Naprotek: Building a Successful EMS in Silicon Valley with a Woman's Touch
Recently, I had the privilege to visit Naprotek Inc., an EMS provider in the heart of the Silicon Valley, where I was able to spend some time speaking with CEO Najat Badriyeh, and two of her team members: VP of Marketing Liz Davidson, and Director of Business Development Mike Brown.
Judy Warner: Najat, please tell me a little bit about Naprotek, how you got started, and how you came to start and run an EMS company.
Najat Badriyeh: I have always dreamed of starting my own business, without a particular determination of a field or area of expertise. Growing up in Lebanon, my role model was my father, who owned a retail store and succeeded in making it the best one in our city. I loved to visit him in his office and imagine what it would be like to be my own boss.
Eventually, I came to the United States, where I worked in electronics. Multiple business ideas interested me: rework, ECN support and R&D. There was a time when I thought about material and kitting as a potential service. Nonetheless, once I switched from semiconductor work to PCBs and the more experienced I became in electronics, the more I focused on the CM services.
I was working at Fine Pitch Technology, helping it grow and become very successful, when rumors started about its upcoming acquisition by Solectron. It was immediately that I made up my mind. It was about time to make my dream come true and start my own business. Considering that Solectron is a high-volume company, I realized that there is a great opportunity for a business that focuses on small-volume engineering work and prototype. That is when I started Naprotek, in 1995. The rest is history and here we are today.
Warner: What size is the company today, as far as sales, number of employees, and square footage?
Badriyeh: As far as sales are concerned, our goal for this year is to sell just under $20 million. Our model always has been to support prototypes, working with R&D and doing the front end. Over the years, we moved into servicing the low production volume for companies, without advertising this fact enough. More recently, we started moving in a different direction. We plan to grow and expand the business in a manner that will double our production in the next few years, and we are adding the mechanical assembly and ICT test. The road map that we are following is to strengthen the small-volume production. We have installed three new lines in the last three years. This new equipment will boost our capacity and enable us to achieve our growth plan.
At this point, we have 65 employees in a facility that is more than 23,000 square foot. We can meet our growth needs by utilizing swing shift, with an option to add a graveyard shift.
Naprotek's Mike Brown, Director of Business Development; Liz Davidson, VP of Marketing; and Najat Badriyeh, CEO.
Warner: Liz and Mike, tell me a little bit about your backgrounds, and then what you see as the pain-points and challenges for your customers from a sales standpoint? Liz, why don't we start with you.
Liz Davidson: I joined the company when it was still fairly young, in 1997, so I have witnessed and lived through its growth. As Najat said, our focus was primarily on new product introduction, (NPI) and we have built quite a reputation as a premier supplier in this segment. Over the years, we expanded our service offering. Today our model is to support the new product introduction and production. That's why we've brought in the three new lines.
We've also focused heavily in training our employees. Our employees are trained and certified to IPC 610 and J-STD-001. We are positioned for company growth. We have the infrastructure, the facility, and all of the equipment.
Many customers had experienced the pain of doing prototype and low-volume production offshore, and in many cases with no reduced price benefit to them. Local companies still need the support here in the U.S. They want the proximity of someone who can provide the quick-turn prototyping and support some level of production. Naprotek is the ideal solution for them.
Warner: Mike, I imagine you have a lot of competition being right smack in the middle of Silicon Valley. I read that you have a background at Flex. Tell us a little bit about what you see as the pain points and the drivers that you're focusing on as business development director.
Mike Brown: The positive alternative that we offer relies heavily on the expertise of our employees. 62+% have been with Naprotek for 15 to 20 years and they have developed the skillset that is missing from the tier 1 and tier 2 companies. The Naprotek workmanship is consistent and this consistency speeds up the production process.
In contrast with tier 1, where a quote can take five to seven business days to be signed off, we produce a turnkey quote in four hours. You cannot do that at any other place of business. If I had not been part of this team and witnessed it with my own eyes, I would have told you that it is impossible. It is of the utmost importance to the customers that they have someone who can build from NPI to prototype, to low-volume manufacturing, and get the visibility and flexibility that the bigger companies cannot deliver, since they are constrained by a great turnover. From this point of view, we offer a competitive pricing in addition to a service that is unavailable in the large companies.
We have competitors around here, but one of our significant advantages, for our size, is we're very financially viable. We have zero debt, we have new equipment, box build, ICT and solder paste inspection. Medium- to high-volume production typically moves out of this areas in most cases offshore. We've been supporting those customers for those tier 1s for years now, and very successfully. We have some customers that we can't mention that are name brand customers, and we take care of all the front-end work, and we're trying to take on more of the low- to medium-volume production.
Warner: So you're moving towards that full integration model then. It's nice for your customers that you have those relationships with the tier 1s so they can seamlessly ramp. That's an interesting model.
Brown: A lot of the tier 1 OEMs have products that they're building that don't make sense to go offshore, and we fill that gap as well. You even ask the tier 1 CMs, they would rather have us do it here locally because it's just not worth the effort to do it offshore.
Warner: What would you say would disqualify a project from going offshore, other than maybe lack of a technology set? What keeps them from taking a certain project there?
Brown: It could be the continuous change in the design and the parts. It also depends on the number of boards needed. Most engineers want to have direct input in the production to the point of coming to supervise the production on what is “their” board. We can do the low-volume production. On the front end of that board, we can also quick-turn build it, or do repairs and warranty work. It is very common to find engineers who want to switch parts out in the middle of the process, and we can do it right here faster than anyone else.
Warner: Do you see Naprotek as largely a regional company then? Liz and Mike, maybe you want to talk about your sales model?
