By Holger Dielenberg
Benjamin Schultz is the brainchild and cofounder behind Bastion Cycles. Starting at Space Tank in 2016, the Bastion team developed the beginnings of what is now becoming Australia’s best high performance bicycle. Bastion had clearly identified a gap in the private sports market. Within a year they outgrew Space Tank and moved to their own warehouse in Kensington in order to scale their custom manufacturing business. With 70% of their total sales going to export, this year Bastion are set to hit their first Million Dollar annual turnover! Benjamin tells us what it’s like building a niche manufacturing business in Australia.
From mining industry to car manufacturing to starting a high end bicycle brand – this is a worthwhile read for aspiring manufacturing startups.
Can you describe your background before you started developing performance bikes?
I have been an engineer for 18 years and when I left university in 2000, it was pretty hard to get a job so I spent the first few years in mining. My goal was always to get a job with a major OEM so when Toyota opened up a technical centre in 2003 I migrated to Melbourne and spent the next 12 years working for them. 3 years in Japan, 6 months in Thailand, and all over the Southern Hemisphere and Asia. I was the chassis department manager with 14 staff and we handled Camry, Aurion and Hilux and we also undertook special projects for Landcruiser and other off road vehicles. When Toyota moved our function offshore of course our whole world was turned on its head. Ultimately for me it was a critical turning point in my life.
What compelled you to move from solid employment to starting your own business?
I was already in midlevel management positions and most of my role was forecasting, product planning, coming up with new ideas for development. Also budgeting those kinds of million dollar projects. So I could have taken those skill sets across to another industry because automotive was gone or I could have gone overseas, but I had a young family and didn’t want to do that. Then I thought most of my roles are exactly what you need to start your own business. So I turned to my passions which largely revolved around high end engineering and my newest passion which was bikes. I had already sold all my fast cars and was more into bikes and was always thinking about I could build them better.
Did you start out on your own or as a team?
My skill set was in business development and I hadn’t been doing hands on engineering for quite a while so I approached James Woolcock and Dean McGeary to become partners and they brought that vision to a physical product. All of that went remarkably smoothly. It’s the first time in the world that 3D printed titanium bonded to carbon fibre tubing had ever been done on a commercial level. Design studies had been done, but those studies would never have been commercially viable. So our bikes are a world first in a sense that we took it out of the lab and did it properly for real world conditions and commercial manufacturing point of view. Having a core team of competence has been integral to our success.
How did you go about starting your own manufacturing business from the ground up?
Firstly I began a process of looking at what technologies are out there, what materials could be used and then I applied my knowledge of frame and structural design, noise and vibration, ride and handling, etc to what we could do from a bike frame perspective. What became clear was that to be done in Australia it shouldn’t be mass produced, but we do have the capability here to manufacture very high tech, low volume products. So really we developed a bike like we would develop a car. I spent six months developing a business plan before we did anything else. We knew our market gap and sales price, so from that we chose the technologies and set up budget breakdowns for each part of the bike that would hit our price point. We said, this is our competition, this is their performance and price, this their weight. Then we asked where and how do we need to be to position it? Australia has a name in sporting goods and our cycling track team regularly has the best competitors in the world and we’ve had Tour De France winners. Australian’s punch well above their weight in all sports, but particular in cycling so in the minds of the public there is a subjective correlation that helps us sell our product.
How would you describe yourself?
I tend to take on things in my life that I can see add value to people’s experience and I’m very passionate, but practical at the same time. For instance in this business we’re building world leading innovative bicycles that really bring a smile to our customer’s faces and we really try to wow and delight them. Before bikes, I engineered cars in the automotive industry. I really enjoy being in a small business now and not in a large corporation because I get to explore my own passions across a much larger range of business functions. As I get older I’m becoming passionate about business and innovating structures and supply chains and dealing with retail and customers.
What are some of the main challenges you have faced?
