Galway business Xerotech was founded by Dr Barry Flannery, who admits he always had a clear vision of what he wanted to do in life, and that mission is a fully electrified future.
How and when was the company started?
The company was founded in 2015 but really started to grow after I finished my PhD at NUI Galway in late 2017. It was clear to me that the electrification of transport was going to be one of the biggest things of the coming decades and I knew that I had to be a part of it somehow.
What is the problem you are trying to solve and the size of the market you are addressing?
The automotive industry is electrifying, and this is now clear to everyone – but what about everything else? How are the construction equipment, mining equipment, agricultural machinery or the rest of non-road mobile machinery market (NRMM) going to electrify?
They face a very difficult problem. They buy diesel engines today and tomorrow they’re being told that they won’t be allowed to use them – they have to go electric. The problem is that these markets are predominantly low volume meaning that they can never achieve the economies of scale that the automotive industry can. Car models are built in the hundreds of thousands to even millions of units meaning that production tooling and R&D costs for new battery systems can be amortised across a huge number of vehicles to spread the cost.
The NRMM market is the complete opposite – it’s low volume and high-diversity. There are about four million engines made for this market each year varying in size from a few horsepower to thousands of horsepower. While the market is low volume, it is not low value; the total addressable market exceeds €100 billion when it electrifies. The problem is that its highly fragmented and diverse and there is no single silver bullet solution.
“NRMM manufacturers can never achieve economies of scale with customised batteries”
A typical NRMM manufacturer, like a mining equipment manufacturer, might only build 1000 machines a year, and worse yet there might be 20 different models within that. They can do this today because diesel engines are available off-the-shelf and in regular sizes of horsepower. This is not the case for battery systems, instead they are custom built per machine and huge non-recurring engineering charges are imposed for the design costs.
NRMM manufacturers can never achieve economies of scale with customised batteries and it becomes impossible for them to electrify because they need to pay for the full tooling and R&D cost. Xerotech have recognised this problem and have come up with an engineering solution to solve it.
How will you address this?
Xerotech has developed a scalable and flexible battery platform. The idea is that we can offer these customers off-the-shelf battery systems in regular sizes. While it might not be the perfect size for the customer, it will be close enough and sufficient just like the engine they buy today. The trick with Xerotech’s platform is that we have engineered in commonality and modularity across the platform, so it doesn’t matter if the customer buys a 10hp or 50hp battery, they share the same components.
This means that we can aggregate lots of low volume customers together and increase our unit numbers and achieve automotive economies of scale. This allows us to massively reduce tooling and R&D costs for the customers. Fundamentally we are enabling the electrification of the NRMM space.
What impact has COVID-19 had on the business?
COVID-19 has had a relatively limited impact on our business and in some ways, it has had surprising benefits. The most significant effect of COVID-19 has been the near universal acceptance and availability of video conferencing with all customers and suppliers. This has enabled Xerotech to move an order of magnitude faster and more cheaply that what would have been possible last year. We can engage customers on multiple continents and win business all around the world from Claregalway in a single day.
“Fundamentally we are enabling the electrification of the NRMM space”
What are your impressions of the start-up ecosystem in your region and in Ireland in general?
There is good support at the very early stage in Ireland through the Local Enterprise Office, Enterprise Ireland and the Western Development Commission – all of which have played a crucial role in the growth of Xerotech over the years through investment, grant support and entrepreneur development programs.
However, Ireland is heavily geared towards software-based companies and there are comparatively limited number of hardware based start-ups (with the exception of medtech).
Xerotech’s journey and success is turning out to be a case study, demonstrating what can be achieved in Ireland. Starting a company like Xerotech is really difficult and especially so in Ireland due to the capital-intensive nature and the sheer scale of our product’s technical complexity. It is a significant barrier to entry for other companies trying to enter these types of spaces. We had to build our own state-of-the-art battery pack design centre just to support our product development and customer projects.
We feel that there should be more supports for capital intensive start-ups that have significant physical and equipment related requirements.
It’s extremely hard to do what we have done, and it shouldn’t be this difficult. We believe that it is preventing a lot of really exciting companies from ever taking off in Ireland. Tailoring early-stage supports to be more suitable for CAPEX investments in equipment and facilities would be a game changer here in Ireland.
What are your growth plans?
We have just hired our 20th employee and will be growing to nearly 40 employees over the next six-months as we start scaling up our production. We’re getting a lot of inbound international investor interest and are on track to complete a €12-15m Series-A in mid-2021 to support further expansion of the company, team and construction of our new automated serial production line.
“We feel that there should be more supports for capital intensive start-ups that have significant physical and equipment related requirements”
What are the biggest mistakes or lessons you have learned so far?
The biggest lesson I’ve learned is that getting your story right and having a compelling vision can enable you to overcome nearly any barrier. This can be anything from winning customer contracts, securing investment to hiring world-class people.
When I started this company in 2015, I never would have believed that today we would be pulling the top talent from multinational companies around Ireland and Europe to join Xerotech and drive our vision of a fully electrified future forward. This has been possible through our achievements to date and the strength of the story around the company.
What advice do you have for fellow founders?
You need to know your story and have a compelling vision. Why is your company different? Why does it matter and how are you differentiated on a global level?
You need to be able to articulate your ideas, your plans and your passion. I am a deeply technical founder and while this has been instrumental in developing our core business and technology, it has not been what has driven the company forward. You have to be able to convince people to buy into your vision and you need to be compelling.
Pictured is Dr Barry Flannery, founder and CEO of Xerotech. Pic: Michael Dillon
Interview by Stephen Larkin
Published: 6 November, 2020