MFG Austin Ep 15: Nate Horvath, CEO of Staccato

Nate Horvath of Staccato on how his time at institutions renowned for developing leaders, including the US Marine Corps and Stanford Business School, shape him today, the line between manufacturing and craftsmanship, the changes in the gun industry, and what we can expect from Staccato in the future. Many experts consider Staccato’s products to be some of the finest shooting guns in the world.

It’s amazing, Ed. In terms of what any of us do for work, I think you can have a job, you can have a career, or you can have a mission. At Staccato, we have a mission. Our mission is protecting freedom. And everyone at Staccato cares very deeply about that. Every day our products are used by thousands of police officers in over 1,200 departments nationally to protect their communities. And beyond law enforcement, there’s an even larger community of lawfully armed civilians who depend on our pistols to protect themselves and their families. So, we really believe in what we’re doing. We’re purpose driven. And I love every day. I love coming to work, and I think most of our team members do as well.

There are a number of things that go into it. We like to think about the craftsmanship as well as the precision manufacturing that go into every pistol. On the craftsmanship side, it’s really the design— the attention to every little detail, both functional and cosmetic. Things like the precise setting of the trigger weight, the zeroing the sites, the deburring of any sharp edges, the removal of tiny machine tool marks—I put that all into the craftsmanship bucket.

Historically, Staccato was very much a gunsmith. A very small production gunsmith company. But to scale and to bring our product out to a broader audience, we had to embrace precision manufacturing. And the precision manufacturing side of the house is really about repeatability. Being able to make the same component every time, to very precise tolerances. We’ve invested tremendously in our shop. You saw the shop years ago and you’ve seen it recently. And as you know, we have lots and lots of new CNC machines that are generating, producing our frames, and our slides. And then we’ve got our gunsmiths on the assembly side that put it all together. For us, it’s the magic in that combination between materials, the precision manufacturing, and then the attention to detail in the assembly, and the gunsmithing.

We’re currently at just over 200 team members. We’re bursting at the seams in our current facility. We’re going to be moving into a new facility in Florence, TX, just up the road from where we are in Georgetown. The new facility will have a 75,000 square foot manufacturing floor and then about 15,000 square feet in terms of office and admin. It’ll almost triple the size of our footprint today. But the thing that we’re most excited about is that we’ve designed the flow from beginning to end. We’re into white space, so we had a blank sheet of paper to start with versus growing over 20-plus years along the way. Our flow today wouldn’t be in any lean case study. Well, maybe the beginning of a lean case study, not the finished product yet.

Yeah, it’s super exciting. I’m glad you mentioned it. The Staccato campus is on 40 acres. We’re co-located on a larger piece of property that’s about 750 acres, which will have a variety of shooting sports-related assets there. We already have three nice outdoor ranges. We’re adding a couple of sporting clay courses. In about 12 months, we’ll have an indoor range as well. So, people will be able to shoot indoor, outdoor, sporting clays, pistols, rifles, carbines, the whole nine yards.

Initially the idea was we want people to come out, see their pistol being made, take a factory tour, go out and shoot it as it’s coming off the line and through quality. Kind of like a Porsche or a BMW driving experience. And then it grew from there because we have this great piece of property, and we know a lot of our pistol owners also enjoy other shooting disciplines. So, we thought since have the opportunity, let’s go ahead and offer the whole nine yards. We’re really excited for this happening later this summer.

Well, the gun business has grown. It’s grown considerably, driven largely by new gun owners over the last five years. There’ve been more than 5 million new gun owners in each of the past three years. Maybe a little bit less in 2022—things kind of moderated a bit. But during the pandemic, there were close to 60 million guns sold during the 2020 and 2021 timeframe. So, the industry has been growing. Concealed carry permits have also grown dramatically. They’re now well more than 20 million concealed carry permit holders across the United States. And that number’s a couple of years old. It’s probably more like 22 or 23 million by now. At Staccato, our business has also grown dramatically. Today we produce more pistols in a month and a half than we did in an entire year in 2018. We’ve really, really grown and we’ve outpaced the market.

But at the same time, we’ve changed and focused our efforts. Back in 2018, we had over 30 different pistol products with over 3000 different parts. It was a very complex operation. One of the first things that we did when I got more involved in the business was look at that and try to figure out if we were really making money on some of these skews when you fully allocated costs and inventory, carrying costs, and the complexity. We narrowed the product line to five pistol models and our focus was making the very best five pistol models that we could. And that’s served us well.

Also, we’ve entered the law enforcement market. Most of the top SWAT teams in the country—everyone from LAPD to Miami Dade, to Dallas SWAT, to the US Marshals Special Operations teams, and even here locally, the Austin PD SWAT team —they’re all running Staccato pistols now. Mostly because they found a distinct improvement in their performance with the Staccato pistol versus what they had been carrying previously.

