Issue #13 - The Future of Manufacturing
👋 Welcome to Issue #13 👋
Topics this time: VC money into industrial startups, service vs. license revenue and smart robots that play games.
📮 SF and Boston
I'll be in SF and Boston in the next two weeks to meet a lot of founders and VPs of industrial companies. Let me know if you are around as well or if there is somebody I should meet. Thanks!
👩💻 Hannover Messe => founders wanted 🔍
I'll do a small workshop at Hannover Messe in April about how to escape the pilot purgatory. The date isn't fixed yet but please let me know if you would like to participate.
💸 Funding Strategy for Industrial Startups
I published a new post about funding strategies for industrial startups which you can read here. The baseline is that I think either you can raise a lot of money early on or you have to do everything you can to be capital efficient and have a long runway until you hit Product-Market-Fit. Why? I'll explain it in my post.
As always, I hope you enjoy reading it and if you do so, any feedback, shares or links are much appreciated!
Many thanks again for the feedback on the NL - I will work and iterate on it.
Disclaimer: thoughts and opinions expressed in the newsletter are my own.
What I enjoyed reading
#ecosystem#
🏭When I summarized my thoughts about the last year, it was pretty clear that the industrial startup ecosystem evolved by an order of magnitude. There are definitely more companies, more funds, and more money is floating in the sector. While this is my subjective view, I'm glad that there is also some data now that proves this development. As you can see in the graphics below, both the amount of VC money raised and the number of deals grew a lot recently.
#ecosystem#
🏭 Manufacturing is cool again, yeah! I think it was always cool but this article highlights a lot of interesting numbers about the US manufacturing sector:
1) For the past several decades, the number of professionals entering manufacturing had decreased.
2) In the US, jobs in manufacturing have grown at a faster rate than at any time in the past 20 years.
3) Manufacturing accounts for approximately one-third of the US GDP.
4) Each manufacturing employee generating another 3.4 workers elsewhere along the supply chain which means manufacturing is at the heart of the economy (source: Manufacturers Alliance for Productivity and Innovation).
#robotics#
🤖 Many of you probably know Jenga. It's a complex game where you need steady hands. Now MIT researches have taught a robot how to play it and the results look really promising. The robot estimates the state of a piece and simulates possible moves to decide on the best one. What's really interesting here is that "unlike in more purely cognitive tasks or games such as chess or Go, playing the game of Jenga also requires mastery of physical skills such as probing, pushing, pulling, placing and aligning pieces. It requires interactive perception and manipulation, where you have to go and touch the tower to learn how and when to move blocks" according to MIT assistant professor Alberto Rodriguez. Watch the video yourself here.
#M&A#
💰 Christian Dahlen who is an active business angel and counts e.g. Wandelbots to his portfolio, recently wrote a piece about the importance of the $300M Relayr exit and how the company got there. He lays out the four steps that Relayr took to scale its business from his point of view:
1) Strong focus on the business outcome.
2) Understand the buying center.
3) Integrations in the ecosystem.
4) Structured Go-to-Market strategy.
About industrial Startups and Companies
#warehousing#
📦 It's obvious that warehouse automation is a very important topic for Amazon and it's not too long ago that it acquired Kiva Systems for more than $700M. Just recently, it also invested in a French company that is working on self-driving forklift trucks called Balyo. The deal would be exercised to the full 29 percent if Amazon orders up to 300 million euros of Balyo's enabled products in the future. Watch the forklifts in action here.
#fundraising#
🤑Eclipse Ventures (US) is one of the most well-known funds that invests in full-stack manufacturing and robotics startups. They count companies such asInstrumentaland6Riverto their portfolio and led the massive $179M round in Bright Machinesrecently. Good news for the ecosystem that they just announced their new $500M fund to double down on that.#3dprinting#
📇 It's hard to write this Newsletter without covering 3D printing and one name that often comes up is Desktop Metal. The company is currently on a run and just raised another $160M which makes it the highest-funded private 3D printing endeavor in history.
It's worth mentioning that they have raised part of the money from industrial companies (and their VC arms) such as BMW, Ford, Panasonic and, Koch that led the latest round. Raising from strategic investors can definitely make sense. However, I think not in your Seed Round since there are too many things unclear and it decreases your chances to get acquired by a competitor significantly (happy to discuss).
#factories#
✈️ If you want to build electrical flying cars, there is a high chance that you have to reinvent the whole manufacturing process. Therefore, Munich-based Lilium that has raised more than $100M, is trying to use and develop truly digitally-native production systems that will support the people on the shopfloor and improve the efficiency of the system. One of the key aspects is that it is very people-centric. At the same time, the Head of Industrial & Production Planning is pointing out that "in the industrial context the user is a bit of an afterthought, so software is designed for functionality rather than user-friendliness". I think this confirms that there is a big opportunity for new entrants.
Additional thoughts on recent development
Service vs. License Revenue #businessmodel#
My impression is that there is an ongoing discussion between founders and investors on what the right level of subscription revenue is in order to raise a new round of funding. I think it is misleading if investors use the same framework for every software company - e.g. AI, I40, traditional SaaS - since they develop very differently. When I stumbled on this tweet from David, his thoughts really resonated with me and I think the same holds true for the manufacturing sector:
"I think I a lot of VCs didn't know what to make of Carta bc of its "services revenue." It's a trend that I think you're going to see a lot more of in the coming years. Core subscription software + service-level revenue will drive stronger cash flow and LTV. "
Industrial Landscape #landscape#
I'm working on a new update to my industrial startup landscape. There are now in total ca. 250+ companies in the landscape - here you can see the changes within one year:
Again, Thanks to everybody for supporting this newsletter and for sending me interesting links. As always, any input, shares, and feedback are always warmly welcome 🙏
Robin