Supply chain disruptions are hitting some of the most powerful companies in the world, pushing venture capitalists to invest in industrial tech start-ups that offer solutions.
So far this year, a record $ 45.1 billion has been raised by industrial start-ups, up from $ 34 billion raised in 2020, according to PitchBook data.
“The market is hot right now,” Lux Capital partner Bilal Zuberi told CNBC in an interview. Lux has $ 4 billion in assets under management.
Lacking a sexy history and consumer-oriented products, industrial companies have long struggled to attract venture capital interest.
But the recent increase in supply chain bottlenecks, logistics issues and factory closures during the Covid pandemic has prompted Lux Capital, GGV Capital and General Catalyst, among other well-known VCs, to invest in cutting-edge start-ups specializing in predictive technology, software and artificial intelligence.
According to Dave Evans, CEO of Fictiv, a San Francisco-based on-demand manufacturing company, attracting more investor funds to this space is a broader understanding of the seriousness of these issues.
“Supply chain issues used to be a functional issue. Only people in the supply chain knew about supply chain issues,” Evans said. “Then when the pandemic hit they became general issues and actually started to affect consumers.”
Awareness of supply chain constraints continues to grow as companies such as FedEx and Nike refer to the impact of the backlog on their business.
Lux Capital has allocated $ 150 million to $ 200 million this year to industrial companies such as Veo Robotics and Nozomi Networks. Nozomi, specialized in cybersecurity for the industrial sector, has just raised $ 100 million in a Series D funding round from a group of investors including GGV Capital and Honeywell.
Edgard Capdevielle, CEO of Nozomi Networks, told CNBC his company plans to go public through a reverse merger with a special purpose acquisition company or a traditional initial public offering.
A growing number of industrial companies that aim to solve supply chain problems with robotics, 3D printing and artificial intelligence have gone public this year.
- IronNet and 3D printer maker Markforged went public via PSPC this year.
- Israeli startup Prospera, which makes artificial intelligence sensors to help farmers monitor crops, has been bought by US company Valmont Industries for $ 300 million.
Glenn Solomon, managing partner of GGV Capital, said his fund has already invested more than $ 300 million in 20 industry-oriented companies since 2014. But VCs face competition from publicly traded industrial pillars.
- Honeywell’s VC arm remains very active in 2021, investing money in Fictiv in addition to Nozomi.
- Deere & Co. continues to invest in technology, from robotics to drones. The farm equipment maker recently acquired Bear Flag Robotics for $ 250 million. Bear Flag specializes in lidar sensors and cameras that allow tractors to work independently in the field.
Zuberi said the U.S. infrastructure bill would also be a boon for an industry that longs for more capital investment from the public and private sectors.