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Techshop Files Chapter 7 Bankruptcy In San Jose

In a sad blow to pursuers of curiosity and creativity everywhere, TechShop, the company that grew from one location in Menlo Park, California to 10 locations in the U.S. and 4 internationally, has closed its doors and filed Chapter 7 bankruptcy. TechShop was a pioneer in the growing trend of “maker spaces” that provided open access to manufacturing tools and high tech equipment such as laser cutters and 3D printers.

TechShop History

TechShop was founded by Ridge McGhee and Jim Newton, a science advisor from the hit reality TV Show Mythbusters and robotics teacher at the College of San Mateo. The two began the company in 2006 as a way to offer students and tinkerers alike the access to equipment that would be far too expensive to purchase and maintain on their own. TechShop’s guiding motto was “Don’t try it at home, try it here!”, and by paying an annual membership fee and taking a few safety classes, you were given free range to utilize everything from sewing machines to woodworking equipment to welding rigs.

TechShop Chapter 7 Bankruptcy

The decision to file Chapter 7 bankruptcy came as a surprise to nearly everyone as there was no formal announcement. Like individuals filing for Chapter 7 bankruptcy protection, companies can elect to declare bankruptcy under Chapter 7 of the U.S. bankruptcy code, which initiates an immediate liquidation. For this reason, Chapter 7 bankruptcy is commonly referred to as “liquidation bankruptcy”. While most corporations and LLCs elect to file Chapter 11 bankruptcy, which allows them to stay in operations while the principles create a plan to reorganize their debt, companies that want to quickly and more easily sell off existing equipment and inventory can utilize Chapter 7 bankruptcy in California and other states.

San Jose Company Says Farewell

The Chapter 7 bankruptcy filing and subsequent closing of the California based innovation incubator was of additional shock to those that remember that in 2015 alone, the company hit $14 million in revenue and received widespread recognition for developing the do-it-yourself (DIY) movement. TechShop reported that despite charging up to $1,650 per year for annual membership in the DIY workshop and fabrication studio, many of its locations were bleeding money. Its Pittsburgh, PA location stated it was losing as much as $30,000 each month. In a memo put out this week from the Dan Woods, the CEO of TechShop, the company mentions “we’ve been operating on exceedingly low cash balances for quite some time. Until recently, this meant late payment to instructors and vendors”. Woods also mentioned that,

   “Over the past week we have worked tirelessly to explore options for filing Chapter-11 bankruptcy. This alternative would have allowed us to reorganize and restructure our debt. To file Chapter-11, however, we would need cash to pay an even further reduced workforce, instructors, rent, utilities, insurance, and the like. That is money that we simply do not have. I can no longer ask instructors, employees, and contractors to work when we do not have adequate cash reserves to pay them. Most regrettably, the only viable path forward is filing Chapter-7.”

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