many pros and cons to consider.

At this stage, it is imperative to both create a proof of concept prototype and establish proof of product-market fit as leanly as possible to open up further sources of funding and make steps towards securing revenue.

Prototyping Stage

The Prototyping Stage roughly corresponds to MRLs 4, 5, and 6. This is the stage where you are developing Works-like and Looks-like prototypes and bridging the gap between the proof of concept and the customers’ expectations. At this stage, you’ve eliminated the biggest risks in your technology and product market fit, and are now aiming to run pilot projects with potential customers. From a financing perspective, you have unlocked the possibility of early-stage venture capital (VC) and hopefully established a short history of securing grant funding to help with any more grant applications you might apply for.

At this point, it becomes possible to pursue angel investors that are appropriate to your venture. Angel investors typically lend a lot of domain experience both in technology and fundraising to help at this early stage. However, because these investors will be joining you at a very early stage, it becomes especially important to assess whether they will be a fit for your team. Consider the alignment between your technology, skill gaps, and other needs and the investor’s experience and network. While looking for the right investor to work with, it’s also important to consider what they’re looking for as well. They’re likely to have certain requirements for the startups they’ll work worth and will tend to be inflexible on these requirements. Trying to understand their portfolio by looking into previous investments and talking with them about their requirements early can save everyone time. In some cases, you might end up talking with someone that would be a good fit, but only at a later stage in your development or a different time for their portfolio. In those cases, it can be beneficial down the road to maintain a good relationship for the future. Some startups even maintain a mailing list of potential investors and send out regular updates before any actual investment to stay in communication.

Some alternative forms of financing include seeking out Single Family Offices (SFOs), High-Net-Worth Individuals (HNWIs), and companies with investing arms that might have an interest in your technology. Typically SFOs and HNWIs will have fewer requirements than other VCs about the stage and particular technology but may have more specific requirements in other areas. It’s important to note that they may not be able to bring the same network capabilities or level of expertise as other investors might. Seeking out investment from an investing or venture arm of a company that might be interested in your technology is another possibility. This kind of investment is considered a sort of R&D expense for them and, depending on your technology and your team, can provide a path to acquisition, if that is your goal.

At this stage, it is important to produce proof that you have achieved product market fit and traction through things like pilot projects, sales contracts, partnerships, investments, and revenue. Funding sources will start to be less interested in the details of technical development and much more interested in the details of business development, which can be a jarring shift for some teams.

Validation Stage

The Validation Stage corresponds to about MRLs 6 and 7 onwards. This is the stage where you are finished with or finishing your engineering prototypes and the associated Design for Manufacturing, DFM, and other Design for X, DFX, processes. Technology development has mainly become a process of validation at progressively higher production levels and resolving any issues that appear in that process. Business development has mirrored this through progressively larger and more impactful pilot projects and sales. On the fundraising side, grant funding is generally being phased out as the ROI on the team’s time is less valuable than other funding avenues. Some longer-term angel and pre-seed / seed stage investors have been secured and are providing valuable guidance, and the team is either conducting or planning series X rounds. Revenue has generally been established at this stage, and the team is looking at the final steps to move over from financial support through fundraising to self-sufficiency through revenue.

After building your business to this point and with regular revenue and customers as an added layer of financial security, new sources of funding will become available to you. Previously non-dilutive grant funding and equity-based venture capital were all that were readily available. While any non-dilutive funding will always be a boon, equity-based financing can be supplemented with debt-based financing to avoid losing valuable equity. Venture banks specifically work with startups to provide debt-based financing, assuming you can provide some collateral and have generally mitigated financial risks significantly. Their risk tolerance is markedly lower than VCs, and utilizing this type of financing leaves the majority of the financial risk on the shoulders of the startup, unlike VCs who share both the highs and the lows. Venture banks tend to have higher interest rates as well, but preserving equity can make it well worth it. Lastly, if you’ve built a sufficient proof of financial reliability, debt financing through a bank can be a much easier and faster way to flex your cash flow than other forms of funding.

