Like so many great things, it all started with a beer in Tartu, Estonia’s frolicsome and freewheeling university town. Martin Vares, a mechanical engineer by trade, was responsible for designing and ensuring the production of natural gas filling stations but was spending too much of his time hounding manufacturers to see if they could produce his industrial and engineering solutions.
“I was spending 20 per cent of my time on emails and phone calls,” says Vares. Most companies in the industrial space don’t produce all the parts necessary for manufacturing themselves, he notes. Rather, the part manufacturing is outsourced to third parties with the correct, often expensive machinery. Vares would send out emails with his 2D drawings attached, inquiring about quotes and manufacturing lead times, only to have to call up to find out they were booked or didn’t have the capabilities.
This led him to commiserate with a friend over a beer. It was September 2016. Before the War in Ukraine heated up. Before the pandemic. Donald Trump hadn’t even been elected president. Vares told his friend that, as an engineer, he found it ridiculous that he was spending hours chasing manufacturers on the phone. The human transaction in the procurement process was slowing things down. Something had to be done. From that rant emerged a new company.
“We discussed it and came up with the idea of a marketplace platform,” says Vares.
They called it Fractory.
According to Vares, Fractory is an outgrowth of Estonia’s do-it-yourself mindset, and the company’s development is entwined with the country’s digital trajectory, which has led to the nickname e-Estonia. Digitisation was originally undertaken to save money and cut back on bureaucracy and paper waste. But people also accepted it because it made sense, he says.
“Estonians have always been makers,” says Vares. “Estonians are not conquerors, and we are not settlers,” he says. “We build our homes, maintain our homes, and build everything necessary for our homes. Sometimes, often, it happens that we come up with something brilliant that others also need.”
With Fractory, Vares and his cofounders developed a cloud-based manufacturing platform that connects engineering companies with the manufacturing market. Companies can upload their CAD files as either 2D drawings or 3D models, find the best fit for manufacturing partners using Fractory’s algorithm, order whatever parts they need, and have them delivered. The ordering data is standardized to make sure there are no delays and quality stays efficient.
“We provide quick access and the best solution on the market for customers,” says Vares.
Creating the Fractory platform was no picnic. Vares says that the company needed to develop the technology to automate the selection process. “Dissecting the order information and connecting it to a manufacturer is pretty complicated,” he says. In addition to manufacturing technology, the platform, for example, includes elements of fintech and logistics. “We haven’t built one company, we’ve built five companies at the same time,” he says. “It’s been a massive process.”
A direct effect
Fractory’s online marketplace is not only aimed at engineers who need custom laser-cut parts. While they can use it to compare and fulfil orders, regardless of batch size, manufacturers that have specialised laser-cutting equipment can maximize the capacity they have to better capitalize on their cutting machines, which are often very expensive to acquire and to operate. Orders can run the gamut, from large-scale production to one-off prototypes, and Fractory has engineers on staff who can troubleshoot any issues that might arise in any part of the process.
According to Vares, Fractory’s cofounder Rein Torm, a former software developer at Skype, was interested in the project because he could design a platform with actual physical output. The designs uploaded to Fractory’s site would eventually be produced and installed, as part of a ship or train, for example, or as a component of a CNG filling station somewhere.
“For him, the world has always been digital,” says Vares. “He was intrigued that he could build something digital that directly affects the physical world.”
It did take some years to win the market over, though. Vares acknowledges that Fractory at first struggled to win over first adopters. “It was not well received, but we were stubborn, and we knew that it made sense,” he says. “Six or seven years later, we now know the revolution we are bringing to the industry is inevitable,” he adds. “It was bound to happen anyway. We were lucky to get it started before it was obvious.”
Fractory currently has about 80 employees across multiple locations, including an office in Turku, Finland, and another in Manchester, UK, where it opened a location in 2019. It also liaises with 164 active supply partners around the world, each one of which is vetted by the firm.
Its home market is Northern Europe, where growth continues in Estonia, with a population of 1.3 million. “Estonia has been growing immensely,” says Vares. “Manufacturing is everywhere,” he says. “The amount of metal that goes around the world is not something that people think of every day, but even in a small market like Estonia, the volumes are massive.”
As they are in Finland, Latvia, Lithuania, Poland, and Sweden, where Fractory has expanded its supplier market. The UK has also proven a good market for the company, and via the UK, Fractory is also serving US customers. Indeed, about a tenth of UK orders are from US clients.
Interestingly, the last technology innovation in the metal manufacturing market might really have been email, says Vares. Three decades ago, customers would have to go to suppliers in person to place orders. Email eliminated the need to do that, but Fractory has changed the process. For users, Fractory offers a way to get the parts they need faster, so they can focus on their actual important tasks.
“At the end of the day, the customer wants the metal parts,” he says. “They want to make their product, and they want to sell whatever their product is. Procurement is a means to an end.”