Discussing fundings with a serial investor in Additive Manufacturing

AM Ventures Holding GmbH Krailling, Bayern, Deutschland 14.05.2018 Foto: Tobias Hase

The ability to raise money when the market is uncertain and when most AM companies announce negative financial results raises a certain curiosity. 3D ADEPT Media caught up with Arno Held, Chief Venture Officer (CVO) at AM Ventures, to understand this topic.

While big Additive Manufacturing players naturally focus their investments on their business and strategic ways to grow, AM Ventures Holding GmbH (AM Ventures) has decided to grow the entire industry by investing in forward-thinking AM companies.

At the heart of the company’s journey in the additive manufacturing industry, we find Arno Held, Chief Venture Officer. Industrial Engineer by training, Held started his career in industrial laser applications and built extensive experience with leading machine manufacturers such as Trumpf. Not surprisingly, he got to a tipping point in his career when he discovered AM (which was rapid prototyping at the time).

From the role of an intern in the R&D department to Dr. Hans J. Langer’s executive assistant at EOS, Held learned a lot about 3D printing but also start-ups. “I got hooked not only on the 3D printing part but also on the start-up culture”, he tells 3D ADEPT Media. As part of a project, he got to meet a team of three founders in an incubator at Eindhoven: the founding team of Shapeways.

I really liked to work with these guys, experienced the start-up dynamic, saw what start-ups can do to 3D printing and what 3D printing can do to start-ups. That was a topic I started to follow quite passionately”, he continued.

Back to EOS, he switched to the business development and strategy department. He did not only want to work with start-ups anymore, he wanted to invest in them. As per his words, he wanted to “invest in small start-up teams and in early stage technologies in additive manufacturing”.

With the willingness to make this vision a reality, he pitched this project to the Langer family that decided to provide funds to set up a venture capital firm that would focus on investing in additive manufacturing companies. Together with Johann Oberhofer, former Chief Operating Officer at EOS, and long-time companion of Dr. Langer, AM Ventures got underway as an independent firm in the Langer familiy’s group of companies. This means that EOS is not an investor in any companies funded by AM Ventures – and obviously that AM Ventures is not an EOS company.

In January 2015, AM Ventures officially took off. Our very first investment was DyeMansion. We’d met Felix and Philipp earlier and basically cofounded the company with them. DyeMansion was a success story on its own. In the last five years, AM Ventures has grown very well. Today, we are a team of almost ten people. We have scouted more than 1500 start-ups companies across the world that specialize in AM. We have already funded 17 companies in seven countries, on three continents and we are still very curious and highly-motivated about our little industry”, Held enthuses.

From scouting new start-up companies to the investment management of the portfolio members, AM Ventures has proved out its essential role in accelerating the AM industry. The serial investor in 3D printing is really one-of-a-kind when speaking about investments as it combines an in-depth know-how on AM and business development. They know the ins and outs, the resources and skills required to evolve within the industry. 

But how do we manage investments in a pandemic world which sends out alarm signals about economic uncertainty? And most importantly, how should AM companies position themselves to get funded?

We were keen to listen to the thoughts from AM Ventures on these questions.

Amid the chaos

Interestingly, the current socio-economic environment did not slow down AM Ventures’ potential investments in AM companies but it did change the way it operates and assesses its investments.

At the beginning, when we had the very first lockdown, we were naturally a bit confused and unsure about what the future will bring. We dove into our budget and asked all portfolio companies for certain emergency budgets and measures, so that they come out with a plan of what would happen in the near future. After assessing these data and monitoring our portfolio companies closely, we were quite pleasantly surprised that our portfolio all the way through, was in a good state. We saw that companies still conducted their funding rounds whose planning had started last year or early this year. Investors were still interested in supporting them.

Furthermore, despite the crisis, we have seen that our start-ups recover quite impressively and quickly. Some of these companies are even doing fantastic”, Held explains.

We can endorse Held’s comments today, as among these start-ups and apart from DyeMansion, who raised $14M USD in summer, there is 3YOURMIND. Remember the software company recently secured $5.5M USD to expand its market. Furthermore, in an Opinion of the Week segment, Alexandre Donnadieu-Deray, Head of Sales and Managing Director North America at 3YOURMIND told 3D ADEPT Media the company gained traction amid the pandemic and thanks to the crisis. For software companies like 3YOURMIND for instance, the crisis has shed light on the importance of their services in a production environment.