Once you’ve reached a certain stage, going public with an Initial Public Offering, IPO, can also become a consideration. This is a form of equity-based financing where you sell shares of your company to investors. An IPO can be a lengthy and complex process with many implications for your organization and how it is run, the overwhelming majority of which is beyond the scope of what is presented here. Financial expertise should be consulted throughout the process and many parts of your organization will have to weigh in on the decision, Board of Directors, Board of Advisors, shareholders, founders, etc.

Finally, there is another option for debt-based financing. You can issue bonds to investors to spread your costs out over time. Similar to loans from venture banks, these bonds will carry significant interest and will also require a record of financial stability to even attempt to issue. Identifying investors to purchase these bonds may also prove difficult as the market for startup-issued bonds is much smaller than for other financial tools at your disposal. Generally, venture banks will provide an easier means of debt financing.

At this stage, your goal is to achieve some kind of financial stability, but what that looks like is up to you and your company to decide. For some that might be a financially sustainable, privately owned company. For others, their goal might be to grow the company as large as possible with an IPO. Many aren’t interested at all in running a company for the long term and are simply looking for a successful acquisition. In the case of an acquisition, you may never actually reach the Validation Stage in some aspects of your business. In any case it is important to have conversations about this with your co-founders and investors early on to ensure there is alignment on these tremendously important decisions.

In conlcusion

Throughout growing your startup you’ll utilize many sources and methods of fundraising. Early on, grants will be your primary source of funding and any gaps will have to be supplemented by the founding team. The SBIR and STTR programs are nationwide and fund a swathe of new technology ventures, but there may be many local grants to take advantage of as well. It is important to stay in touch with local support organizations to keep up to date on these. Once you’ve advanced past the Concept Stage, venture capital will become an increasingly large part of your funding. It can be very helpful to start with angel investors that have a network and expertise in your industry as they often provide significant support throughout their involvement. Seeking financing from venture arms of larger corporations can support fundraising efforts and secure a path to acquisition. At the Validation Stage, venture capital becomes less personal and many alternative forms of financing become available. As you approach this stage it becomes increasingly important to have alignment with your team on your long-term goals to determine what success looks like. Regardless of whether you’re looking for an IPO, an acquisition, or just to build your own company, fundraising will be an inevitable part of the process.

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January 12 2023

Creating Your Project Roadmap

Peter Hogya Blog, Startup Stages

After taking the Product Stage Assessment and receiving a general Product Roadmap, you will be prepared to create your own roadmap to plan and document projects to advance your hardware product and Manufacturing Readiness Level (MRL). The results from the Product Stage Assessment will provide a good starting point for determining your overall MRL, but it will not go into enough detail to determine your progress on the individual subthreads. It’s important to go through the complete MRL documentation to understand what subthreads are ahead of others and to manage progress consistently across each. The MRL methodology was created to gate manufacturing development across different subthreads to minimize risk moving forward. Part of creating an effective roadmap will be identifying which subthreads can be moved together as part of a single project, as well as determining which subthreads are priorities to move based on your current progress. We’re going to walk through a case study to follow the process from start to finish.

Case Study Overview

Let’s say we’re developing a high-end, energy efficient refrigerator that takes advantage of a new battery technology to provide some load balancing to reduce energy costs and backup power in case of outages. All of our parts are commercial off-the-shelf (COTS), so we have no new manufacturing processes to worry about. We have been continuously engaging with our customers as we’ve iterated through works-like and looks-like prototypes and merged the two into a single prototype. We’re satisfied with the results of this process and are starting work on our first engineering prototypes and the design for manufacture (DFM) process. Our goal is to work closely with a contract manufacturer (CM) and utilize some of their engineering design services to move us forward on this, and to subsequently outsource manufacturing to the CM as well. In the future we may bring manufacturing in-house, but we have no immediate plans to do so. Our MRL subthreads are generally around a 3, with some subthreads at 4 since we’re using COTS parts and plan to work with a CM to manufacture our product. However, we’ve neglected the Cost Analysis (C.2) subthread because we aren’t planning on doing the manufacturing ourselves and, as a result, this subthread is at a 2.

Based on where we are, our future goals, and our neglected areas revealed by the MRL methodology, we’ll come up with some roadmap projects to make tangible progress on the road to mass manufacturing.

