I’m reading an extremely interesting and critical post about the 3D printing industry by Alex Huckstepp.
The provocative title of the piece is “3D Printing Companies Are Dying…”, and while he’s quite correct in his analysis, I would add a couple of points.
In his whimsical style, Huckstepp’s point is basically this:
“For the better part of a decade, 3D Printing companies have been foie gras-ed with Venture Capital and, more recently, SPAC $. An indigestible amount of money has been forced into the bowels of startups at irrationally stretched valuations – and they’re choking. The growth of these companies has failed to keep up with their appetites and it’s increasingly apparent that they won’t be getting fed much more. Unfortunately, feeding themselves (metaphorical profitability) is beyond their reach.”
He proposes that 3D print companies have been given staggering amounts of cash, and yet the total valuation of the industry has not grown, or even caught up to the investment.
This is all quite true, and disturbing at the same time.
Massive piles of cash have been directed towards multiple companies in the space. These companies would, in theory, want to use that cash to develop products that bring in more than sufficient revenue to recoup the investments.
That hasn’t happened, at least when looking at the entire space as a whole. In our weekly leaderboard the valuation of companies is dramatically down from what it was a couple of years ago. Some companies are down 90% from their initial value. Correction: some companies are GONE from the leaderboard entirely, a 100% drop.
And those are only the publicly-traded companies. There are plenty more 3D print companies that remain private. It’s likely that many of them suffer from the same malaise as Huckstepp describes; it’s just that we can’t know about it.
The way I see this is as follows:
- Technology is initially developed
- Investors are attracted by the potential to expand into huge industries
- They shower the company with cash
- The company eventually discovers their tech is not really as useful as envisioned
- Sales are made but not nearly as high as thought
- Revenues remain flat
- Companies scramble to grow by cutting, merging, or acquiring
- Eventually, some of them will disappear
There’s one obvious missing step in this process: changing the tech, or inventing new tech that actually addresses the issues holding back sales growth. Somehow many of these companies haven’t been able to do this, and they remain stuck on their original concept. That is in spite of some of them having massive cash piles to use to invent new things. This is one of the reasons corporate acquisitions are taking place: buy instead of invent.
In a way this is a natural sequence of events. It’s the classic hype cycle scaled to corporate size. As a reminder, this is the hype cycle:
- Early adopters
- Hype wagon envisions incredible things
- More adoption
- Realization that it doesn’t really do that
- Anti-hype begins
- Some stick with it and eventually discover the true, productive use of the tech
- Tech becomes a standard for specific areas
What Huckstepp describes is part of the anti-hype phase of the hype cycle. Everyone’s been burned by the tech and they don’t like it. Bad things are said. Negative stories are written.
There are a few points I’d like to make.
First, according to the hype cycle there will be some that will actually use the tech for good and useful purposes. They will gradually emerge and become the well-known applications for the technology.
Second, Huckstepp’s points really apply only to selected companies. There are plenty in the space — too many, as I agree with Huckstepp, but not all of them are in this position. I am aware of many that do not have massive funding, and some are even self-funded. These companies are indeed building their companies properly from the ground up and have become self-sustaining. Usually, they’re doing exactly what they should be doing: focusing on specific applications and making customer value.
Third, the 3D print space is by no means “complete”. There are many 3D print processes today, and there will be many more tomorrow. Part of me believes that we really haven’t yet discovered the truly productive technologies that will be a standard thing decades from today. Every week I see something quite new, sometimes radically new, that, if implemented could change the market considerably.
It may be that many of the companies of today fade away when new tech emerges that renders their old tech obsolete.
Via Medium
