Fourdotzero: startupland or corporateville?
Industry 4.0: for start-ups or large corporate?
With the emergence of smart manufacturing, what we refer to as the fourth wave of industrial revolution or industry 4.0, and the rise of autonomous cyber-physical systems disrupting traditional industrial setting, the global competitive field in supply chains is reshaping. The question is whether the new evolving landscape is the traditionally “start-up disruptor” ecosystem, or there is more to it.
Before answering the question, we need to provide a better understanding of industry 4.0: the notion of fourth wave of industrial revolution pivots around the emerging of autonomous systems in manufacturing and technologies, driven by a number of technology-enabled – and sometimes technological – vectors. In particular, our definition of fourdotzero, includes 8 vectors:
- Autonomous robots, both in the production and movements of goods and parts
- Simulations: that allow for agile design testing, and post-design development of procedures, specific production activities and training and support materials
- Vertical and Horizontal Integration: where traditional manufacturing barriers between multi-tier suppliers and functions are eliminated
- Industrial Internet of Things: with the increasing number of connected sensors, devices and drones, collecting data and executing actions
- Fog Computing: a network infrastructure which uses locally based clusters for shared computing and data storage
- Additive Manufacturing: which enables 3D printing of prototypes as well as spare parts
- Augmented Reality: which plays a role in information management, training and customization
- Big Data and AI: albeit separate technologies in the context of smart manufacturing they go hand in hand, as they need each other. Used for controlling advanced robotics and autonomous vectors, as well as in production planning and optimization, quality assurance, maintenance and so much more.
Who is driving the disruption in industry 4.0?
Global manufacturing is a rather concentrated industry. Nearly 85% of global output is produced by only 15 companies. Four countries – USA, China, Germany and Japan – are responsible for 50% of global output. Despite that, there is an increasing amount of money invested in smart manufacturing technologies developed by small and medium size enterprises. The level of investment is growing exponentially, having reached in excess of 3B USD in 2017. This is, of course, good news for all prospective entrepreneurs in industry 4.0, as there if definitely lots of opportunities for new companies and entrepreneurial ventures.
To understand better the investment dynamic, we mapped all the important start-ups in the industrial AR/VR segments, industrial robotics and wearables, with the investors in the space: from the visualization of the networ, it emerges that there are few companies which have multiple investments in these adjacent technologies, almost as a way of diversifying their risks. Among those investment firms building eco-systems, few well known names stand out: GE Ventures, Qualcomm Ventures, Caterpillar Investments, Cisco, Intel Capital and so on. More interestingly, the insight that among the top 10 investors in Industry 4.0 only two are traditional venture capitalist: all the others are either accelerators or corporate venture capitalists, representing an industrial or electronic giant betting into the space. This makes a critical difference for entrepreneurs, as traditional financier require a financial exit, whereas corporate venture capitals have other strategic reasons for investing. The bottom line is that, while there is plenty of money, a lot of it comes from large industrial and electronic conglomerates, who are well aware that disruption is coming, and they are helping driving it by hedging their risks. The benefit of industrial investments is clearly the potential to get as well early customers, from within the same holding. The drawback come with the exit expectation: in most cases, these ventures receive investments with the idea of being acquired not IPOed. Finally there is one last consideration, related to the proportional increase of industrial investment vs. financial once: the expectations about the type of company change: with corporate VCs taking the lion’s share, more and more of the companies receiving funds are already generating revenues: nowadays nearly 50% of companies receiving seed funding have already generated revenues, as opposed to 9% in 2010. Commercial viability becomes a conditio sine qua non for raising funds, whereas this – traditionally – was not the case for early investments in tech companies.