This blog was initially published in the September issue of Global Corporate Venturing. Disclosure: Enso Ventures (quoted below) is a sponsor of the Advanced Materials Society (AMS) programme, Venturing in the Advanced Materials & Manufacturing Nexus. The Advanced Materials Society is co-organised by LEIF. Alex Baum of Evonik Venture Capital, an investor in Wiivv (see below) will be among the speakers at the AMS conference in London on November 10th.
There’s been some very intriguing venturing along the advanced materials and advanced manufacturing value chain over the summer. For example, European chemicals giant Evonik made a VC investment in Wiivv Wearables Inc, a Canadian start-up that plans to integrate electronic sensors into 3D-printed shoe insoles that use Evonik’s chemicals. Yes, the previous sentence requires re-reading doesn’t it? A chemicals company investing in shoe insoles – what’s going on?
Wiivv is a fascinating deal because when you unpick its financial and strategic rationale, you get a glimpse of the industrial transformations being forged by the convergence of advanced materials and manufacturing. This is what Germany call ‘Industrie 4.0’, GE calls the ‘Industrial Internet’ and what GCV and LEIF will address in the Advanced Materials Society.
“Wiivv’s business is an ideal match for Evonik,” says Dr. Bernhard Mohr, head of Venture Capital at Evonik. “Through our investment in Wiivv, we’re supporting the market launch of one of the first individualized mass-produced articles to be manufactured by 3-D printing.”
Currently, 3D printing is mostly used for prototyping new products. When the product goes commercial, conventional volume manufacturing kicks in. But Wiivv will use 3D printing for mass production of bespoke insoles (because our feet are all different). The market for insoles may sound ‘nichey’, but Wiivv says that in the US alone, it’s estimated at $4bn per year (growing at 4%), which is not a bad niche.
The strategic link for Evonik is that Wiivv uses one of its high performance polymers – polyamide 12 – in the 3-D printing process. Evonik is investing in a business which will enlarge the number of innovative applications for one of its speciality chemicals. This is classic corporate venture capital – invest in innovation that opens new growth areas for your business, rather than wait to be out-innovated.
“[Wiivv] also gives Evonik access to the highly innovative growth market for wearables,” says Mohr.
Wearables (electronics worn on the body) is a market poised for explosive growth that every corporate wants to access. The good news for venture capitalists focused on advanced materials and manufacturing is that wearables will rapidly accelerate the update of vanguard manufacturing techniques such as 3D printing, while also stimulating demand for speciality materials and chemicals that are turned into products through advanced manufacturing.
“We’re seeing an encouraging impatience to adopt advanced materials because that’s how companies can get a competitive advantage in very competitive markets,” says Kirill Mudryy of Enso Ventures, the early stage advanced materials investor based in London and New York.
He adds: “At heart we still believe that Moore’s Law has not changed. It’s just being re-defined. We know that there is demand for smaller, faster and more energy-efficient electronics across an ever-growing range of industries as the ‘internet of things’ becomes a reality. We know that this demand can’t be met with current material technologies, that VCs grossly neglected this area, and that this is therefore creating a choking point. Or to put it differently and more positively, it creates an opportunity to invest in advanced materials and enabling technologies that allow engineers to design new and innovative products.”
Enso’s investments include Picodeon, a Finnish thin film deposition technology company offering dramatic improvements in batteries, which is headed by Applied Materials veteran Fergus Clarke.
“The low performance of batteries, bulky design, and short life-times are classic choking points for the internet of things,” says Mudryy.
Batteries, wearables, industrial internet applications, 3D printing and other forms of advanced manufacturing are the focus of a handful of new corporate and financial venture funds that have been launched over the summer or just before.
Other investors in Wiiv included Formation 8, the US VC making a big play for 3D printing, as a part of what it calls the overall ‘hardware’ sector. Formation 8, which is closely linked to the manufacturing giant Flextronics, announced a new $75m ‘hardware’ fund in May. Wiivv is its second 3D printing investment. Its first is Velo3D, which is led by Benny Buller, formerly of Khosla Ventures. Currently in stealth mode, I’m guessing it will print bikes, but I may be disappointed. Buller says he’ll tell me more in November.
Airbus Ventures announced a $150m fund. Seraphim Capital, a UK financial VC, announced that its latest space-focused fund was backed by Airbus and Thales, and that the European Space Agency will have a seat on its advisory board. British vacuum cleaning giant In May Dyson made its first venture investment in US battery technology business, Sakti3.