It has a huge impact as you might imagine. Oftentimes, we’ll have our end users come in and talk to the team members and talk about why they chose the Staccato pistol. In some cases, we’ll have officers that have had to, unfortunately, utilize their pistol and they’ll share stories about how they’ve used a Staccato to protect someone or to protect their partner. And that resonates very deeply throughout the organization. Once you leave one of those meetings, I can tell you that everyone is incredibly focused on thinking about the next pistol that they’re making, where that’s going, and ensuring that it must be the absolute best. So, it’s tremendously impactful.

It doesn’t really influence the way that we’re running our business. As a firearms manufacturer, we must navigate that climate, which is not just political. There are businesses that don’t want to bank a firearms company. There are businesses that don’t want to insure a firearms company. Most of the technology industry is not especially favorable towards the firearms industry. So, you can’t advertise, you can’t use digital advertising, or page search, or things of that nature. We work within the constraints. We’re the most highly regulated industry in the United States. And we operate within that framework, and we do so lawfully. We believe in what we’re doing, and we try not to really deviate or think too much about it. We focus on making a great product for great people. And we’re moving forward every day.

I joined the Marine Corps after high school. I was an enlisted Marine. I started at the bottom and just spent four years in. So, not a career, but it was enough time for me to really appreciate the value of teamwork and culture and leadership and the importance of people. In the Marine Corps infantry, you’ve got a fire team, and then a squad, and then a platoon, and then a company. You could see performance of these groups when they competed against one another really come down to a hundred percent leadership and culture. Those that had great leaders and strong cultures they would win, whether it was an obstacle course race, whether it was rucking up to the top of a mountain, whether it was marksmanship—they just performed better. And so that really taught me how important the people element of everything was. And I’ve carried that through my entire career since then.

I got out, went to college and majored in accounting. I got my CPA, then went to work for Arthur Anderson, back when they were still around. I did a few other things, and ultimately went back to Stanford Business School, got my MBA and then went into the investment field. I worked for a big investment firm for about four years and then I joined a smaller firm. It was really kind of an investment holding company—a family office structure—where we were actively taking control positions in a variety of different industries. We were maybe not contrarian, but we weren’t scared away from things that other folks might be.

One of the things we looked at along the way was the firearms industry. We really liked the long-term trajectory of the industry, and we believed in it. That led to the acquisition of STI, the predecessor brand to Staccato. We acquired that business in the middle of 2016. Then after a year and a half or so, my boss sort of gently asked or “voluntold” me that perhaps it would be good for me to take on an interim leadership position to help the business get squared away. That was 2018. At the end of that year, I had really enjoyed it and we had made great strides in helping stabilize the business.

When we invested, there wasn’t a lot of precision manufacturing. Everything was a little “mom and pop-ish.” It needed some work, which we knew. After spending the year doing that, working with the team, being on the operating side of the business, I loved it. So, my boss gave me the opportunity. He asked if I’d like to run the business full-time. I’d leave the investment side and go to the operating side. I still work for the same boss. I’ve worked for the same guy for 15 years. He’s amazing. But for the last five, it’s been on the operating side, and I’ve really enjoyed it.

Stanford was an incredible experience. I learned a tremendous amount there. One thing that I’ll point to, which I have used from the very beginning, and I continued to use today, is just a database decision making mindset. At Stanford, one of the things they taught you was to focus on the data to make your decisions. People oftentimes can become emotional, or they think, oh gosh, we should do this. Or they’re doing that so we should do the same thing. Versus really looking at the data, listening to your customer, and doing economic analysis to decide. I’ve used that time and time again at Staccato.

One of the things we’ve done in the past five years is we’ve insourced a tremendous amount of manufacturing. Things that we used to buy; we’ve begun to make them ourselves. That’s really helped because it’s stabilized our supply chain. We make a higher quality product internally and it also allows us to change more quickly. If we find an improvement, we can implement it immediately.

I sure didn’t Ed, but I tell you, I love it.

Today, our brand awareness is still small. Small, but it’s rapidly growing. Over the next three to five years, I believe that Staccato will develop the same type of brand awareness in the firearms industry that a Porsche or a Ferrari enjoy for performance in the auto industry. And that’s really where we’re headed. I believe that’s where we will be.

It does. I’m not a native Texan, as you know, but I love Texas. I think Texas truly reflects the American spirit and the Texans that we have here and hire, they’re hardworking, they’re smart, they’re constantly looking to improve. Texas is a definitely a pro-business state. Our company was founded here and it’s been great for our business. So, we love it here. As I mentioned, we’re investing heavily in Florence and so no plans to leave anytime soon.