Investors can’t get enough of 3-D printing companies even though some of the sector’s biggest names are bleeding red ink.
Three-dimensional printing unicorn Carbon, a frequently mentioned IPO candidate, on Tuesday announced a new funding round of over $260 million, hiking its overall total to $680 million and giving it a valuation of $2.4 billion.
Madrone Capital Partners and investment management firm Baillie Gifford co-led the round, Carbon’s fifth since it was founded in 2013 and launched in 2015.
The hefty cash infusion highlights the thirst for 3-D printing companies despite a batch of discomfiting IPOs. Venture capitalists have invested at a record pace ($650 million) so far this year while shares have plummeted the past 12 months at Nano Dimension Ltd. ADR NNDM, -4.23% down 80%; Organovo Holdings Inc. ONVO, +2.60% down 71%; SLM Solutions Group AG AM3D, -2.33% down 68%; and at 3D Systems Corp. DDD, -5.14% which is off 38%. There are some strong performers over the last year at Materialise N.V. ADR MTLS, -1.52% up 27%; FARO Technologies Inc. FARO, -3.23% 22%, and Stratasys Ltd. SSYS, -2.97% up 15%.
Those numbers underscore the realities of at least 38 companies vying for a slice of a slowly evolving multibillion market. It takes time for manufacturers to “rethink and change the fundamental design of their products” through 3-D printing, says Forrester analyst Carl Doty.
HP Inc. HPQ, -0.19% the biggest name in industrial 3-D printing, just opened a 150,000-square-foot facility in Barcelona, the largest 3-D printing and digital manufacturing R&D center in the world. It recently expanded its partnership with SmileDirectClub to 3D print more than 50,000 mouth molds per day — nearly 20 million in the next year. HP does not break out revenue for 3-D printing, which is part of its $21 billion printer division.
As for the weak performance of many publicly traded 3-D printer companies, investors are hardly fazed. To date, $3 billion has been invested into 3-D technology, Doty says.
Investors such as Jim Goetz, a partner at Sequoia Capital, are willing to ply money into Carbon because of what they call its hybrid business approach. “Carbon has pioneered a business model in a market that hasn’t changed in decades,” Goetz told MarketWatch. “Most major hardware makers offer a one-time purchase of equipment that depreciates over the life of the product, with annual licensing fees.”
Carbon has lined up customers such as Ford Motor Co. F, -0.40% Adidas AG (DE: ADS), and dental labs, who sign 3-, 5-, and 7-year subscription deals to use either a high-end printer that carries a $200,000 annual subscription fee, or a basic printer, at $70,000 a year.
“We have a sound, predictable business model,” Carbon co-founder and CEO Joe DeSimone told MarketWatch. The multiyear deals around allows Carbon to “lock in” 70% of revenue on Jan. 1, he added.
The Silicon Valley company has focused on three markets: foam replacements for Adidas ADS, -0.70% shoes and Riddell football helmets; creating crowns, bridges, and dentures for dental labs; and new markets in automotive. (In February, Carbon announced a partnership with Riddell to produce the first-ever digitally printed helmet liner. In January, Ford announced the first digitally manufactured polymer parts on production vehicles for the F-150, and Ford Mustang, and replacement parts for the Ford Focus.)
Carbon plans to use its new round of capital to expand research and development efforts, and fuel growth in Europe and Asia.
Read on Marketwatch