Industrial tech insiders: the next big opportunities in industrial innovation
Industrial Tech is on a rapid growth trajectory, but is it still an underfunded opportunity and what are the emerging trends?
Our recent report, in partnership with Speedinvest shows that while traditional industry accounts for 30% of global GDP, Industrial Tech investment accounted for just 3% of European VC investment in 2020 (albeit growing rapidly, up 8.8x since 2014). As investment and interest in the sector ramps up, we spoke to two industry insiders, for their insight on the trends and developments of European and global industrial tech innovation.
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Jordan Shapiro, Associate, Software & Services, Consumer & Internet, NEA
What’s the US perspective of the European industrial tech startup ecosystem?
In our experience, Europe is a fantastic ecosystem for industrial tech. European markets bring to the table deep technical expertise from top universities and some of the world’s largest industrial companies. This proximity matters – in many cases, we see European companies have an edge in finding design partners and discovering early product-market fit (especially common for manufacturing companies). There is some associated risk of developing a product that so specifically meets the need of a single OEM that it doesn’t apply to the broader market, but companies can mitigate this risk by starting conversations with multiple strategic partners early in their development processes.
How has Covid-19 impacted industrial tech startups?
Covid-19 has caused many industrial customers to reevaluate their supply chains and technology stacks. At the onset of the pandemic, a series of lockdowns impacted companies with single-source, globalized supply chains and reinforced the importance of redundancy and local production.
Meanwhile, manufacturing and construction businesses redoubled their efforts around safety standards and automation to reduce health risks in their operations.
Although we saw many customers halt their operations and purchasing at the start of the pandemic, we think there is renewed interest and opportunity in products that can help to manage increasingly complex supply chains, safety regulations, and automation schema. Industrials have always been the cornerstone of our societies and economies, and we expect the space to rebound with full force as we continue to combat Covid-19.
What niches do you find especially promising and interesting from the investment perspective?
We’re excited to be partnering with game-changing logistics platforms like Berkshire Grey, ClearMetal, Outrider, and Upskill and we think there is always more work to be done in optimizing modern logistics!
Consumer demand for a clean and efficient supply chain is growing rapidly alongside the rise of ecommerce, but logistics software and hardware is evolving at a startling rate to meet that demand. A few areas that we’re particularly focused on at the moment include warehouse robotics, third-party logistics (3PL) stacks, last-mile delivery, and supply chain sustainability.
How can a European industrial tech company attract investment from firms like NEA?
One of the most critical criteria for a firm like NEA is thinking big. When we make an investment in a new company, we need to believe there is a (multi-)billion dollar outcome in that company’s future. Especially given the inherent fragmentation of markets in Europe, we always look for a market expansion plan that allows companies to reach massive scale. The intricacies of which markets to launch, how to sequence those launches, how you’re building your product to apply to those markets, and how you expect to grow market share are all important details to have ironed out before engaging with a global firm like NEA.
Peter Puchwein, Vice President Innovation, Knapp
What key trends do you see in intralogistics?
One big trend from the US is so-called Micro Fulfilment – fulfilment of online orders, e.g. groceries, processed close to the customer with a high degree of automation. High urban real estate costs and limited storage capacities mean Micro Fulfilment Centres are typically located directly in an existing supermarket or store. However, Micro Fulfilment will always need a backend of big distribution centres (DC) to deliver products to them in time.
In general, over the last decade automation has happened to a much higher degree in Europe than in the US, due mainly to the differing availability of manual work forces.
What impact has Covid-19 had?
E-commerce is the big winner of Covid-19. The transition from shop delivery to e-commerce fulfilment is one of the biggest goals for many companies.
But technologies like UV-C disinfection enabling Covid-safe manual workplaces are also a growth space.
What are the most high-potential technologies in warehouse tech?
One big trend is data driven logistics and artificial intelligence (AI). Not everything needs to be AI-powered, but taking large amounts of data and using it to make the right decisions will have a huge impact on optimizing and improving warehouses over the next years. AI will be a major part of this. To make this possible, the merge of the typical software layers in the warehouse is mandatory. The control layer and the stock layer need to be embedded into one decision layer.
The field of robotics in goods-to-person systems will also get a boost with AI and the data behind. Robots will do even more of the reiterating work in warehouses, but humans will always be needed in other fields, where human advantage and judgement is required, e.g.: value-added services, monitoring, decision making and maintaining the system. It will be a productive coexistence of intelligent work for humans and simple and reiterating work for robots.
What are the ways for a company to minimize risk and costs while automating the warehouse / intralogistics operations?
Simulations have already been used for years to understand and optimize logistics. Digital twins are a big success factor when it comes to reducing installation times on site and testing a system in an early project stage.
BPMN (Business, Process, Model and Notation) is one key to better understand the processes, and specify the needs for a customer. Based on BPMN software, simulations are available very early in the project phase to test the integration of the warehouse with ERP systems.
Dive into the data on Industrial Tech, funding, technologies, applications and trends with the 40-page report, in partnership with Speedinvest.