There has 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 venture capital (VC) investment in Wiivv Wearables, a Canadian startup 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 is 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 calls “Industrie 4.0”, General Electric calls the “industrial internet” and what Global Corporate Venturing and Leif will address in the Advanced Materials Society’s November 10 event in London, which we launch today.
“Wiivv’s business is an ideal match for Evonik,” says Bernhard Mohr, head of venture capital at Evonik. “Through our investment in Wiivv, we are supporting the market launch of one of the first individualised 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 is estimated at $4bn a 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 in the 3D printing process. Evonik is investing in a business that will enlarge the number of innovative applications for one of its speciality chemicals. This is classic corporate venturing – 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 VCs 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 are seeing an encouraging impatience to adopt advanced materials because that is 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 is just being redefined. We know that there is demand for smaller, faster and more energy-efficient electronics across a growing range of industries as the internet of things becomes a reality. We know that this demand cannot 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 lifetimes 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 this year.
Other investors in Wiiv included Formation 8, the US VC making a big play for 3D printing. Formation 8, which is linked closely 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 am guessing it will print bikes, but I may be disappointed. Buller says he will 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 would 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.
Disclosure: Enso Ventures is a sponsor of the new GCV Advanced Materials Society’s November 10 event in London.