Case Study Roadmap Projects

Our first concern should be addressing the Cost Analysis (C.2) subthread, since it presents the highest risk to scaling according to our MRL. It’s also easy to see how falling behind in understanding our costs could set us back significantly. We also need to advance our engineering prototypes and test manufacturability, which will be an iterative process much like our earlier prototypes.

Internally, we can begin identifying and researching key cost drivers and developing a production development strategy for moving from the lab to pilot testing and ultimately to a full-scale manufacturing facility. We can validate this strategy with our CM to get a better understanding of our costs at each stage and ensure that our funding will be adequate and our product will be profitable. This will satisfy MRL 3 for C.2. While we’re working on this we can document important decisions made between comparable alternatives in parts and systems to satisfy MRL 4 for C.2. Once we’ve reached this point we’ll need to produce actual engineering prototypes to advance this subthread, which will be contingent on other subthreads as well.

Externally, we can use the engineering services provided by our CM to kick off our gauntlet of design for X (DFX) iterations with DFM. For our particular product this could include working on our PCB layouts for our electronics components or design assistance on the injection molding for the body of the refrigerator. Depending on our internal skills and the availability of skilled design contractors, this can potentially be many modular projects conducted in tandem. Once we’ve finished a complete DFM round across all subsystems we can validate our work with engineering prototype actuals, which will take some subthreads up to MRL 5.

Based on this analysis, our Project Roadmap would look something like this.

Project Roadmap Summary

When creating your Project Roadmap it’s generally a good idea to start by creating projects to address your lowest MRL subthreads first. This will minimize risk and save you from redoing work if the results of these projects lead to some significant changes to your product. The next step is to continue advancing the Prototype Stage of your product. Many subthreads will require you to produce physical prototypes to advance them, and many will require analysis of the results of this production. Moving to the next prototype stage will be the biggest step forward in terms of MRL advancement, and will generally leave you with a number of subthreads to catch up afterwards. By creating an effective Project Roadmap using your current MRL progress, you can leanly address key risk areas while moving the needle forward on your road to mass production.

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January 12 2023

An Introduction to Prototype Stages & Phase Gates

Peter Hogya Blog

Hardware product development can be a long and arduous process. It is rife with pitfalls that can easily skyrocket costs to reaching production and cause months or even years of delays. Many of these pitfalls are the result of attempting to rush to full scale production without understanding everything that needs to be done to get there. Therefore, it is important to understand the entire process and ensure that each step is completed to the point of acceptable risk tolerance to move forward. Developing a new product is always a risky venture, and taking too long to reach the market is another danger, but there is considerable value in determining which steps entail the most risk for your particular product and paying commensurate attention to them.

Concept Stage

There are 3 major phases that hardware product development can be broken down into. The first is the Concept Stage, which entails the research and development into the fundamental functionality required for the product to meet customer requirements. This can mean many different things depending on the technology being developed, but, for the case of manufacturing capability, this is simply connecting a customer problem to a piece of technology and validating that the technology works. For example, you might be looking at customers that need faster charging batteries and developed a new and improved battery that can meet that charging requirement. All that’s required for this stage is customer research into the problem space and a proof of concept prototype showing that the technology works. Little of the exploratory work put into developing a new technology is relevant to manufacturing.

Prototyping Stage

The second stage is the Prototyping Stage. Neglecting the work required to complete this stage and validate that completion is one of the biggest sources of unexpected costs in hardware product development. Here we iterate through the simultaneous development of two different kinds of prototypes, the Works-like Prototype and the Looks-like Prototype, to refine the concept technology into a sellable product. This process of iteration is important because a certain amount of trial and error is required to advance development, but this iteration should be contained within the Prototyping Stage. Once this stage is completed there should exist several nearly finalized documents that detail the product for both internal and external communication. These include things like the Product Requirements Document(PRD), Bill of Materials (BOM), Bill of Process (BOP, etc. Any changes made past this point should only be the result of requirements coming from manufacturing resources, either contract manufacturers (CMs) or internally, and not from new customer requirements or other improvements to the design unrelated to manufacturing. Ideally conversations with CMs will begin during this stage to minimize issues down the line.

