Armbrust American

Lloyd Armbrust grew up watching his father work in manufacturing in Duluth, Minnesota—a city that had shrunk from 200,000 people to 16,000 by the time he left, a testament to America's industrial decline. He'd always wanted to get back into manufacturing, but took a detour into tech, building Own Local (a Y Combinator-backed company) to $11 million in revenue. When the pandemic hit in early 2020, Lloyd watched in frustration as the country scrambled for masks. Sam Altman's call to buy a billion masks from China at 38 cents each crystallized the problem for him: "Why are we going to spend $350 million buying a billion masks when I could build the capability of making a billion masks for $5 million?" He did the math and decided to act.

Lloyd bought an assembly line in April 2020 and shipped his first box of surgical masks on May 20th. What started as a personal passion project quickly escalated when an entrepreneur friend pointed out he'd need to scale massively. Lloyd put together "probably the worst deck I've ever put together" and pitched his investors from Own Local. They responded with $5 million in capital raised over a weekend—the fastest fundraising of his career. Rather than follow the traditional VC playbook of chasing billion-dollar exits, Lloyd structured the deal differently: a 60-65% royalty until investors hit 1x return, then declining to 20%, 15%, 10%, and 5% as they earned multiples. This aligned incentives for a profitable, sustainable business rather than a speculative unicorn chase.

The manufacturing operation required more than just buying equipment. Lloyd converted warehouse space into a clean room facility, spending roughly $250,000 on HEPA filtration, air showers, epoxy floors, and epoxy walls. He sourced off-the-shelf robotics from Japan and components from Chinese manufacturers with 10-20 years of experience, then integrated them into a fully automated assembly line. About 30% of the final machine was made in the U.S. The vertical integration went deeper: Lloyd didn't just assemble masks from imported fabric. He built the capability to process raw polypropylene pellets into the fabric itself, giving him massive cost advantages and future flexibility.

The early market was hungry. With surgical mask shortages everywhere, Armbrust American went direct-to-consumer through Amazon and its own website, as well as direct to government agencies and hospital systems. Lloyd built a 15-person sales team—the only surgical mask manufacturer to have one, he notes—because cutting out middlemen (retailers, group purchasing organizations) made the unit economics work. He could afford to employ people dedicated to sales because manufacturers typically lose 40-50% of margin to distributors and resellers. By selling directly, Armbrust American kept those margins and reinvested in growth.

In roughly six months of 2020, Armbrust American hit $10 million in revenue. At peak, the company produced 1 million masks per day across three shifts. Unit costs dropped to 5 cents. However, scaling production was harder than Lloyd anticipated. The machines ran far below their theoretical capacity initially, requiring massive investment in training and standard operating procedures. Growing from 4 employees to 50 overnight exposed the gap between software scaling (spinning up AWS instances) and physical manufacturing. What looked like a weakness—having to build operational muscle the hard way—became an advantage: competitors trying to replicate the model would face the same painful learning curve.

One SKU (surgical masks in various colors) drove almost all 2020 revenue. Lloyd stayed focused rather than diversifying, though he was already developing N95 production capacity and exploring adjacent PPE products like head coverings and boot coverings.

By the time of this interview, the first cohort of investors was nearly paid back their 1x return and about to transition from the 65% royalty to the 20% tier. Lloyd had 2,000 customer-investors using the same royalty model to fund additional machine purchases, creating a customer-owned manufacturing network. He was expanding into N95 masks (which he believed no one had yet manufactured at scale in the U.S.) and other PPE products built on the polypropylene base unit.

Lloyd was bullish on manufacturing's future in America. He argued that technology would eventually "eat alive" the middleman layers that still dominated traditional manufacturing distribution. Direct-to-consumer manufacturing with lean sales teams could compete with overseas production not through labor cost arbitrage, but through cutting out the parasitic distribution chains. Looking ahead to 2021, he hoped to "4x" revenue and see Armbrust American become a blueprint for bringing strategic production back to U.S. soil.