3D printing, or additive manufacturing, will be big and impactful. We don’t know how big. We don’t know exactly when. But as a VC investor, we should be exposing ourselves to take advantage of this opportunity. And we are.
Innovation by itself has no value. It only has value when it has a competitive advantage in a market. It is the market that the innovation can reach that drives value. In the case of 3D printing, the promise is extremely high, driven by such things as: reduced inventory, reduced parts count, reduced lead time, unique designs, rapid prototyping and many more. The reality is that if 3D printing can overcome its challenges, the size of the prize is huge. I hear numbers thrown around such as, the additive manufacturing market is $4 billion today and growing at 30%, but if it could capture just 1% of the $10 trillion in global manufacturing it would be a $100 billion business. Yawn. Much better to say, it could be “fricking huge” but don’t ask me to put a precise number on it. It is much better to be directionally correct than precisely wrong.
When we look historically at the work done in 3D printing the vast majority has been in plastic materials. This is logical because it is the easiest place to start. More recently dramatic progress has been made in ceramics and metals as well, both in terms of the manufacturing techniques and the materials that are printable. While a few years ago there was significant excitement about the possibility of us all having a 3D printer at home, the reality is that the vast majority of applications are happening in the commercial and industrial area (see Figure 1; source IDTechEX). We have seen, and are expecting to see high growth rates. These numbers predict over 30% compound annual growth rate.
When breaking this market information down into the types of suppliers we see an interesting trend. There is a continued growth for the equipment makers and the services providers, but the highest area of growth is expected to be with the material suppliers (Figure 2; source IDTechEx.)
This year SMS Research Advisors conducted 700 interviews of users in the 3D printing area. One of the most pressing issues is the limited number of materials that can be printed. Three of the top five “beefs” include a desire for: better mechanical properties (#2), more available materials (#3) and lower material costs (#5). When asked what materials these managers would like to see, a whopping 84% said “Metals”. When we look at the metals that have been printed it is the expensive, exotic materials such as gold, titanium and high-temperature nickel-based alloys. Missing from the list is our everyday, low cost, high mechanical performance steel.
A few years ago Chrysalix invested in NanoSteel, a company that has produced a new category of advanced high strength sheet steel to lightweight the automotive industry. NanoSteel along with its industrial partners General Motors and AK Steel are introducing low cost, high strength, high ductility steels that will reduce sheets from 2mm to 1.2mm without sacrificing performance.
However, what we really invested in with NanoSteel is a highly creative materials team, who when set a task can design an alloy to specification. Recently they have turned their attention to 3D printing, producing steel alloys that have been printed on all three metal printing processes: binder jet, powered bed fusion and freeform direct laser deposition. The first parts requiring high wear resistance have been adopted by a customer in the aerospace industry and market trials are underway in oil and gas, mining and heavy equipment manufacturing.
NanoSteel’s materials address the heart of the needs of 84% of the respondents in the SMS survey: materials that are metals, have high mechanical properties and are low cost.
Producing such materials is difficult and we are still early in the process of optimization. Generally speaking, steels like to be produced at high temperature and 3D printers want to operate at low temperatures. The good news is that the materials innovation team will continue to work to optimize the metal performance for the equipment available, while at the same time the equipment makers will want to meet market demand by extending the operating ranges of their machines. In other words, we have a company that will continuously innovate into an industry that will continuously innovate, each of which will make the other better.
NanoSteel has a solid secondary opportunity in 3D printing, in addition to its sheet steel. This is the ideal for venture investing: our downside is known and limited, our upside is unknown but unlimited.