Works-like Prototype

The Works-like Prototype does what the product needs to do, but doesn’t necessarily look like the final product. It should be capable of most functions required for the customer, but there are details remaining to be completed and layout / parts are not finalized. These prototypes are often built with off the shelf parts like Arduinos and use low volume manufacturing techniques like 3D printing. These are built primarily so users can validate assumptions about functionality and provide input in the design process. This input can then be incorporated, alongside any desired engineering or design changes, into the next iteration of the prototype and the process of sourcing feedback and identifying issues internally can begin again. This should be repeated continuously alongside development of the Looks-like Prototype until a satisfactory level of fidelity is achieved and risks to the following stages of development are acceptably minimized.

Looks-like Prototype

The Looks-like Prototype is meant to resemble the final product, but doesn’t necessarily have the functionality of the final product. It is primarily focused on the customer’s aesthetic and usability concerns and serves as a second means of sourcing customer feedback. These are also built using low-fidelity techniques, but can often be done even more cheaply than the Works-like Prototype, with foam boards for example. As with the Works-like Prototype, once customer feedback has been sourced, this should be incorporated into the next iteration. This process should repeat until the desired level of fidelity is achieved and risks to the following stages of development are acceptably minimized.

Prototyping Stage

The purpose of this stage is to shape the product from the original proof of concept prototype to something that more closely resembles what the customer wants to purchase and use. The goals for this stage are validating the technology works as intended, incorporating customer feedback into the product, determining the important aspects of the final product in regards to form and function, and validating each incremental step with the customer. Ideally the final iteration of each prototype, Works-like and Looks-like, would reveal no further changes that need to be made to the design. Realistically, this isn’t economically feasible, but anything more than minor changes should be considered a significant risk to moving onto the next stage. During the Prototyping Stage, problems and changes with the product are expected. Resolving these issues and finalizing any changes will form an important foundation for moving on to manufacturing concerns. Any remaining issues can easily set back costly progress in manufacturing and can lead to an overwhelming amount of complexity from having to deal with both issues in the Prototyping Stage as well as the Validation Stage simultaneously.

Validation Stage

Once both the Works-like and Looks-like Prototypes have been completed and validated with low volume components, the Validation Stage can begin. At this point, conversations with CMs should increase significantly to leverage their expertise in Design for Manufacturing (DFM). In addition to DFM other Design for X (DFX) processes should begin. These include designing for assembly, testing, repair, upgrade, sustainability, etc. Each DFX process encompasses its own iteration cycles to test and validate performance indicators. These performance indicators will be specific to the product being developed and include not just material properties, but other business considerations as well, quality, assembly time, component availability, etc. Additionally, not every DFX process will be required for every product, many products don’t require upgrades or repairs. Every product will require DFM, however, and it is generally a good place to start.

Design for Manufacturing

DFM first requires identifying manufacturing processes for each component. During the Prototyping Stage, low volume manufacturing processes, like 3D printing, are used to iterate quickly and cheaply. These processes don’t often scale to larger orders cost effectively, and a higher upfront cost for tooling can enable much lower costs down the line. Each of these manufacturing processes will have their own considerations that must be navigated, for example, injection molding requires mold flow analyses and consideration of materials. Many of these decisions will be driven by business in addition to engineering concerns. Tooling in particular can be a cashflow hazard and may force a more steady adoption of high volume manufacturing techniques.

Design for Test

Design for Test is another important process for many hardware products. For more complicated products, breaking the product down into subassemblies can be enormously helpful in testing. Faulty components can then be caught at the subassembly level and prevent wasting an entire build on a single faulty part. This can also save significant time when debugging a production line by narrowing down where the failure happened. For electronics, it can be beneficial to design circuit boards with additional space for use with a testing jig to test the boards as a standalone subassembly.

Validation Stage

These are only a couple examples of the DFX processes that will come up over the course of hardware product development. Bringing a product to market will require careful consideration of many DFX processes and with much greater detail than presented here.

Once all of the DFX processes have been completed, there should be a finalized set of documents, PRD, BOM, DOP, etc., that can be handed over to manufacturing resources, either CMs or internal assembly, to begin production testing. This involves a series of generally escalating production runs with deescalating oversight and control. Initial runs may only run at a hundredth of their potential capacity and will have oversight from skilled engineers to identify and resolve any issues. As these runs scale in size, they will also gradually shift from skilled engineers to technicians operating the line to ease into standard operating procedures. Automation, QA/QC, packaging and shipping processes will come into play here as well. It’s worth noting that many companies will use the output of early production runs as samples for customers and partners to trial. Any significant changes that need to be made to the product at this point have the potential to be very costly as previous work may need to be redone.

