Whilst the consumer-led technology boom seems to be fizzling, the next golden age of technology growth and VC investing could be in the industrial sector, which is just getting started.

There is currently a lot of naval gazing going on in the VC sector, and there are voices* that are saying the consumer-led, software based revolution that started with the launch of the iPhone in 2007 has about run its course.

A new Pitchbook webinar “Has the music stopped?” also highlights that the later stage software and B2C sectors are the most cash starved (investment demand exceeds supply by up to 3.7x) , while other sectors are doing much better.

So perhaps the problems that VCs face will not go away once inflation and the cost of capital reduces. The world is changing, what with deglobalisation, geopolitical competition and the emphasis of resilience over efficiency, which no longer favours capital-light software and consumer startups, which thrived on large global markets with minimal marginal costs, and accounted for 49% of investment made in 2021.

So why an industrial tech boom now? The very conditions  (deglobalisation, geopolitical competition and resilience over efficiency) driven by decoupling into sub-optimal smaller markets, the war in Ukraine and the need to drastically reduce carbon emissions.

We understand the need for agile supply chains. We realise how important production is for our economic and national security. And third, we need to decarbonise, which will require the growth of new manufacturing systems at scale and demand rapid advances in industrial technology.

What would be the nature of such an industrial resurgence?

A Financial Times article** provides the example of 3D print manufacturer VulcanForms, who can produce tens of thousands of parts for a jet engine one day, then switch to doing medical implants or consumer electronic components within a matter of hours. The knowledge of how to make the part lives in the software.  Large industrial customers can focus on their core R&D, sales and marketing, rather than production, which could theoretically now be outsourced not to hundreds of suppliers in dozens of countries, but to individual factories located anywhere customers are.

Right now, those firms tend to be highly siloed. But imagine  a world where they would be connected just as consumers are on the internet, able to share resources and information seamlessly in a new industrial smart grid. The productivity and growth opportunities could be very significant.

Three-quarters of the world’s $100tn gross domestic product is made up of traditional legacy industries — such as manufacturing, transportation, logistics and healthcare — that have yet to be deeply transformed by technology.

President Biden’s $369 billion Inflation Reduction Act (Climate Bill) enacted in August 2022 will certainly help to turbo-change this kind of industrial change in the US, and the EU is considering similar initiatives.

It’s a transformation that could change the nature of our economy. We are starting to take on more industrial and climate tech clients than ever before. Technopreneurs may want to look for opportunities in this new landscape.

*”Venture capital faces a tougher future” by Michael Casey published in the Financial Times 29/3/2023

** “A new technology boom is at hand” by Rana Foroohar published by the Financial Times 27/3/2023