Davidson: We have a lot of local customers, but we also have customers throughout the U.S. We're not specific to the West Coast.
Warner: What's your sales model then? Do you have reps? Do you have direct sales people?
Davidson: We have always followed the direct model. We have direct sales people and it's worked well for us over the years. Mike, you can speak about the rep portion, and how it works in the industry.
Brown: Using reps is a very long sales cycle and it takes too long for them to be paid, disqualifying a lot of them. I have the utmost respect for reps, but the majority of them are component reps with a shorter sales cycle and very few calls, as opposed to EMS.
Warner: Najat, do you have any concerns in regards to having available capital to scale as you go into box build and add lines?
Badriyeh: We have been in business for 20 years. Some of the equipment we bought in year one became old and perhaps obsolete. Remember that you are talking more than 15 years and that technology changes and evolves at a very fast pace. You must keep up-to-date with your equipment and your work.
Our equipment can handle down to .0105 very successfully. In our business, we deal with R&D, different technology, different components, and the latest developments. With our team Naprotek can do what nobody else can.
Regarding the new equipment cost and the financial issue, it has been my policy as CEO to maintain a cash reserve for the company over the years. It is essential for the support and the growth of business. In addition, considering our excellent financial situation, we have lines of credit that we can use if necessary.
Warner: To any of you, what keeps you in this business?
Davidson: It’s in our blood.
Brown: It’s exciting. Like Liz says, it gets in your blood. You get used to the excitement. You learn to love your customers, and it's fun and exciting because you're working on new products with new companies. There’s professionalism and the people that we work with are really smart people.
I'd say what's different about Naprotek than any other EMS that I've ever worked at is that Najat has done a great job at creating a really nice culture here. When I come in to work in the morning, I'm excited because I like where I work. Najat has a great management style and a very nice long-term vision, too.
Warner: Let's hear it for women-owned businesses!
Davidson: I would like to reiterate what Mike said: Our success relies on the expertise, seniority, and loyalty of our workforce. A main key for the success of Naprotek is employee retention.
It is part of the culture that we developed. We do not need additional time to train new people. Once they join us, they know their jobs, they work with the highest quality in mind, and they know multiple tasks within the process. Most importantly, we know that we can depend on them.
Brown: We are unbelievably multi-crossed as far as training goes. I've worked in places where there's one person who does this one job, and when they're gone it just stops. But here I think there's a lot of cross-training.
Warner: I've done a couple interviews lately with some pretty exceptional companies in which they said they view their employees as their greatest assets—far more so than the very best equipment available. What say you? Do you agree with that?
Brown: Anyone can buy equipment, but if you put in the right culture, where the people are invested and can deliver quality work on time, that shows up in how they are really treated and that it is real.
Badriyeh: We take our time when we interview people, trying to get people who fit with the group and who are really qualified to work with Naprotek team. I am very happy with the way we choose our employees and those who work with us.
Warner: Which is so refreshing, because sometimes when you get into a large corporate environment it doesn't often feel like that, does it? Looking forward to the next year or two, what do you see as industry drivers, trends, interests, or challenges?
Brown: I do see a consolidation coming because a lot of the smaller ones are undercapitalized. What you'll find too, is that many of the medium-sized EMS providers are really dependent on a few customers, so they're not very diversified. That is one of the significant advantages here—we are very diversified. The top 20 customers make up 80% of our revenue.
Warner: That makes sense. Any other trends you notice?
Davidson: There is a lot of discussion within our industry about automation and big data driving the business. Naprotek must continue to stay abreast of new trends.
Badriyeh: I have one major concern as we move forward in the future: Will the Valley have enough direct and talented labor? I worry immensely that the new generation does not want to go into manufacturing. Working as an assembler does not perk a youngster’s interest. We need workers who are willing to take on these jobs in order to maintain our industry.
Brown: It's too much work (laughs).
Warner: In fact, I talked to someone yesterday that said there are so many hot, alluring jobs with Google and software companies in the Valley that it fuels a lack of interest on the hardware side.
Brown: Absolutely. The glamour's in software.
Davidson: The glamour's not in manufacturing.
Warner: You're not the only one who's concerned about it. It seems like it's especially a concern here in the Valley because of the hot, cool jobs and the demographics.
Warner: What else do you see as unique challenges in this region?
Badriyeh: Sometimes the speed at which things are going scares me. What is going to happen in the future? Where are we going?
Warner: We live in a brave, strange technological new world, and none of us really know where it's going. Najat, do you have any final thoughts or comments about the required passion, dynamics, or unique challenges presented by being a woman-owned business? Because you are very unique in our industry.
Badriyeh: Trying to win over my first customer without a history and references in this industry was the biggest challenge I faced. I self-funded the business from the beginning. It takes a lot of sacrifice to survive until you receive the first order.
Warner: Do you think that was more challenging because you were a woman?
Badriyeh: I am not sure whether gender played a role in the beginning; that will always be a question in my mind. Is it the same for everyone? I waited three months for the first order and they were the longest in my life, the first two years were challenging in every way; it wasn’t easy to add a vendor, also for the same reason. Although it was a difficult period, it should not scare anyone from taking the step of starting their own business. My advice is to start without fear, do not give up too easily, but be prepared for at least a year of great sacrifice and patience in order to succeed.
Warner: You were ahead of the curve. That doesn't sound like a challenge; that sounds like you did a good job. It’s been a delight to get to know you and learn about your company, and how you're so relationship-driven all around, from your employees, to your customers, and the way you do business is really lovely.
Badriyeh: Thank you.
Warner: Thanks to you also, Liz and Mike, for your experienced insights as well.
Davidson: You're welcome, Judy.
Brown: Thank you. Come back anytime.