Summary

The path to mass manufacturing is a complicated process and requires different mindsets and expertise at each step. The Concept Stage generally starts long before the realization of a potential product and market fit begin, and results in a proof of concept prototype that is far from manufacturing ready. The Prototyping stage then involves the parallel and iterative processes of developing Works-like and Looks-like Prototypes, resolving both customer and engineering issues along the way. Once these are complicated, merging them into a single prototype and going through various DFX processes can begin. These will include different things for each product, but will always center on DFM and working with manufacturing resources to determine how best to build the product. This culminates in a series of scaling production runs towards mass manufacturing where any final considerations are handled.

If you haven’t already, consider taking our Product Stage Assessment to determine where you are in the scale manufacturing process and check out our other articles on manufacturing to find more information.

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January 12 2023

Introducing the S4C Product Stage Assessment

Peter Hogya Blog

The Manufacturing Readiness Level (MRL) methodology is a core part of Scale For ClimateTech’s secret sauce to scaling hardware companies and a universal metric to quickly communicate to investors or stakeholders where your company stands. The MRL methodology is a means for assessing the maturity of manufacturing capabilities for a particular product, originally developed by the Department of Defense (DoD) to improve manufacturing outcomes for weapons systems. Methodologies like MRL can provide a valuable source of structure and direction to startups navigating the many complexities of product development and encourages unilateral growth to minimize risk and unpredicted costs (dive deeper into MRLs in our previous post here).

However, if you’ve even glanced at the documentation provided by the DoD, you will quickly find that the language and vocabulary can be a barrier in itself.

Hence the Product Stage Assessment

The Product Stage Assessment is a tool developed to estimate your hardware product’s stage of development, manufacturing readiness level (MRL), and technology readiness level (TRL). It will ask you a series of questions about your hardware product and development at this present moment to get an idea of what key milestones you’ve completed and email you a customized product roadmap in the form of a google spreadsheet as pictured below.

Example road map assesment.

It is a mostly multiple choice survey that checks key indicators about your product’s progress from the concept stage to mass manufacturing to provide you with a product roadmap. The results from the assessment are intended to provide you with a high level overview of the journey to mass manufacturing and is customized based on your answers to show where you are on that journey.

Before you get started answering on a variety of topics related to your product, consider your confidence level and the details you have.

The more detailed and honest you can be with yourself, the better your results will be. In our experience, teams much more often tend to overestimate their MRL level than underestimate it.

When asked about your customer and the problem that you solve, have you done market research? Have you done qualitative customer research? Quantitative?
Have you validated your assumptions with low fidelity prototypes, smoke tests, concierge tests, Wizard of Oz tests? (We like greenice’s writeup on all of these tests here)
Have you documented all of this? Each task requires a thorough understanding and answer to the problem at hand, and documentation to share learnings with contractors, new hires, investors, and any other stakeholders you might have.

In our Scale For ClimateTech program we contract a local university engineering resource to provide an outside assessment for our teams, which has proven tremendously helpful for many of them. With that context, this assessment isn’t as thorough as hiring a team of engineers to vet your MRL level but will at least point you in the right direction.

With all of that in mind, you can get started below.

Take the assessment

You’ve taken the assessment, now what?

Once you have completed the assessment and considered your answers carefully, you should find yourself with a list of tasks–some complete, some in progress, some to-do, and some that you might be unsure about. If you found yourself with incomplete tasks before completed tasks, then you may have gone past the MRL recommended phase gates in certain tasks and should consider returning to those foundational tasks that are incomplete.

Since hardware product development can vary greatly with the actual product and with the available skill sets, it’s not unusual to move ahead in certain MRL subthreads much faster than others. In this case, it’s important to consider the areas you’re behind in and address them before they cause problems. If your list of tasks does not have incomplete tasks listed above completed tasks, then you’ve followed the recommended phase gates so far and can simply proceed to the next task!

