Last year, more than $6.5 bn of venture funding have been invested globally into smart manufacturing start-ups, up from only $0.6 bn in 2013. This significant increase signals the emergence of new platforms in a sector which has historically been dominated by relatively stable, large players. The nucleus of this development is in the U.S., which is by far leading in terms of venture funding. Only here and, to some extent, in China do entrepreneurs and financiers have sufficient access to capital and technology to place big bets on the ascent of new industrial platforms. Nearly two-thirds of global venture funding for smart manufacturing platforms were raised by U.S. companies.
We see three key drivers behind this development: Firstly, a digital re-invention of the capital goods economy. This is e.g., indicated by the projected growth of OEMs’ IT spend: from $0.2 tn in 2008-2017 to more than $0.5 tn in 2018-2027. Secondly, manufacturing has become the most data-rich environment on earth: industrial companies are creating more than 1,800 petabytes of data annually, far ahead of any other sector. And, lastly, the combinatorial effects of technology, where hard- and software combine to form a cyber-physical production stack that encompasses everything from physical production to orchestration, intelligence and design.
Let me quote just two examples for well-funded American start-ups at the intersection of software and manufacturing that may define how we will think about the capital goods economy in ten years’ time. The first one is Bright Machines, an example for a full-stack manufacturing start-up seeking to revolutionise the manufacturing sector by introducing fully autonomous cyber-physical production systems. The company is a spin-off of Flex Inc. and aims to combine AI, computer vision, IoT and robotics to autonomous, self-healing “robotic cells” that will combine to form the “lights out factory”. Bright Machines officially launched last year and received $180m of seed funding. My second example, Oden Technologies, takes a more evolutionary approach. Its aim is to harness data from existing facilities to create actionable insights, thereby evolving and optimising an existing factory stack. Oden has so far managed to roll out their data product with a relatively modest $15m funding amount.
The capital for these companies is provided by a mixture of mainstream VCs as well as a new breed of highly specialised smart manufacturing investors, such as Eclipse or Lux Capital. Additionally, the venture world has also been discovered by large strategies to get access to new technologies: GE has e.g., orchestrated more than 70 venture investments in this space over the last five years, followed by Intel, Alphabet, Cisco, and Qualcomm.
Together, these founders and investors are creating a re-imagined U.S. capital goods economy that will hatch the manufacturing platforms of tomorrow.