By Jason Purcell

The fourth industrial revolution, also known as Industry 4.0, is set to transform the manufacturing industry as we know it. Machine to machine communications of “things” connected via the Internet of Things (IoT) will provide previously unavailable operational insight, together with the ability for machines to make autonomous decisions fuelled by Artificial Intelligence (AI), which will drive greater automation, reduced costs and increased efficiency. This will go well beyond improving specific factories and will span enterprises and their supply chains, fundamentally reimagining the manufacturing process from end-to-end.

Industry 4.0 is being driven by technology; a major disruptor to the manufacturing sector. This has provided a huge opportunity for new players to enter into the market – particularly those specialising areas that will aid the process of digital transformation. These include things like sensor-based technology, data aggregating technology and robotics information processing, which all leverage AI to allow machinery to communicate in real-time, both machine to machine and also to derive greater insights to humans.

Germany leading the way

KPMG estimates that the implications of all this innovation are gigantic – Industry 4.0’s component markets “may amount to more than $4 trillion by 2020”. Traditionally, one of the biggest challenges for European software companies has been having large customers on their doorstep to sell to. However thanks to its strong industrial heritage and globally competitive car industry, Germany is very well positioned in this sector, and we see a lot of exciting innovation and promising start-ups.

Investments in Germany

German investments in Industry 4.0 technologies have been steadily increasing since 2013, with estimates suggesting that more than 80% of the nation’s companies will fully digitalise their value chain by 2021. Looking at recent activity, it is interesting to see the strong participation of both US investors and major strategic players in these deals:

• Relayr acquired by Munich Re – Relayr, an industrial IoT middleware platform designed to facilitate interoperability through industrial-grade platforms, has been added to Munich Re’s portfolio – a interesting cross-sector move from the German re-insurance company which is a new entrant into the IoT space.
• Konux raised $20 million in Series B venture funding round led by New Enterprise Associates – Konux develop IoT-based software designed to help industrial companies unlock a new level of asset performance through real-time data fusion and analytics. The company made impressive progress in 2018, and their focus on the future digitisation of international railways is seen by investors as a huge opportunity.
• TwentyBn raised $10 million in Series A venture funding deal led by M12, Microsoft’s venture arm – TwentyBn continued their rapid progress last year. The company are providers of an artificial intelligence system designed to install common sense into computers and build deep learning capabilities through large video datasets taken from everyday situations.
• Tado raised $50 million of venture funding from Amazon Alexa Fund, E.ON and Total Energy Ventures – Energy conservation technology developer, Tado, strengthened its market position after securing significant funding. The company offers a mobile application which automatically detects a user’s proximity to their residence and adjusts the temperature of the air conditioner accordingly.
• Mitte raised $10.6 million of seed funding in a deal led by Danone Manifesto Ventures – Mitte’s smart home water system purifies water through innovative distillation technologies. Recent funding will allow the company to double down on “final engineering efforts” before taking the product to market.
• Comsa Computer and Software acquired by Siemens PLM Software for an undisclosed sum – As part of Siemens’s self-driving car strategy, the company acquired Comsa Computer and Software, a developer of designing and analysis software for the automotive industry.

Germany and the Global Market

 Incumbents in manufacturing are reacting to digital advancements, realising that if they fail to do so, they will fall behind. At the G20’s Digitising Manufacturing Conference, for example, the sector was urged to adopt a collaborative approach to combat the challenges of Industry 4.0 – sharing best practices was outlined as “essential to facilitate digital transformation on a global level”. And the international gaze is cast towards Germany and Europe. In fact, by 2020, the continent is expected to make up over a third of global Industry 4.0 investments.

The landscape is changing rapidly, and in order to maximise the opportunity, a strategic understanding of the challenges of selling a tech company and how best to position the business to attract the right partners is required. With that, FirstCapital can help.