The roadmap is intended to provide a broad overview of that next task. For example, “first build of multiple units with production-quality tooling (ie. tools sufficient to meet the product’s quality requirements).”

It also provides a MRL, Technology Readiness Level (TRL), and some product stage information about where you are currently on the left columns. While the broad overview is helpful, it’s important to also consult the MRL spreadsheet to determine the details associated with the particular overarching task. Taking all of this information and turning it into an actionable plan is your next step.

FAQ

Now that I’ve completed the assessment. Now what do I do?

Check out our post on Project Roadmaps to create some projects that’ll get you closer to mass manufacturing your product. And check out our post on Manufacturing Readiness Levels and Prototyping Stages as well to get a better understanding of everything required to get there.

Can I edit the Product Roadmap spreadsheet to track my progress?

Please do, it was created to be an interactive way to keep track of major tasks.

How much does the assessment cost?

The assessment is free!

Can I access past results?

We don’t provide past answers to your questions, but the Product Roadmap that is shared with you will remain accessible indefinitely.

What is the difference between a customer requirement and a technical specification?

A customer requirement is a potentially qualitative statement about what the customer wants, i.e. the product should be light, while a specification defines these requirements in exact technical terms, i.e. the product must weigh between 2 and 5 pounds with a preference for lower weight. Some requirements can be difficult to translate into specifications.

My team has multiple products at varying stages of development. How should I approach the assessment?

The methodologies used in the assessment are generally focused on assessing a single product at a time. Consider doing the assessment for each individual product. Or use the one that is farthest along to help identify what tasks will need to be completed for all of your products eventually.

I completed the assessment and have not received a roadmap.

The Product Roadmap will typically appear in your email in less than a day, and it may appear in your spam folder. If you haven’t received it after a day please contact info@nextcorps.org

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January 12 2023

What is Manufacturing Readiness Level (MRL)?

Peter Hogya Blog

Teams focused on taking an idea and making it into a manufactured product are faced with never ending decisions about how to best move forward with the product while simultaneously being aware of the risks that they are taking along the way.

It can be extremely difficult to be aware of and track all the factors that go into moving the process forward. Many end up putting their resources in the wrong place at the wrong time, or completely missing a risk factor. Sometimes they never recover. There is a tool specifically designed to help manufacturers keep track of their risks and to make sure that they are allocating resources to the most important tasks needed to have a successful product. That tool is called the Manufacturing Readiness Level or MRL.

A Brief History of MRL

The Manufacturing Readiness Level (MRL) methodology is a means for assessing the maturity of manufacturing capabilities for a particular product. It was originally developed by the Department of Defense to improve manufacturing outcomes for weapons systems. The MRL methodology is now finding broader application across the hardware manufacturing landscape. The original problems encountered by the DoD was that they were experiencing much higher than anticipated costs in bringing new hardware to production as a result of poor scale up manufacturing practices. The problems they encountered are shared by many hardware product development teams. More specifically, these problems can mean success or failure when encountered by startups with limited resources who are working on bringing hardware products to market for the first time. MRL’s are an excellent tool when added to other common methodologies like Technology Readiness Levels (TRL) and Commercialization Readiness Levels (CRL). In fact, MRL’s are directly linked to TRLs that were adapted from another DoD methodology developed to assess the maturity of a technology for acquisition and use in NASA’s space programs. Methodologies like these can provide a valuable source of structure and direction to startups navigating the many complexities of product development.

What are MRLs?

As stated before, the MRL methodology is a means for assessing the maturity of manufacturing capabilities for a particular product. They are broken down into 10 levels across 9 major threads each with their own subthreads. By breaking the process of bringing a product to market into areas that can be assessed, it allows the manufacturer to see where their strengths are and what they need to work on. So, for example, you might have a very strong understanding of your costs and feel that you are at an MRL of 5 there, but you might not have anyone with the requisite skills to lead one of your process areas. In that thread you could be at an MRL of 2. Each subthread has its own MRL score, but the individual threads are not as important as the combination of threads on a particular level. For a more complete picture of the whole process, check out the original documentation here, and look forward to our startup friendly redesign, coming soon!

