How are digital technologies transforming corporate venturing in the industrial space? Venture capitalists, who once considered manufacturing a place for incremental innovation, now see investment potential is rising with Industry 4.0.
Traditionally, few venture capitalists would touch industrial startup companies. Time cycles were too long and clunky hardware complicated things. However, deep digitalization is taking hold, the expectations are that the industrial sector will evolve much faster. What has changed?
One reason venture capital and corporate investment have shied away from industrial startups is that they have been few and far between. After all, if you cannot find something exciting to invest in, there’s little point having a strong venture activity and a dedicated fund.
Perhaps it is also the case that industrial conglomerates were looking inward to find innovative ways instead of looking outward for it. As a result, venture capitalists considered the manufacturing space the place for incremental innovation, though less interesting.
In reality, though, the startups have always been around but they were typically swapped up by incumbents before they got to be of a scale that they had true impact on the market. What that also meant is that the overall paradigm in industrial tech remained the same. A bit like a yogurt beyond the expiration date. What seems to have happened now is that some of the “yogurt” culture of industrial startups has become beneficial. Think of it like inserting probiotics into the mix. As a result, some startups have been able to bypass this logic and are spreading a new industrial culture. I think of the phenomenon as a Lean process coupled with a human-centric approach to technology, what my co-author Natan Linder and I call Augmented Lean.
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