What To Read Into Additive Industries' New Loan
Additive Industries received a significant financial boost in an unusual way.
The Dutch company announced a loan from its financing partners to the amount of €10M (US$11.4M). They explain:
“Additive Industries, the Dutch manufacturer of industrial 3D metal printing systems, has secured a EUR 10 Million loan from BOM Brabant Ventures and existing shareholder Highlands to accelerate the growth towards a worldwide top 3 position. Since its inception in 2012, Highlands has been the stable financing partner of Additive Industries and is now joined by BOM Brabant Ventures, a regional investment fund aiming for a strong, sustainable, and future-proof Brabant. The Province of North-Brabant is the home of many high tech equipment OEMs with its concentration in and around Eindhoven, where Additive Industries was founded in 2012.”
Congrats to Additive Industries, of course, as these funds will most certainly allow the company to continue pursuing their goals to be in the “top 3” as they describe it. Their now-proven system is ready for sale worldwide, and cash for sales, distribution and marketing will certainly be useful.
What is interesting about this financial arrangement is that it is a loan, rather than an investment. It’s money to be paid back, and no company shares exchange hands. I think this is quite unusual.
Normally 3D printing companies don’t get loans due to the competitive and fast moving marketplace, where innovations and market moves can rapidly put a player out of business. A loaning agency, like a bank, really does want its money back, with interest, and on a scheduled basis. They generally will have nothing to do with the crazy world of speedy changes in a tech environment they don’t understand very well.
Thus we don’t often see significant bank loans to 3D printing companies. Instead we typically see investments from angels or VCs who proceed with the expectation they may lose their money entirely. Ventures are not certainties. There is a definite non-zero possibility of total loss. They understand that, and go “in” quite willingly if they believe in the company’s future.
Here we have a loan. What’s going on?
Well, first of all, the loan is not from a bank. It’s from two parties: Highland, a long-term shareholder in the company, and BOM Brabant Ventures, a VC. Yes, a VC is loaning money to Additive Industries, not taking shares as a VC would normally do.
Why would they do this? Normally an investor would “bet” on the future success of a company by providing seed funds to get things going. But then often the investor simply waits for a future moment when their shares would grow in value and be liquidated.
I’m speculating here, but I suspect the loan is specifically designed to speed up the growth of Additive Industries. Why do so? It would also speed up the growth of the share value and perhaps even speed up the date of share liquidation. Make money faster, in other words.
It also shows that the investors have significant confidence in Additive Industries to pay back the money, something a bank might not understand. As a shareholder, Highland in particular would have specific knowledge of the situation and thus we can conclude that Additive Industries is in very good shape.