Our business fundamentals in terms of gross profit and cost to manufacture versus sales are all solid and we actually exceeded our targets, but the number of sales we’ve managed to achieve in our first three years weren’t where we hoped to be. We’re learning now and getting better at it. We started trying to sell direct to the consumer thinking like any inventor that our bikes are so good, they’ll sell themselves. In reality it’s very hard to sell a fifteen thousand dollar bicycle over the internet to someone who has never met you off the back of some emails. It’s a miracle that we were able to do it to the volume we were achieving. We’ve learned that adding global retail partners gives our brand credence. Consumers are now more willing to order direct from us because we have a strong network of very high end stores who represent us around the world who trust us.
The other challenge is capital infrastructure. We exhausted all of own money from the payouts that we got from Toyota. We managed to get a grant from City of Melbourne and recently got a grant from the AMP tomorrow fund which was very welcome but still finding the right space for the right price to work from is so difficult in Melbourne. That’s where starting at Space Tank was so vital because where else are you going to go? We were unique in the sense that we were a start-up, but we needed a lot more than a “hot desk”. We needed noisy, expensive, manufacturing equipment and no one is going to lease a space to you with no sales history and no track record. The banks won’t lend to you either. To be honest who will support a product developer these days in Australia? No one. So that’s where Space Tank was absolutely vital to us getting off the ground.
Do you collaborate on special projects outside the world of high performance bikes?
We debated for a long time whether we should because we didn’t want to compromise the bike business, but yes we do and it actually added value to our business in unexpected ways. We’ve done industrial design parts for engineering companies and we also lend expertise to other bike builders. Probably our most rewarding collaboration was with Paralympian Stuart Tripp who got Silver at the Rio Paralympics. When we looked at the design of his hand cycle and did the numbers on weight and aerodynamic gains that we could make, we realised that we could shave over 40 seconds off his time. That would have put him well and truly into the gold position at Rio and it bears mentioning that Alex Zanardi who beat him was on a bespoke hand cycle built for him by BMW. That’s what really motivated Stuart and the Australian Institute of Sport and Cycling Australia to approach us. Also in the recent Commonwealth Games, the men’s tandem team used new custom made aerodynamic handle bars that were developed with us. Brad Henderson and Thomas Clark won two silvers with those handle bars.
How did being at Space Tank help you through your startup phase?
It was pivotal. We literally couldn’t rent anywhere. We would have been stuck in our garage or we would have hot desked somewhere and had to pay people to do our prototyping for us which is impossible when you’re the inventor and engineer. It would have taken us much longer, cost us a lot more to make our prototypes and I honestly think we wouldn’t have been able to get going. I don’t know how we would have done if we hadn’t have found Space Tank. There was the paint booth downstairs, studio space and the ability to affordably grow. There was the 3D printer, 3 phase power, a good compressor and proper ventilation so we could run all of our pneumatics and as we progressed with our prototyping we were able to add our own more specialised equipment like a vibratory finisher, sand blaster and carbon fibre resin weaving machine. I was on my own during the first year so it was great to be part of a community of other product entrepreneurs and niche manufactures. We were able to bounce ideas off one another, learn from each other and also share contacts and suppliers or even share simple resources like sand paper. That’s a very encouraging thing for innovation. There was always something that would help you advance quicker.
Can you talk more about collaborations and friendships from Space Tank that continue today?
Yeah sure, Rain Gidley was always around for resin advice and Aidan from Cut Throat Knives and I still talk and exchange ideas every now and then. Recently we shared some quality control methodology and we often talk about marketing strategies. It’s good to have other niche manufacturers who are on a similar growth path to share stories and pain points with because there is a lot to learn from other people’s journeys. There is also a new Space Tank member, Martin Carswell who we now collaborate with on leather goods. Martin makes really beautiful handmade bike tool rolls that fit under your saddle. He uses laser cutting at Space Tank to achieve extremely accurate effects and all his work is hand crafted to suit our brand and they’re extremely popular.
