Industrial Tech, also known as Industry 4.0 or the Fourth Industrial Revolution, refers to the integration of advanced technologies and digital systems into industrial processes and manufacturing facilities. This involves the use of technologies such as robotics, automation, artificial intelligence (AI), the Internet of Things (IoT), and cloud computing to improve efficiency, productivity, and safety in industrial operations.
In the past three years, the sector has tripled in value and attracts almost $6 Billion in funding each year. The start-ups in the sector have a combined value of more than $100 Billion! Even in 2022 they raised more funding than previous years, despite of the large-scale pull back in VC deployment. Industrial Tech is among the fastest growing sectors in terms of VC investment this year.
With $4.7B raised so far, VC investment in European Industrial tech in 2022 is on track to surpass the record set by 2021. Logistics has been the largest segment both by the amount invested and the number of rounds, followed by robotics and energy.
Corporate investment also plays a big role in the sector. Corporate investment in European industrial tech was in 2022 higher than ever.
As mentioned above Europe has a significant industrial tech market, but is still relatively small compared to the US, who has the largest and most mature industrial tech market, with a well-developed ecosystem of startups, investors, and established companies.
APAC, on the other hand, also has a rapidly growing industrial tech market, mostly driven by countries such as China, Japan, and South Korea, which are investing heavily in advanced manufacturing technologies. For example, the adoption of in-region digital industrial platforms is expected to rise by 30% and Investment in industrial metaverse initiatives will double in 2023.
Also, the industrial tech sector in the MENA region is showing promising growth, with a focus on innovation, productivity enhancement, and sustainability. The region is leveraging industrial tech to drive economic growth and development, positioning itself as a hub for industrial innovation and digital transformation.
Tech with Benefits
That investments in this sector are this high is not surprising. The benefits that come with industrial tech are extensive. First of all, the tech is ideal to improve efficiency: Industrial technology can automate repetitive tasks and optimize processes, leading to increased efficiency and reduced costs. It can also enhance safety. By automating hazardous tasks and using sensors to monitor equipment and worker safety, accidents and injuries can be reduced.
Industrial technology can also increase production output by enabling machines to work around the clock and minimizing downtime for maintenance and repairs. Additionally, by using sensors and AI to monitor and adjust manufacturing processes in real-time, product quality can be improved, and better consistency can be reached. Lastly, with the ability to quickly reconfigure machines and processes, industrial technology enables manufacturers to quickly adapt to changing customer demands and market conditions.
More product-specific examples of industrial tech that we are seeing in the market:
1 Collaborative Robots (Cobots):Cobots are robots designed to work alongside humans in a collaborative manner, assisting workers in various tasks. They can be used for tasks such as pick-and-place operations, assembly, packaging, and quality control to increase productivity, improve ergonomics for workers, reduce human errors, and increase flexibility in production processes.
2 Predictive maintenance solutions, that predict when equipment or machinery is likely to fail, allowing for proactive maintenance actions to be taken. This can prevent unexpected breakdowns, reduce downtime, extend equipment lifespan, and optimize maintenance schedules, leading to improved efficiency and cost savings.
3 Industrial Internet of Things Platforms enable the connection, monitoring, and management of industrial devices and assets. They can provide real-time data on equipment performance, energy consumption, and other operational parameters, allowing for better decision-making, remote monitoring, and predictive analytics.
4 Digital Twins. These are virtual replicas of physical assets or processes that enable real-time monitoring and simulation. A digital twin of a production line for example can help optimize workflows, identify bottlenecks, and optimize resource allocation, leading to improved productivity and efficiency.
5 Energy Management Solutions use data and analytics to optimize energy consumption in industrial processes, reducing costs and environmental impact. These solutions can monitor and control energy usage in real-time, identify energy wastage, and provide insights for energy optimization measures.
6 Supply Chain Management Solutions use advanced technologies such as AI, IoT, and data analytics to optimize supply chain operations. They can provide real-time visibility into the movement of goods, optimize inventory management, and enable predictive analytics for demand forecasting and risk management.
Tech for climate change
Industrial tech can play a key role in climate change. In Europe, industrial processes account for more than a third of the CO2 emissions. New technologies to make these processes greener are more than welcome.
Industrial tech is already playing a crucial role in addressing climate change. Renewable energy technologies, such as solar panels, wind turbines, and hydropower systems, that involve advanced manufacturing processes for their production, installation, and maintenance are one example.
Then there are also energy storage solutions, such as advanced batteries and hydrogen storage systems. Those are critical for integrating renewable energy sources into the grid and reducing reliance on fossil fuels. Additionally, Smart Grid Technologies that enable more efficient and reliable energy management are making their entrance. Green Building Technologies that involve the use of advanced materials, design principles, and automation systems in the construction and operation of buildings to improve their energy efficiency are up and running.
To meet the 2050 climate goals, more ambitious policies regarding renewable energy need to be implemented and more technologies need to be developed. The demand remains high.
Despite the fact that 2022 was a bad year for the tech market and the global economy in general, climate tech companies in Europe and North America raised $82B across 2,910 deals, which is a 19% increase over 2021. Investments in climate-focused industrial tech startups have reached record levels over the past year. The logistics sector led the way, followed by green energy alternatives and advanced materials.
By October 2022 European investors had also raised over 60 specific funds for climate change support, with over $4B dry powder.
With over a third of the global economy being industrial ($23 trillion in output), there are still a lot of possibilities and opportunities for the industrial tech sector.