Investing in the Future Part 3 of 3: What’s Next for Venture Capital in Additive Manufacturing?

In this final chapter of my story about raising venture capital for a hardware startup, I discuss the future of Additive Manufacturing, where the industry is headed, and where I believe the investment dollars will flow to in the years ahead. My hope is that you can use my experiences and foresight to better position yourself to find the right partner for your venture. Good luck!

Even though I’ve recently written about the challenges associated with fundraising for hardware and “full stack” companies, compared to other types of manufacturing entities, companies in the additive manufacturing space are lucky. Irrespective of the technical domain in which you operate, no startup will successfully fundraise without a true innovation, so we feel fortunate that ours is a technology on the cutting edge. Our industry is experiencing sustained double-digit growth rates (potentially even through COVID… but we’ll see). There are countless next-generation applications across a number of vertical markets from aerospace to biomedical to electronics manufacturing that make it easier for startup companies in our space to attract investor attention (closing the deal is always a challenge). An entrepreneur trying to build traction for a hardware manufacturing company in a more mature market sector such as battery technology, for example, might have a tougher time finding funding unless the power of their technical breakthrough is sufficiently compelling.

And then there’s COVID-19, which has totally upended any logical, orderly path to securing venture capital for anyone in any market. Using the pandemic as a watershed event, let’s talk about where venture capital was/is going pre-/post-COVID in the additive manufacturing space.

I read with great interest Sarah Goehrke’s recent article in Forbes, “These 3D Printing Companies Have Raised Millions During the Pandemic.” Part of the attraction to our industry is our agility. Additive manufacturing requires little to no tooling, allowing for fast transitions of production lines. During the early days of the pandemic, many 3D printing companies began to rapidly produce urgently needed items like PPE, spare ventilator parts, and testing swabs. Here at Essentium, for instance, we 3D printed thousands of reusable face mask frames for distribution to first responders.

Goehrke goes on to say that beyond COVID-related applications, additive manufacturing has come into play as a solution to disrupted supply chains, and to eliminate the delays and costs of international shipping. Investors have noticed, and she cites several examples of 3D printing companies that have recently announced tens of millions of dollars in new funding. I heartily agree with Sarah’s assessment that “doing so during an economic downturn sets these companies even further apart, showing that they have something so special that its future can’t be put on hold.”

One recent example is ICON, a company that 3D prints houses. Actually, their technology is in the area of extruding quick setting, high-strength concrete. They have the software expertise, material science, and the robotic technology to print large structures very quickly and affordably. Focusing now on scaling, ICON just raised $35 million in Series A funding to help solve the global housing crisis.

An example on the software side is Hewlett Packard’s recent investment in an application by a company called Dyndrite. The purpose of this software kernel is to speed the calculation of geometric shape modeling to make 3D printing more efficient, accurate and to create solid one-piece objects that simply cannot be manufactured by traditional methods. HP just adopted the Dyndrite kernel technology to power its next generation of additive manufacturing software solutions.

There are other cases of filament-focused businesses, metal 3D printing companies, and biomedical device ventures receiving VC funding, as well as a flurry of merger and acquisition activity in the additive manufacturing space. The fact that investors are still pouring millions into this manufacturing sector during a pandemic is telling. But what’s next?

As we emerge from this crisis, I believe there will be continuing interest in many facets of 3D printing as more companies realize the advantages of additive manufacturing and leverage the advancements of companies like ICON, Dyndrite and ideally of course, Essentium.

Over the next 10 years, polymer development should be an area of massive growth and investment as new applications in the polymer space, like end-use consumer parts, are created and realized at greater scale. Obviously I’m somewhat biased, but looking at the funding trajectories and production-related success of metal additive since 2010 may provide a pathway to similar growth and production-scale opportunities in the polymer space over the next decade. Outside of classic polymers, next-generation biomaterials, carbon fiber-infused filaments, nano particles, and polymer/metal and polymer/ceramic printing technologies all remain postured to garner significant venture funding in the next phase. 3D printing software is another sector that should attract significant interest as engineers seek to go from CAD to print —faster. The printing industry is now at a point where the design paradox of the past has been reversed: widgets can be built which cannot be modeled in CAD or adequately prepared in build-processor software packages. And finally, industrial transformation is another near-term opportunity for growth driven by 3D printing. As manufacturers build the smart factories of tomorrow, they will integrate additive manufacturing methods to on-shore or localize production and reduce dependence on geographically extended supply chains.

However, these companies will only get funded if the entrepreneurs driving them sufficiently network to find the courageous investor or identify the VC fund written with the mandate to fund a materials- and hardware-based venture. Once again, I exhort investors to set up additional funds and broader mandates today so they can be ready to jump on the manufacturing opportunities of tomorrow. But at the same time, hardware- and materials-focused entrepreneurs need to look for the right kind of money—patient capital—in an investor that shares your vision for something besides an immediate ROI. Set the proper time horizons and the right expectations for your growth cycle, and you will be on your way to building a successful venture.

So, there you have it. I’m far from a fundraising expert, but I’ve been there and done that, as they say. My hope is that after reading this you might navigate successfully through your early expectations, and find the like-minded capital partners you need on your financing journey.

Good luck!

Essentium, Inc. provides industrial 3D printing solutions that are disrupting traditional manufacturing processes by bringing product strength and production speed together, at scale, with an open ecosystem and material set. Essentium manufactures and delivers innovative industrial 3D printers and materials enabling the world’s top manufacturers to bridge the gap between 3D printing and machining to embrace the future of additive manufacturing.