This is where the flow on effect of the Space Tank community is so important. It teaches you the value of collaboration and the ability to work together with like-minded businesses to reduce the cost. We’ve learned how valuable that is. We have a bike fitter and another engineer as well as an industrial designer working on their own business inside our factory. We’re going to continue that model because they are synergistic businesses that feed off each other.
You’ve certainly become a Melbourne success story, where are your markets around the world?
Australia is our biggest market by percentage and Indonesia is second. Having said that the Australian market is only 30% of our total global sales. So from that perspective we are largely an export business. The cycling culture in Asia is growing very fast. That’s great for us because Asia is close, shipping is low and we can take advantage of the free trade agreements with the ASEAN region which helps us compete with American and European imports who get charged with large taxes. As the cycling culture matures and develops, people want something more unique. They’ve probably already bought special editions from established manufactures and then they look for something better and different. They’re after that completely unique ride and they find us. Our offering is a very unique, high tech and light weight experience completely tailored to your ride style and body measurements. Cycling as a sport is still a relatively new thing in many locations around the world, but there are certainly lots of high end enthusiasts who really appreciate our product.
So what’s it like starting a manufacturing business in Australia?
Very hard, there’s not enough manufacturing going on. It’s very hard to find equipment or to run lean on components when many distributors just don’t carry specialised niche stock because there are not enough people buying those items in Australia. So many local suppliers slug us with extortionate mark ups and I try not to give a distributor my money when they only order items only when I order it from them. That’s a real struggle being so isolated from the rest of the world and I guess it’s also hard for distributors. Often we’re forced to buy component parts direct from America, Europe and Asia because our local distributors aren’t holding or they’re charging too much. Property development is also driving all of our talent out of town because they can’t afford rent. But when you move to the outer suburbs where it’s cheaper, you’re isolated from the action and innovative heartbeat. Also from a financial point of view, even though we’re still in our startup phase and can get money to work with CSIRO or a university, we’ve found that they’re not very commercially focused. Their good at research but that doesn’t help us implement our growth strategy.
Is there much Government support for product startups during their early manufacturing stage?
No there isn’t and that really holds us back. Europe and America have much stronger investment and business support structures for innovation and manufacturing startups and the whole world can see the obvious benefits of this. It seems to be part of their culture. Australia simply does not have that same culture of support. There is no support of any benefit for individual manufacturing startups in Victoria. We ended up getting more support from local councils and private organisations like AMP than we got from the Government. Our Government is blind to grass roots development.
I mean, we’re on track to sell over a hundred bikes this year and turn over one million dollars. We want to get our own machines like a titanium 3D printer and other extremely specialised advanced manufacturing technology but we still don’t qualify for government infrastructure grants because we haven’t crossed their minimum threshold requirements. You need a minimum of three years of trading which I feel is a long time to still be classed as a startup especially when we’re turning over more than half a million dollars, have got five staff, a strong track record and a pipeline of work coming our way.
What advice would you give a product startup based on all the experience you’ve acquired?
Okay, let’s assume you know your product is good, you’ve done your research and you know people want it. There’s a market for it. Let’s take all that out of the equation. Once you’ve passed that point, you then have to decide if you want to make it yourself in Australia. It all depends, if you’re making something that needs to be injection moulded out of plastic and need to make three hundred thousand a year or more; then you should manufacture in Asia. Simple. But if you’ve developed a highly engineered luxury product that relies on quality and brand image, then you choose Australia. You really have to be incredibly resilient and resourceful. Our system is geared to help established businesses, but there is no proper systemic support for grass roots physical product innovation.
Make sure that everything you’re doing in the first three years can progress without any help at all from the government. Don’t rely on handouts. Collaborate with your peers and design the component and sales model according to where and how you plan to make and market the product. I guess the final message is that export are vital. Even if Australia might be your biggest market and easiest to succeed in, it will probably still only be a fraction of your total global sales so don’t ignore the world.
In our experience, you will make it overseas before you make in Australia. Customers seem to only want something made here if it is already made a name for itself and is desired overseas. Australians seem to be followers, not trend setters when it comes down to it.