Experts now only recommend selective investments in additive manufacturing. Industry pioneer Herzog could benefit from this with its new fund.
3D printing’s breakthrough even into parts of mass production has been predicted by experts for several years. The industry is growing, and interest among investors is high.
The problem: as growth expectations have risen, so have valuations. If the industry does not grow at double-digit rates, as many are predicting, overheated prices are likely to fall again. This makes it all the more important to have a "full understanding of the individual business model and competitive positioning for company-specific valuations," according to a new study by Roland Berger.
And there is great interest; a real hype has grown around the topic in recent years. Last year, according to the study, there were a record 47 M&A deals with a volume of more than €2 billion, twice as many as the year before.
Printers and materials are becoming cheaper
Companies in the sector raised more than €1.5 billion in financing rounds, a figure that has risen by more than 40 percent annually since 2018. Prominent IPOs last year included the 3D printer manufacturer Velo3D and Desktop Metal. Shares in some companies have fallen in value since IPO.
"Investors see the great potential of additive manufacturing," industry pioneer Frank Herzog tells Handelsblatt. He believes the industry has great growth prospects, although the really major hype has died down somewhat. "You can see the potential, but there is a lot of uncertainty about what the right area is."
The entrepreneur founded the market leader Concept Laser with his wife Kerstin back in the year 2000. He sold his company to General Electric five years ago for a sum in the mid hundreds of millions. Now he has set up a venture capital fund for investments in additive manufacturing. The fund, which reached a volume of €60 million, was significantly oversubscribed. Frank Herzog and his wife Kerstin put in €25 million themselves.
Now he has set up a venture capital fund for investments in additive manufacturing. The fund, which reached a volume of €60 million, was significantly oversubscribed. Frank Herzog and his wife Kerstin put in €25 million themselves.
Herzog said that his fund was with great interest precisely because investors are now examining their choices more closely. There is enough money in the market, he explains, so it is all the more important to offer added value.
Herzog stresses that he "didn't go along with these crazy valuations" during the first wave of investments. He welcomes the more differentiated approach that investors are now taking, and says it is also good for the target companies. "Sometimes it’s helpful when you have to think twice about every expenditure, because you’ll use your money more wisely and purposefully."
Investors in Herzog's new fund include large family offices and experienced entrepreneurs. One example is Rolf Schwind, who develops laser systems for eye treatment. "Additive technologies allow us to think about our high-tech products in new and better ways," says Schwind, who wants to continue investing in this future-facing area.
Overall, the industry's prospects are good. According to a study by Learnbonds, the 3D printing market could grow from just over $16 billion to $40.8 billion by 2024. German companies such as Eos, Concept Laser and Trumpf play a leading role in the industry.
Will 3D printing make its breakthrough into mass production?
At the same time, 3D printing could soon achieve its long-awaited breakthrough into parts of mass production. It has already gained acceptance in the development of prototypes as well as in specific industries such as aviation. The fact that additive manufacturing has helped some companies maintain production during the pandemic, and that printers and materials have become cheaper, could help the technology to gain broader adoption.
One barrier up to now has been the amount of time required to print larger items. Here, too, improvements are in sight. For example, the start-up Ponticon has developed a new manufacturing technology based on extreme high-speed laser material deposition (EHLA). "We are much faster, very often ten times faster," says CEO Tobias Stittgen. In addition, it has become possible to print stronger and lighter components.
The 3D printing industry has come of age, Herzog says. "In metal printing, it's already heading toward industrialization." He also expects a bigger push in the consumer sector. This is something experts rather scoffed at initially, he says, but a lot has happened in the meantime, for example in application software and materials development.
Herzog's new fund aims to invest in start-ups in all areas of 3D printing, from machines and services to robotics, automation, and applications using artificial intelligence. Among the first investments is Rostock-based Aim3D, which has developed a multi-material printer that works, according to the company, far more cost-effectively than previous machines.
Herzog still sees great potential for 3D printing in Germany. "A lot of ignorance still remains in the industry, and there are many doubters." Medium-sized companies in particular shy away from buying 3D printers because the potential applications are not yet clear to them. "We need more application research."