Generally, if you have achieved a higher MRL on certain subthreads and a lower MRL on others, your overall MRL would be the lowest of those scores. The reason for this is that the entire methodology is built on the idea of phase-gating development and de-risking investment in future steps. Phase gating means that you will work to meet all the subthread criteria at a given level before moving on to focus on the next level. For example, you may have an incredible manufacturing workforce available and sufficient funding to move forward with the project, but if you’re struggling to find suppliers for key components, then any future investments in development are going to be subject to your high supply chain risks. The individual subthreads are intentionally aligned along the specific levels to optimize your development process towards de-risking each next step and avoiding committing too many resources towards advancing one subthread when another could end the entire development process. This focus on minimized incremental advancement shares much with ideologies like Lean Startup, NSF I-Corp programs, and Agile.

The individual threads and subthreads encompass a wide range of engineering and manufacturing concerns related to scaling manufacturing and, together, attempt to capture the entire process of scaling. However, it’s also important, particularly for startups, to also understand what MRLs do not attempt to cover. MRLs do not deal with any business concerns, hiring beyond the manufacturing workforce, sales or marketing strategies, investment beyond budgeting and identifying potential investments, and, perhaps most importantly, they do not assess product market fit. It is important to understand this scope to know both when to lean on the expertise provided by the MRL methodology and also when to supplement it with resources from other domains like TRL and CRL as mentioned earlier.

So Why Use MRLs?

The purpose of using the MRL methodology is to address manufacturing and quality risks and issues through the development process to provide products that consistently meet customer requirements. The US Government Accountability Office (GAO) conducted a study of 54 weapons programs and found that Research, Development, Test, and Evaluation (RDT&E) costs rose by 42% – $47.2B total – and schedules slipped by 20%, on average 2.5 years. As a result a number of US government agencies, including Congress, the GAO, and others, reached a consensus, “advanced weapon systems cost too much, take too long to field, and are too expensive to sustain.” The MRLs were consequently developed to contain those costs and meet those deadlines, or in other cases to more accurately determine them.

The efficacy of the MRL methodology has been proven through achieving widespread DoD adoption, despite being developed internally there was initial resistance to its implementation, and subsequent industry adoption by Lockheed Martin, Raytheon, Boeing, General Electric, and more. The DoD has identified the major benefits of the MRL methodology and assessments as follows

Facilitating development of a manufacturing roadmap
Identifying lagging elements in manufacturing maturity
Involving all stakeholders early in the process
Improving communications between different actors

Outside of the clear benefits to manufacturing, the phase-gate approach to product development encouraged by the MRL methodology supports financing validation. Investments in new ventures are often tied to milestones and without a common terminology to discuss manufacturing maturity it can be difficult to agree on appropriate milestones. Utilizing the MRL methodology and thread terminology can provide a framework to start these discussions from and tie milestones to very specific, relevant, and actionable goals.

How to Use MRLs?

If you’ve even glanced at the documentation provided by the DoD, you can see that the language and vocabulary can be a barrier to easy understanding. NextCorps and our university partners are in the process of making the MRL more accessible to start-ups. We’ve developed the easy assessment tool to get you started in assessing your current MRL is to use our Product Stage Assessment tool.

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About S4C

Peter Hogya

About Peter Hogya

Posts by Peter Hogya:

Funding that Fits Your Product Stage

Fundraising can be a particularly difficult part of building your startup.

Concept Stage

Prototyping Stage

Validation Stage

In conlcusion

Creating Your Project Roadmap

Case Study Overview

Case Study Roadmap Projects

Project Roadmap Summary

An Introduction to Prototype Stages & Phase Gates

Concept Stage

Prototyping Stage

Works-like Prototype

Looks-like Prototype

Prototyping Stage

Validation Stage

Design for Manufacturing

Design for Test

Validation Stage

Summary

Introducing the S4C Product Stage Assessment

Hence the Product Stage Assessment

You’ve taken the assessment, now what?

FAQ

What is Manufacturing Readiness Level (MRL)?

Teams focused on taking an idea and making it into a manufactured product are faced with never ending decisions about how to best move forward with the product while simultaneously being aware of the risks that they are taking along the way.

What are MRLs?

So Why Use MRLs?

How to Use MRLs?

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