3D Printing Investment Going Vertical As Big Exit Looms

Transformative technologies often get massively overhyped at the early stage. In the case of 3D printing, the breakout moment was supposed to be 2012, when a new generation of desktop 3D machines hit shelves. Soon, they were to be nearly as commonplace as smartphones.

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Needless to say, that futuristic vision didn’t pan out. But while 3D printers haven’t become a ubiquitous presence in our homes, the technology has increasingly become a driving force of innovation in the manufacturing sphere. From jet engine parts to teeth straighteners to lab-grown chicken nuggets, startups and established manufacturers alike rely on the technology to create new products and add efficiency and customization to production of existing ones.

VC checkbooks, meanwhile, have been wide open. In the past year, VCs have invested over $600 million in at least 45 startups devoted to 3D-printing technology or making products with 3D printers, per Crunchbase data. A few earlier investors in the space, meanwhile, are looking to pocket some returns from the largest offering in years.  Below, we take a look at where the money is going–and what that might portend for the sector’s future.

Go vertical

First, it bears mentioning that about 40 percent of total venture funding for the 3D printing space this year went to one company: Carbon. The 7-year-old Silicon Valley company is the big-name unicorn in the space, with a last reported valuation at around $2.4 billion. It’s a broad platform play, developing 3D printing software, hardware and materials using a proprietary technology called Digital Light Synthesis.

Although none came close to securing as much funding as Carbon, there were dozens of smaller, earlier-stage rounds, too. Many went to companies using 3D printing in targeted industries including homebuilding, apparel and drug delivery.

That’s in keeping with long-term trends. While 3D printing hasn’t proven a hit with home users, companies applying the technology to narrow industry verticals are pretty well represented among funded startups.

“The new generation of hardware companies, rather than just building a machine, are looking at how they can address a market very specifically,” said Bradley Rothenberg, CEO of nTopology, a startup developing software commonly used in the design of 3D-printed products.

Here are few examples:

• ICON, an Austin-based startup using 3D printing, robotics, software and advanced materials in a business aimed at transforming homebuilding, raised a $34 million Series A round in August.
• Lightforce Orthodontics, which enables orthodontists to use 3D printing to make custom braces for patients, raised $14 million in Series B funding in September.
• Aspect Biosystems, a developer of microfluidic 3D bioprinting for human tissue-based therapeutics, raised $20 million in a Series A round in January.

(We’ve put together a long list of 3D printing-focused startups funded in recent quarters here.)

In some areas, 3D printing is already well-established as the go-to method for production and customization. If you or someone you know got a hip replacement in the past few years, odds are good that the procedure involved a 3D-printed implant. And in podiatry, 3D printed orthotics are rather commonplace. Research firm Gartner is predicting that by 2023, 25 percent of medical devices in developed markets will make use of 3D printing.

Aerospace is also a power user. Just last month, aerospace giant BAE Systems disclosed that it will require 30 percent of the parts for its Tempest fighter jet to be 3D-printed. The engines for Boeing’s 777X jets, meanwhile, already contain more than 300 3D-printed parts.

Big exit test

Back in startup-land, the future of investment in 3D printing startups hinges largely on the valuations markets attach to mature players in the space.

For now, the big test of that is the pending public market debut of Desktop Metal, the maker of metal and carbon fiber 3D printing systems that attracted $430 million in venture funding since its inception in 2015.

A month ago, the Boston-based unicorn announced plans to list on the New York Stock Exchange through a merger with Trine Acquisition Corp., one of a growing number of so-called special purpose acquisition companies (SPACs) offering a quick route to public markets. Under terms of the deal, Desktop Metal will have an initial equity value around $2.5 billion, well above its last-known private valuation of $1.5 billion.

Big-name tech investors are behind the offering, laying out an optimistic vision for how the company could shape the future of manufacturing. Prominent Silicon Valley startup investor Chamath Palihapitiya describes it as the beginning of the “2.0 era” for additive manufacturing, in which tools and machining are “replaced by printers, materials and parts in an on-demand ecosystem.”

For now, though, Desktop Metal’s financials show that to be more futuristic vision than contemporary reality. A new filing shows that for the first six months of the year the company posted just $5.7 million in revenue, well below year-ago levels, paired with a net loss of $45.6 million.

Luckily for Desktop Metal, public markets have been pretty good at printing money for money-losing startups lately. Hopefully, that will tide things over until its 3D printing technology makes money on its own.

Illustration: Li-Anne Dias.