For more than 20 years, US-based Trent Capital Management has invested its clients’ money in smart technology companies.Mainly in mobile phone companies.
As of now, the company has a new investment policy: 3D printing.
“It’s the first thing we’ve seen come along that is going to be as universally disruptive as the cellular telephone industry,” says partner Jim Folds, who is advising the company’s family office clients among others that the technology’s time is about to come.
Although the US has registered more patents in 3D printing technology than any other region or country, Europe is fast approaching parity with the States in terms of market value, with Asia also close behind and rising.According to Alan Meckler, chief executive of Mediabistro, there will be anywhere between six and 10 IPOs of 3D printing companies in Asia in the coming years, as the technology begins to resemble to growth of the internet.“It sparks the creative juices of entrepreneurs,” said Meckler.
Despite modest results for existing 3D printing companies, overall industry predictions are pretty wild.Sales are expected to reach $8.41 billion by 2020, according to a report from MarketsandMarkets research group, with Europe leading the way.“Governments in Europe and Asia/Pacific are investing heavily in research and development,” observed Rahul Ganjau, spokesman for the group.
Among the advances that will spur this rapid growth are the many new materials which it will become possible to use in the 3D printing process, including polymers, metals, sand, ceramics and living tissue.The prospect of very large size printing opens the possibility of house construction, among other things.
On a smaller scale, creating functioning prototypes of solar energy devices has helped US company Peppermint Energy to save $250,000 in tooling costs, allowing for rapid modifications and improvements to their technology, as they try to popularise it in emerging economies.An estimated 1.3 billion people still lack access to electricity.
Another US company, Designs for Hope, used 3D printing technology from market leader Stratasys to develop a device which generates and stores electricity from bicycle pedalling.A Ugandan orphanage was one of the first places to benefit, according to the company founder Chris Bond.“The beautiful thing is, they’re using their bikes anyway.It’s free energy.”
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The global application of such accessible, low cost technology, could mean exceptional opportunities for investors who spot the best new 3D printing companies.
Stratasys (stock ticker SSYS) and 3D Systems (DDD) are the market leaders, according to Steve Roberts, whose company Fripp is based in Sheffield, in the north of England.His brand Picsima (www.picsima.com) has helped to develop a means of 3D printing silicon, which may have numerous revolutionary applications in healthcare, including wound care to prosthetics, cases for smart devices and even sex toys.
“I think there are many interesting opportunities for family offices to invest in 3D printing,” says Roberts.“Most 3D printing uses materials that allow you to print something like a prototype, rather than using ‘real world’ materials.There are two current exceptions: metal, where you can use a nickel-cobalt alloy or titanium, for things like Formula One cars, other motorsport, or aerospace, where you many only need a limited number of a certain item.“The other area is medical grade silicon, which we’ve discovered how to print.”
Roberts believes that his company’s breakthrough may have a profound impact on the medical sector, depending on the outcome of licensing and patent discussions.“Like any investment, it depends on a family office’s appetite for risk,” says Roberts.“The aspects that are most investible include tools that allow the millions of us with ‘two-and-a-half D’ brains to create and manipulate 3D data and objects – things like the Oculus Rift product.”
For a more general consumer base, Roberts argues that most people are as yet unprepared for the advent of 3D technology.“Many people are creative in 2D, but it’s a massive leap to go into 3D.For the full benefits, you need a 3D brain, which takes years of training,” he says.“It’s going to come, but not for the next five to seven years.”
Among the prime applications of the technology will be 3D scanning devices, already on the market for under $1,000 from companies such as Fuel 3D (www.fuel-3d.com).This company offers a hand-held 3D scanning tool, meaning that you can copy the form of any small item, then send this information to a 3D printing shop, and order it from them.“So if something small and non-functional breaks on your fridge, for example,” says Roberts, “you could replace it in this way rather than ordering a new part from the manufacturer.”
He can see that such a short-cut may fall foul of intellectual property or copyright issues.Even more so when it comes to things like dolls and figurines.“So if you copy your Hermione doll from Harry Potter and send it to your friend, have you infringed copyright law?” he wonders.There could be a world of legal argument, in an echo of the battles that followed the rise of Napster and other music file sharing services.
3D printed blue treefrogs in different layer thicknesses (Photo credit: Creative Tools)
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Roberts believes that, in the medium term, the most popular entry point for domestic customers to 3D printing will be the Fuse Deposition Model (FDM) technology, where you have a string of plastic tubing which then melts when it comes close to a nozzle and then is deposited in layers, rather like icing a cake.“People are developing all kinds of new materials for this technology,” says Roberts.“There is a rubber-like material which can be used for mobile phone cases, another with wood-like properties.There are many new filaments.”
A printed human liver could become a reality in 2014, according to biotech firm Organovo, which believes that it could be used in drugs companies’ clinical trials, helping to bring down the cost of drug development (though not for human transplants, so far).This news certainly excited UK-based Oxford Capital, which manages funds on behalf of family offices among other investment groups.It included 3D printing on its top 6 hot predictions for 2014.
From a financing point of view, there was a crucial period in around 2008, when the banking crisis took hold, just as several promising 3D printing technologies needed funding.So instead of conventional lending, the companies turned to crowdfunding, through Kickstarter for example.
Maryland, US-based start-up M3D has raised almost $3 million via Kickstarter to fund production of its Micro 3D printer, thanks to more than 10,000 small investors.The Kickstarter web page is a highly instructive piece of marketing, showing exactly what this company believes the world is waiting for in terms of a small, every day printer.See https://www.kickstarter.com/projects/m3d/the-micro-the-first-truly-consumer-3d-printer.
At the top level, the wealthiest investment funds such as Andreessen Horowitz, with more than $4 billion under management, announced its latest Technology Crossover Ventures fund at $2.23 billion in late March, stating that it would specialise in 3D printing technologies alongside drone technologies, bitcoin and enterprise infrastructure companies.
What we are very likely to see in the coming five years will be a major industry shake-up, as the global industrial giants of HP, Fujitsu, Microsoft, Amazon and stationary suppliers such as Staples become more involved in the sector.There will probably be a prolonged bout of M&A activity, as the giants swallow the minnows (providing excellent returns for those who have correctly spotted the best minnows) and the industry eventually becomes commoditised.
“If a family office can get into a technology early and back a winner, the returns on their investment could be substantial,” argues Steve Roberts at Fripp.“But they need to take a long term view.Don’t expect dividends in the first five years or so – 3D stock is moving from a bull to a bear market right now.But it’s worth tracking Stratasys and 3D Systems share prices, to spot an inflection point where they would be worth investing in,”
Eventually, 3D print shops will be as common as regular print and design shops are today, with most homes having a 3D printer just as today they have a PC and DVD recorder.Whether they use them to produce pharmaceuticals, food, spare parts for the fridge, children’s toys, footwear, or a combination of all of these and more, remains an open question.