Furthermore, speaking of the funding rounds process, Held outlines: “In general, there are not necessarily fewer funding rounds and they do not necessarily take longer but there are not so many investors who are active in AM. Of course, the economic outlook of the next 12 to 14 months is probably not as great as it was before the pandemic. The main consequence that results is that the valuations for start-ups has experienced a slight decrease.

Market dynamics

Securing an investment round is always big news for a business, whether it be a fresh-faced start-up or a more grizzled production operation. Doing so in the mid of economic uncertainty only highlights the uniqueness of a company’s products / services and its ability to withstand any hurdles the future would hold.

In addition to 3YOURMIND and DyeMansion mentioned earlier, the non-exhaustive list of companies that announced millions in new investment rounds this year includes: LightForce Orthodontics, Additive Drives GmbH, Additive Industries, Arevo, Azul3D, BCN3D, ICON, Kumovis, VELO3D and Mighty Buildings.

Although timing is often crucial, Held’s words also shed light on a type of sectors that increasingly gains momentum: the digital value chain. This is one of the first examples of forces that affects prices and behaviours of both producers and industrial users.

Besides pandemic-driven applications, AM has officially positioned itself as a solution to disrupted supply chains. Decentralizing production reduces the strain of logistics as digital technologies allow for manufacturing in-situ.

For AM Ventures’ representative, “if you are playing a certain role in the digital value chain, it’s probably the time to focus on that because everyone is looking at it. It’s for sure the right view in my opinion.”

Applications are the second key enabler. “Digital issues addressed by AM companies are very eye-catching. However, while a few years ago, fundings were mostly granted to companies that develop hardware products for AM, this year saw a combination of investments in hardware and a trend towards applications made possible using AM. [LightForce Orthodontics for example, secured a $14 million Series B round of funding to ramping up operations and continue developing its digital platform providing orthodontists with fully customized, 3D printed tooth-moving tools.] This interest in funding “applications” provides evidence of the maturity of AM technologies”.

Moving forward…

While we did not focus on key components of the fundraising process such as in-person meetings between executive teams and venture capitalists, fundraising preparation or the importance to “do more with less”, it is worth noting the pivotal part executives have to play to secure fundings. Indeed, despite the fact that the economy is not at its best right now, there is always room for multiple opportunities and early stage founders need to be savvy

For startups that are raing funds, I would recommend to pick their investors extremely carefully because deep tech and high tech investments require very competent investors who understand the development cycles, the cash requirements for start-ups, and also the volatility which is simply inevitable in this game. If you have an investor that does not understand this, he will certainly be surprised that R&D takes longer and consumes more cash than expected; and an investor who is not well experienced becomes a little bit nervous.,” the CVO points out.

Furthermore, it is no secret that big players usually enter the AM market through acquisitions of innovative start-ups. Remember how BASF or Xerox debut on the AM market? Although this road might seem appealing to founders, Held recommends prioritising collaborations over acquisitions.

“My recommendation which is also one lesson we learned over the past years is to not sell a company too early. Accepting investments from strategic corporate investors can become critical and it’s mostly better to first team up with venture capitalists who want to help accelerating a company and investing extra miles for the sake of the start-up and not necessarily for the sake of a big corporation in the background. We’ve seen a lot of potential dynamic got wasted because start-up entrepreneurs fell for the attractive valuation that big corporations are willing to pay but after that, the dynamic somehow evaporated because the big corporation has boarded them into its ecosystem in very early phases.”

Speaking of the 2021 AM market, he concludes: 

There will be more money available. We are seeing now funds being raised and other funds shifting their focus to watch this industry. I think it should be a little bit easier to get money. This would mean that both the valuations and the volumes of the funding rounds would increase. However, this will obviously depend on the performance of the economic development. Desktop Metal for instance has recently announced it will go public. It’s still an announcement, it is not yet executed. Many are waiting for the outcome of this project. The success or failure of this endeavour will strongly determine how investors will look at AM in the industry in 2021. If Desktop Metal effectively becomes a publicly listed company, this will definitely bring new funds into the industry and attract other investors. But if the project is not a success, investors are very likely to look at this industry as well as other high ambitious projects within the industry quite critically. This crucial point will determine a lot the climate for raising money and for investments in general in AM but I am quite optimistic. When we look at the applications we receive and the plans for AM Ventures in 2021, I remain excited about the upcoming year.”

Disclosure: The interview was initially published in the November/December issue of 3D ADEPT Mag. It has been discussed as one of the hot topics that marked 2020 and that will have an impact on 2021. Since then, Desktop Metal has officially become a publicly traded additive manufacturing company.

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