Taking Inventory
America’s post-pandemic position in the global manufacturing economy:
In the halo following COVID, new trends are reshaping global commerce which in turn drives manufacturing trends. The supply chain disruptions that faced almost every industry from semiconductor chips to toilet paper have major corporations and start-ups re-evaluating supply chains and business continuity procedures.
Geopolitical instability in the global economy with Chinese-American tensions and the Russia-Ukraine War has forced manufacturers to re-consider where components are sourced and products are manufactured. This has led to a trend to “re-shoring” manufacturing, especially in the United States. Companies are also considering national disasters and diversifying manufacturing plants across geographies in the event of earthquakes, hurricanes or other forces of nature that could wipe out plants and operations. As a result, 4.6T in global trade could shift across regions in the next 5 years (McKinsey).
In the US, national security remains of paramount importance. To these ends, we have seen a massive investment by the Biden Administration to re-shore and reinvest with the passing of the CHIPS and Inflation Reduction Acts. These enormous efforts will certainly redefine our domestic capabilities, supply chains, and manufacturing skill sets for years to come. It is undeniable this investment will spawn new industries, new companies, new manufacturing ecosystems, new talent pools, a new position, and dominant position for the United States within the newly defined global deep tech ecosystem.
The time is now to be supporting and investing in the manufacturing sector given its importance to national security, supply chain stability, and saving the health of the planet and humankind.
A planetary state of affairs:
Our planet is at a breaking point with growing populations leading to challenges not limited to food insecurity, pollution, and destruction of natural habitats. We are being challenged to think creatively, to deliver more with less, and to use technology to scale and replace ourselves. At the same time, humankind is facing an era of mutating diseases, global instability, as well as nationalistic and combative nation states.
Consumer driven consumption is yielding trendy seasonal clothes, endless flavor choices at the grocery store, plant-based meats, generating a new wave of manufacturing. Beneath the trendy consumer products we know and love is an invisible world of manufacturing that touches our everyday lives.
Companies disrupting the manufacturing ecosystem:
In the last decade, we have seen an explosion of new manufacturing methods. Today we can harness the power of “biology as a machine” with advances in biomanufacturing and synthetic biology. Given limited land use and a growing world population, we need to better leverage and utilize the limited and finite resources we have on planet earth. Material Impact has several portfolio companies addressing these problems. For example, Galy is a pioneer in cellular agriculture. They believe everything made of plant cells can be done better, more efficiently, and with much less environmental and social impact in the lab. Plants are grown in a lab-based setting rather than on a farm. Existing food production practices account for a third of global greenhouse gas emissions, 70% of freshwater usage, and 80% of deforestation worldwide (AgFunder). Other companies are solving the industrialization of animal-based farming such as Blu Nalu producing cell based, blue fin tuna and Hoxton Farms producing animal free fats.
We have seen the growth of advanced manufacturing with companies 3D printing organs, food, and novel alloys. Global VC investment in additive manufacturing companies has grown 36.7% annually from $390M in 2017 to $1.9B in 2022 (Association for Manufacturing Technology). Foundation Alloy co (MI port co) is enabling innovation in materials to keep pace with the needs of the modern manufactured world, delivering finished metal parts in days, not weeks, and with better performing products at lower costs. Mooji is 3d printing whole cuts of meat at scale that supposedly close the gap between taste, look, feel and nutrition with highly scalable manufacturing processes.
We are producing non-toxic novel materials that are safer for our health and for the environment.
DetraPel’s (MI port co) advanced, PFAS free materials enable paper to perform with all the advantages of plastic, without changing its degradation properties. These coatings have potential applications across food packaging and textiles.
We are seeing demand for a circular economy with waste being up-cycled into new materials for a more sustainable future. Gen Z is demanding sustainability across consumer goods and is increasingly synonymous with luxury. Gen Phoenix (MI port co) rescues leather offcuts destined for landfill and regenerates them into a premium, durable leather material coveted by the world’s most iconic brands for its beauty and durability. The company has supplied material to cover 4 million+ seat covers in mass transportation ranging from Delta to Amtrak and recently launched a new sub-brand with a mission to help advance a circular and sustainable fashion industry.
We are building factories that are leveraging IOT, data, and robotics to allow for remote monitoring, decision making, and automation. State of the art factories at Amazon are rolling out revolutionary robots equipped with vision and sensors. Proteus, as they call it, works more efficiently with and without humans. It carries inanimate objects and makes decisions about how to navigate around objects or people in it its path and signals when tasks are completed (Wired).
As we tackle the final frontiers, emerging sectors are cropping up left and right. For example, space manufacturing in a zero-gravity environment. Companies such as Varda Space and Space Forge are sending experiments to space to slow down DNA synthesis with the hopes of discovering new therapeutics. Other manufacturing methods can be optimized in vacuum environments such fabricating microchips and semiconductor crystals. Furthermore, microgravity-grown crystals have increased single crystal size with fewer impurities and defects. Space manufacturing is a nascent industry with only $166M invested to date (PitchBook) but expected to grow exponentially.
Venture investing in manufacturing requires capital and patience. American Affairs discussed an MIT study by Professor Hiram Samel noting that VCs were willing to make investments in manufacturing, but often the technology required time to scale, additional capital, with overall projects spanning beyond average VC fund life of 7–8 years. Aligning venture investing in manufacturing with funds that have a life of ~10 years is imperative.
The future is here. We must stay ahead of the curve!
References:
https://techcrunch.com/2020/05/26/where-these-4-top-vcs-are-investing-in-manufacturing/
https://www.amtonline.org/article/investment-trends-in-additive-manufacturing-shifting-focus
https://www.wired.com/story/amazons-new-robots-automation-revolution/
