The Current State of Industrial Startups in Europe — An Update (September 2020)

Since I started looking more closely at the manufacturing industry a couple of years ago, there has been a huge increase in the number of startups that try to solve problems in this industry. More precisely, I have added more than 350+ startups to my Industry 4.0 landscape and thereof 225 alone from Europe (as of September 2020) over the years.

I also cover the development of the manufacturing industry quarterly through my Newsletter but I haven’t done an in-depth analysis of the landscape above — until now.

In this post, I want to take a closer look at where these startups are coming from, in which categories they are, how many employees they have, how much money they have raised, and which startups got acquired or had to shut down.

The data behind the landscape

A few notes for those of you who are interested in how this list comes together and where the data comes from.

• The landscape reflects all the startups in the manufacturing sector that I have come across until today. I’m sure the landscape is far from being complete so I always appreciate receiving updates from people around the web. Thanks to everybody who is sending me relevant companies :-)
• For the purpose of this analysis, I focus on the 225 startups that got founded in Europe and use Dealroom as my data source (thanks again Ivan!). Please note, that the dataset is far from complete and that some funding rounds may have not been announced.

And now, let’s take a closer look at the data.

By Location 📍

Germany is by far the country where most of the companies are coming from, followed by the UK (23) and France (17). The order of the countries should not be a big surprise given how mature these ecosystems are but that ca. 51% of all the startups are coming from Germany is still very high. I cannot name the exact reason for this but the manufacturing sector, in general, is very strong in Germany and I probably have much better coverage for the German market compared to the rest of Europe (please send any companies I might be missing, especially my coverage for Israel is very bad).

By Category 🗄️

More than 50% of the companies are in one of the four categories: Analytics & Efficiency, Robotics, Manufacturing-as-a-Service & 3D Printing, or Engineering Tools.

Since Analytics & Efficiency is a broad field it makes sense that 46 companies (20.4%) are in this category. Personally, I noted the rise of robotics companies (31) that got started in various fields such as AGVs (e.g. Gideon Brothers), pick-and-place robots (e.g. NoMagic, Micropsi) or low-cost robots (e.g. Automata, Franka Emika).

By Number of Employees 👩‍🔧

The total number of employees is usually a good indicator of how big the company is. First, I took a look at the top25 companies that show the highest number of total employees:

Universal Robots is leading this list with more than 600 total employees before Relayr with more than 200 total employees. Noteworthy, that both companies got acquired already but continue to operate under their own brand.

In addition, there are eight more companies who employ more than 100 people, namely: NavVis, ProGlove, 3D Hubs, OnRobot, Varjo, Kinexon, Braincube, and SimScale.

If we look at total employees in groups, there are the ten companies (4.4%) mentioned above that have more than 100 employees. 20 companies (8.9%) have between 50–100 FTEs, 68 companies (30.2%) have between 10–50 FTEs and 25 companies (11.1%) have less than 10 FTEs. It’s a pity but for 102 companies Dealroom has no data on FTEs.

By Investment 💰

Varjo and OnRobot have been the only two companies that were able to raise more than €75M. Hardware development — in this case, for VR and robotics — takes a lot of time and cash. In addition, Relayr and Syncron come close to it and raised more than €50M in total.

If we group the total funding in different stages, only 7 out of the 225 companies (3.1%) were able to raise more than €50M. 18 more companies could raise between €10–50M in total. However, the very big majority of companies (88.9%) raised less than €10M in total which is an interesting data point that shows how hard it is to scale companies in this industry (I discussed different fundraising strategies in this post).

If we define Series A as a round of at least €5M, if clearly shows you that most companies are still below the Series A mark, i.e. 183 companies (81.3%) have raised less than €5M in total.

If we look at the categories that received the most funding, the chart shows that Robotics, Analytics & Efficiency, and Wearables stand out and received nearly half of the total funding together (48.8%). I should mention that the high share for “Wearable” is driven by the big total funding of Varjo and ProGlove.

Startups that got acquired 🤑

There have been three bigger exits north of €100M in the past few years with Relayr getting acquired by Munich Re for €300M being the biggest (see christian dahlen’s post about the importance of this exit). All the other acquisitions haven’t been disclosed but based on what I know, they have been pretty small. However, even these smaller exits are still good for the ecosystem to feed money back to founders, business angels, and funds.

It’s worth noting that the majority of the buyers (63.6%) are not traditional manufacturing corporates but rather software companies such as TeamViewer, Hexagon, or Software AG or even other startups such as Xometry or Kreatize.

Companies that had to shut down 😪

Four companies had to shut down already — potentially even more but it’s very hard to get accurate data. As we know, the majority of startups fail so the list will definitely grow over the next years. Instead of the “X”, I’d love to better understand why these companies didn’t succeed. If you have any insights, please get in touch.

I also want to mention that I have tremendous respect for all these founders who took on the journey and started a company even though it didn’t work out. We should embrace these failures and I hope we can all learn from them.

Conclusions and looking ahead 🚀

It’s still early days for many (European) startups in the manufacturing industry and I’m very excited to see how they will develop over the course of the next years and shape the sector. Here are a few additional observations looking at what happened in the last three years:

• There has not been a “unicorn exit” yet. I’m sure it will come but it will definitely take time (and lots of money).
• Many companies that focus on software for machines (e.g. in Analytics & Efficiency) have attracted significant funding. However, I continue to be very bullish about everything around humans and think it has been a bit overlooked.
• The low number of Series A’s shows how hard it is to scale companies in this industry, especially if investors expect similar growth numbers as for traditional SaaS companies.
• I expect to see more companies in the Shopfloor Workflow / App Platform category driven by the general adoption of no-code solutions in the enterprise world and the trend of digital collaboration.
• Very few industrial players are on a hunt to acquire startups as you could see in one of the charts above. I’d love to see this change. Imagine a company like Bosch or ZF Friedrichshafen would suddenly do acqui-hires?! Given how hard it is to attract top (tech) talent, I see this as a viable strategy.
• Even though Covid-19 has hit the manufacturing industry hard, I’m very optimistic that it helps to speed up the digitization of this industry and startups can benefit from it longterm.

Please let me know if you have any feedback on this post and make sure to sign-up for my Newsletter The Future of Manufacturing.